Saudi Arabia’s Public Investment Fund is exploring the partial sale of its stake in Saudi Telecom Company but will retain a majority stake in the country's largest mobile operator.
The kingdom’s $430 billion sovereign wealth fund plans to target international, local institutional and retail investors, it said in a statement on Thursday. While the size and structure of the potential deal have not yet been determined, the fund will retain a majority stake of more than 50 per cent in the telco.
“The potential transaction is in line with PIF’s strategy to recycle its capital to new investments … it is expected to contribute to PIF’s establishment and development of new sectors, in addition to strengthening the Saudi economy's growth and diversifying its sources of income,” the fund said.
The divestment will contribute to the “medium and long-term value” for all of STC’s investors by diversifying the company’s investor base and “increasing its free float and weight in relevant international indices".
The PIF holds a 70 per cent stake in STC, which has more than 13,500 employees in Saudi Arabia and more than 19,000 across the group. No sale of shares will take place before further developments are announced to the market and all applicable approvals are obtained, it said.
Goldman Sachs, HSBC, Morgan Stanley and SNB Capital have been appointed to evaluate the potential transaction options.
STC’s net profit increased to 2.8bn Saudi riyals ($746.5m) in the April-June period. Revenue for the quarter rose 6.6 per cent on an annual basis to 15.9bn riyals, almost 980m riyals more than the same period last year.
It is also rolling out a fifth-generation network across the kingdom. By February, it had deployed its 5G network in more than 47 cities.
In a statement to the Tadawul stock exchange, where STC's shares are traded, the company said “it does not believe that the potential transaction will affect its strategy, daily business or its employees”.
As part of the kingdom's privatisation plans, STC sold 30 per cent of its shares in a public offering in 2003 raising $9.6bn.
The PIF is a central plank of the kingdom's Vision 2030 initiative that seeks to diversify the Arab world's largest economy and reduce its reliance on oil. Under a five-year strategy that was announced in January, the fund aims to more than double the value of its assets under management to $1.07 trillion and to commit $40bn annually to develop the domestic economy until 2025.
The fund has created 10 new sectors, launched more than 30 new companies, created 331,000 jobs in Saudi Arabia and tripled assets under management over the past four years. Under its five-year strategy, the fund will focus on 13 sectors as part of its core domestic strategy.
The PIF is diversifying its investment portfolio and boosting the kingdom’s economic growth by taking advantage of the new opportunities amid the coronavirus pandemic. The value of the fund's US stock holdings increased 3.2 per cent in the second quarter of this year to $15.94bn.
It is also working with the world’s largest asset manager BlackRock to develop an environmental, social and governance (ESG) framework. The fund is also working with ratings agencies to standardise the ESG framework and address the inconsistencies in rankings from different agencies.