Saudi Telecom (STC) has agreed to buy a 10 per cent stake in UAE-based ride-hailing service Careem for US$100 million.
Earlier this year, Saudi Arabia’s Public Investment Fund acquired a stake in Uber, the global rival to Careem.
The acquisitions form part of the kingdom’s strategy of building up overseas assets, especially within the technology sector, as part of its National Transformation Program, as a means of diversifying income streams in the wake of lower oil revenues.
STC, the largest telco in Saudi Arabia, approved the Careem deal at a board meeting last week and will finance the acquisition from its own funds.
“This move is in line with the company strategy to invest in the innovative digital world,” STC said in a stock exchange filing. It did not disclose when it expected the transaction to be completed.
The deal was confirmed on Sunday by a Careem spokesperson, who declined to comment further.
The Saudi Arabian sovereign wealth fund, Public Investment Fund (PIF), unveiled a $3.5 billion investment in Uber this year, giving it a stake of about 5 per cent in the company.
PIF, which also owns a majority stake in STC, announced a $100bn London-based tech investment fund in October, in partnership with Japan’s Softbank.
“Technology forms an important core investment theme for Saudi Arabia that helps a sector with essential future returns, but also possible knowledge gains and technology transfer back home,” said John Sfakianakis, the director of economic research at the Gulf Research Centre.
Saudi Arabia’s ruler, King Salman, last month allocated a further 100bn Saudi riyals (Dh97.94bn) from the country’s strategic reserves for the PIF, “aiming to diversify the investment portfolio and improve the revenues of investment”.
STC was an early backer of Careem, helping to raise $1.7m of funding for the company in 2013 through its venture capital arm, STC Ventures.
The telco, like others in the region, has in recent years increased its investment in noncore start-ups such as Careem in search of new revenue streams, according to Matthew Reed, a Dubai-based analyst with consultancy Ovum.
“It’s part of a strategy of diversification, which has come about in response to slowing growth in some traditional telecoms services.”
STC reported a 7.5 per cent drop in third-quarter profit in October, citing higher operating expenses in the wake of new regulations mandating fingerprint verification for its entire customer base.
Careem for its part was last month reported to be close to raising $300m worth of funding in collaboration with Credit Suisse to further fund its international expansion.
The company, headquartered in Dubai, has operations in 47 cities across the Middle East, Turkey and Pakistan.
Mudassir Sheikha, the chief executive, last month told The National that the company was considering expanding the service into new markets, including East Africa.
Follow The National's Business section on Twitter