Saudi Telecom Company (STC) was one of the first companies to be privatized and then face the chill winds of competition with the coming of a rival in the mobile telephone field. The results have been there for everyone to see. STC’s prices have come down, services have improved. Competition from the customer’s point of view works. But this is good for STC as well, says Abdul Razzak Abu Bakr, deputy CEO for strategic planning and development, STC, in an interview. Excerpts:
Q: How has the competition affected STC?
A: Ever since privatization, STC’s aim has been to operate competitively. Our strategy is based on that. Competition is nothing new. As to the effect, it has been positive. Both the consumer and the provider benefit at the end of the day. That is the angle we have to look at it from in a country that’s enjoying prosperity and improving levels of service in all sectors. Competition speeds the process up. We have major clients now operating as new service providers and this had had positive financial results for the company. Despite their involvement, there is still room in the market for more providers. That fits in precisely with the government’s aims when it decided on privatization. And customers can compare the quality of STC’s services with those of the new providers.
Q: What have been the company’s achievements in 2005?
A: One of the most important achievements this year is the key role the company has played with CITC (Communications and Information Technology Commission) in preparing the market for competition. We managed to meet in a record time all the commission’s demands including the preparation of all the documentation. It was 400 pages. That it was prepared in record time helped the commission present its proposal and specifications for legislating the competition. The other achievement has been the speedy preparation of the operational infrastructure for the other GSM operator (Mobily). As we all know, it started operating in mid-2005. All their requirements were met and they were very appreciative because they hadn’t operated in the Kingdom before. That we met all their needs — setting up the technical, organizational and operating infrastructure which included the local roaming service — in just a couple of months is an outstanding achievement, even by international standards. There are, of course, the other services and initiatives from STC. We have a new competitive pricing structure and campaigns, such as “Bi Balash” (For Free), giving customers a free landline.
Q: In some countries the customer does not have to pay a fee for setting up a landline, unlike here. Why isn’t the service provided for free?
A: The fees that are required from customers to set up the landline service are among the lowest in the region. We have occasional campaigns such as the Al-Jawal and Al-Hatif ones providing the landline service for free with an extra present of SR50 worth of calls, or providing the Sawa chip for SR130 plus an additional free balance of SR200. The “For Free And More” campaign that is being launched is a continuation of last year’s “For Free” campaign. It was a huge success. The aim is to attract fresh customers for Sawa and Al-Jawal.
Q: Any plans on investing more in the Internet service?
A: Ever since the company started the Internet services, it has always striven to provide the right infrastructure and facilities. STC has invested a lot of money to enable Internet service providers (ISPs) to provide a quality service to their customers. One important development was made when we worked with CITC to provide a service with keener prices and a new method of payment. Customers no longer require to buy prepaid Internet cards. The service is called “EasyNet” and it has increased the number of people logging on to the Net. As a result, the duration of calls being made has risen from 800 million minutes to 1 billion minutes. This is a large increase. As for the usage, it depends on the content. Unfortunately, Arabic usage has not lived up to Arabic Internet ambitions. There are no information databases in Arabic. Most of what is available is in English. The company has offered programs for companies to work together with other Arab countries to reinforce the Arab content on the web. This would be more beneficial to Internet users than having websites that are limited to chatrooms. STC is also a main partner in the national initiative to provide Internet services for home use.
Q: There is an increasing number of companies providing telephone calls over the Internet. How is STC facing this competition? And does it intend to provide similar services?
A: First of all let me say that proving calls over the Internet is a new reality that is facing not just STC but all telecommunication companies in the Middle East and the world. There are many technologies that are being developed to implement the Voice over Internet Protocol (VoIP). We are working with CITC so that this service can be provided at the right time. When we see that providing calls over the Internet is good both for us and consumers, we’ll provide it.
Q: What about providing the service of viewing television through the Internet?
A: STC is always interested in providing the latest technology. That is why the company introduced 3G phone services. We have responded to developments such as real-time televideo and caller location and broadband television reception.
Q: There are many people who say that STC has been late in investing overseas. Is there anything new on this front?
A: The company is looking for investment opportunities overseas so as to increase profits. A special department, the Strategic Investment Unit, has been set up. Officials there have made several foreign investment initiatives. Also, we have been talking with international investment banks about international strategies in terms of alliances and mergers. A number of international investment opportunities over the next three years have been identified.
Q: STC has offered part of its shares to the public. Does it have any intention to make a further public offering in the near future?
A: STC has prestigious financial standing, and that gave subscribers confidence when they bought shares in the company. The success was evident; the offer was oversubscribed 3.7 times over. As regards offering more shares to the public, that is up to the government.
Q: There are also initiatives to split the shares of the company. When will this happen and how?
A: That is up to the board of the company.
Q: What is your evaluation of the Kingdom joining the World Trade Organization and its effect on the telecommunication sector? And will STC benefit or will its profits be negatively affected as other competitors are allowed into the market?
A: That the Kingdom has joined the WTO is a great achievement. Its fruits will be seen in the strengthening of the Saudi economy and the provision of more services and products of high quality with reasonable prices — which everyone is looking forward to. The telecommunications sector in the Kingdom was free a while ago, especially in the field of cell phones and databases. STC was already working in a competitive market even before WTO accession.
Q: We have the slowest DSL service in the world, and prices for Internet service are not cheap. How is the company solving these problems?
A: Internet provision started in Saudi Arabia in 1998 and the fee then was 7.5 halalas a minute. The fee was reduced to 5 halalas a minute in 2000 as the number of users increased by 30 percent. In 2003, a lower subscription service was introduced that suited users who log on for several hours. This service continued until Feb. 10 this year, when the EasyNet service was introduced. This service is highly flexible. Customers are connected to the Net by just dialing a 366 number. They don’t need to subscribe to any ISP or buy a prepaid Internet card. It costs them 5 halalas a minute (SR3 an hour) which goes on their phone bills; STC is charged by the provider. As for the DSL service via the 907 number, it started in October this year. Capacity will be increased to half a million users by the end of 2006. The service will also be faster.
Q: Is there any plan to extend GSM coverage to all the Kingdom’s cities, towns and villages in the near future?
A: STC is the main telecom provider in the Kingdom. It has the largest infrastructure for mobile GSM services in the Middle East. The company has managed to provide 25,000 km of cable links between cities. It has also erected 5,000 mobile towers across the Kingdom. It is equivalent to an area of 25,000 sq. km. Currently STC provides services to its customers through the largest geographical network in the Arab world — and which covers 95 percent of all rural areas. We have also built new customer service centers where needed and our customer services now extend beyond serving STC customers to look after Mobily customers as well.
Q: Does the company intend to open subscription offices for females? If so, why didn’t you think about it before?
A: The company is keen on providing services to all its customers in the simplest, fastest and most reliable way. For us, all customers are important, including women. The objective of any company is servicing the client, regardless of gender or place of residence.