Saudi Telecom Company signs $9bn deal to build telecom infrastructure

The agreement involves an 18-month preparation and execution phase

Saudi Telecom Company aims to strengthen digital infrastructure in the kingdom. Reuters

Saudi Telecom Company, the kingdom's biggest mobile operator, has signed a contract worth Saudi riyals 32.64 billion ($8.7 billion) with a government entity to build, operate and provide telecoms infrastructure services.

STC, which offers digital products and services across the Middle East and North Africa region, did not disclose the name of the government entity.

The agreement includes an 18-month preparation and execution phase, followed by a 15-year operational period for the project, STC said in a statement on Tadawul, where its shares are traded.

STC shares rose more than 2.24 per cent on Tuesday after the announcement as this deal marks a significant step in enhancing the kingdom's telecom infrastructure.

The financial effect is projected to be positive, with revenue recognition expected in the company’s consolidated financial statements after the initial operation of the project, which is expected to start in the fourth quarter of next year, continuing until the end of the contract, STC said.

The kingdom’s telecom market size is projected to reach $19.04 billion this year and is expected to grow at a compound annual growth rate of 3.9 per cent, reaching $23.07 billion by 2030, according to a report by Mordor Intelligence.

The sector is witnessing a jump in investments in artificial intelligence, Internet of Things, and cloud computing solutions, creating opportunities for telecom providers and technology companies, the report added.

In the first nine months of last year, STC reported revenue of 56.6 billion riyals, an annual increase of 3.92 per cent, while its net profit reached 11.2 billion riyals during the period.

In November, Saudi Arabia’s Public Investment Fund offloaded a $1 billion stake in STC through the sale of 2 per cent of its stake, or 100 million shares. The PIF, which remains STC’s largest shareholder with a 62 per cent holding, earlier raised $3.2 billion by offloading a 6 per cent stake in STC in December 2021.

Saudi Arabia, the biggest Arab economy and Opec’s top oil producer is forecast to grow by 3.3 per cent this year, a downwards revision of 1.3 percentage points, the International Monetary Fund said earlier this month.

To grow its economy, the Gulf nation is undergoing a significant economic transformation, as part of the Vision 2030 programme, with projects in infrastructure, technology, tourism, real estate and other sectors.

Riyadh also has a programme for expanding the country's information and communications technology sector by 50 per cent by 2030. The ICT Strategy aims to establish an advanced infrastructure to accelerate the digital transformation of the kingdom's economy to create an “innovative future” for the kingdom, according to the Ministry of Communications and Information Technology.