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Saudi Telecom Company SWOT & PESTLE Analysis

ID : 52352753| Aug 2018

COMPANY PROFILE -Saudi Telecom Company

Business Sector :Telecommunication

Operating Geography :Saudi Arabia, Middle East.

About Saudi Telecom Company :

Saudi Telecom Company is a telecommunication company headquartered in Riyadh, Saudi Arabia founded on April 21, 1998. The company provides telecommunication services in the Middle East and North Africa. As per Forbes report, the company has employee strength of 21,316 as of May 2016. Its services include card telephone, video streaming on demand, 3G and 4G services, pre-paid and post-paid mobile services, leased transmission circuits, etc. It had the monopoly in mobile phone services until Etihad Etisalat received its second license.

Saudi Telecom Company Revenue :

$13.8 billion – Dec 2016

Competitive Analysis of Saudi Telecom Company

SWOT
PESTLE
The SWOT analysis for Saudi Telecom Company is presented below:
Strengths
Weaknesses
1. Established market position across Middle East
2. Wide portfolio of services
3. Strong brand value in the Arab markets
1. Limited International presence
2. Declining bottom line
3. Reducing assets liquidity
Opportunities
Threats
1. Expansion to Asian countries
2. Increase in smartphone users
3. A rise in the adoption of 4G
4. Rapidly evolving technology
1. New entrants post liberalisation
2. Cyber security
3. Political instability due power concentration
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Detailed SWOT Analysis of Saudi Telecom Company

 

Strength

1. Established market position across Middle East: According to financial reports of Saudi Telecom Company, the company’s revenue was $13.82 billion for the year ended December 31, 2016, which was more than 50% of the total revenue of the Telecom sectorof Saudi Arabia for the duration.The company’s high-speed 4G network has covered more than 75% of Saudi Arabia and has become the largest network provider in Saudi Arabia.The company has established a strong presence in Saudi Arabia and North Africa and has expanded in Malaysia through a 25% stake inBinariang GSMSdn Bhd. STC also hasa stake in Oger Telecom UAE which fully controls Turk Telecom, Avea in Turkey. STC has a 100% ownership in Viva, Bahrain and 26% stake in Viva, Kuwait. STC has also established its position in services such as IT, media content, distribution and real estate which support its telecom investments throughout the Middle East.

2. Wide portfolio of services: STC offers a wide variety of services including mobile phone, landline, data services, etc. The company’s GSM network services offer prepaid cards, 3G and 4G, international calling. Its data services include DSL and leased data transmission. In December 2017, STC and Thales Critical Information Systems and Cybersecurity announced their cloud encryption service. The cloud services area new addition to the existing portfolio of services. The wide service portfolio reduces the risk of being dependant on a particular type of offering.The company has also entered into aSAR7.3bn ($1.95bn)agreement with the government of Saudi Arabia for providing high-speed fibre optic broadband services to more than 1.3 million households by 2020.

3. Strong brand value in the Arab markets: Saudi Telecom Company (STC) enjoys a strong brand value in the Arab world. In the 2016 Brand Finance Global 500 rankings, STC stood at 252nd place in the global rankings which made it the most valuable brand in the Middle East. STC’s brand valuation increased by 11% during 2016 to $6.2 billion and it was ahead of Emirates, the UAE based, world’s largest airline. The strong brand value has helped STC in its expansion in the Middle East markets and demonstrates the goodwill it has accumulated with its stakeholders.

Weakness

1. Limited International presence: The company generates about 90% of its revenue from Saudi Arabia and North Africa. Their presence in our parts of the world is very little. This dependence on a particular region for revenue generation can lead to company’s risk exposure to political, economic and social conditions of that region. There is a need to diversify into other geographies.

2. Declining bottom line: There has been a trend of declining bottom-line in the past few years. The net income for thefinancial year 2014-15, thefinancial year 2015-16 and financial year 2016-17 was 10,959 million SAR, 9,258 million SAR and 8,532 million SAR respectively.The financial year 2016-17 saw a reduction innet profit by about 8% in comparison to its previous year.With the increasing competition, the company needs to take concrete steps to regain its position by increasing its bottom line.

3. Reducing assets liquidity: Though the total assets have grown over the years, the free cash with the company has reduced from 5,467 million SAR in FY 2015 to 3,594 million in FY 2017.This trend has also beenaccompanied by increasing cash flow from financing and investing activities from 14,274 million SAR in FY 2015 to 19,486 million SAR in FY 2017. This trend indicates that the company has reduced its free cash for increasing its capital. If the company needs cash for some new initiative, then the company may need to raise fresh capital. Lower cash availability will reduce the company’s ability to expand into other regions.

Opportunity

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Threat

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References

1. http://www.albilad-capital.com/Research_EnglishReport/STC-Q3%202017EN.pdf

2. https://www.reuters.com/article/saudi-telecom-ma-idUSL5N1F74RY

3. https://businesswireindia.com/news/fulldetails/the-brightline-initiative-announces-addition-saudi-telecom-company-stc/55933

4. https://www.statista.com/statistics/330695/number-of-smartphone-users-worldwide/

5. https://www2.deloitte.com/content/dam/Deloitte/sg/Documents/technology-media-telecommunications/sea-tmt-2017-global-mobile-consumer-survey-sea-edition.pdf

6. https://www.strategyand.pwc.com/trend/2017-telecommunications-industry-trends

7. https://www.strategyand.pwc.com/trend/2017-telecommunications-industry-trends

8. https://www.prnewswire.com/news-releases/5g-wireless-market-to-reach-5-billion-for-rd-and-trial-investments-by-2020-541785622.html

9. http://www.stc.com.sa/wps/wcm/connect/english/stc/investorRelations/annualReport

10. https://www.forbes.com/companies/saudi-telecom/

11. http://gulfnews.com/business/economy/2017-and-beyond-biggest-risks-to-the-region-outlined-1.1976162

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Saudi Telecom Company SWOT and PESTLE analysis has been conducted by Siddhesh Suhas Salkar and reviewed by senior analysts from Barakaat Consulting.

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Saudi Telecom Company SWOT & PESTLE Analysis
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