Citi is back in Saudi Arabia, determined to pick up where it left off

Updated 18 March 2018

Citi is back in Saudi Arabia, determined to pick up where it left off

The year 1955 was a big one in the history of First National City Bank of New York.
Already a leading financial institution in the US, Europe and Japan, the bank went on an expansion spree in the Middle East, opening offices in Cairo and Beirut. In December, it started up in Jeddah, the first American bank in the Kingdom.
That office on the Red Sea coast was the beginning of a long and fruitful relationship between Saudi Arabia and what was later to become Citibank.
It was disrupted in 1980 when the Samba financial group was formed with majority Saudi ownership, and interrupted again by a strange 13-year hiatus from 2004 to 2017, but Jim Cowles, Citi’s chief executive for the Middle East business, is confident the bank has picked up where it left off.
“We’ve enjoyed a very productive relationship with the Kingdom of Saudi Arabia for many years. Among many transactions and services provided over the years, we were part of the sovereign syndicated loan in 2016, and of course the very successful inaugural sovereign bond issue and the sukuk offering in 2017,” said the 62-year-old Californian.
Those two transactions — which set new records in the global sovereign debt markets with a $10 billion syndicated loan two years ago and $21.5 billion (in conventional and sukuk bonds) in 2017 — were landmark events for the country’s financial system, helping to bridge the gap in the national exchequer left by the fall in oil prices.
They were also proof that Citi did not necessarily need a formal presence in the Kingdom to do business on behalf of Saudi Arabia. But Citi leadership decided that it was better to be all-in with the country’s banking authorities if it was to fully participate in the business opportunities presented by the Vision 2030 strategy to reduce oil dependency.
Last year, Citi won an investment banking license with the Capital Markets Authority, enabling it to take part in the full range of activities in mergers and acquisitions, initial public offerings, privatizations, and other capital markets business.
“So now we have the CMA license, and held our first board meeting in January. We’re very pleased to be back in the Kingdom with an on-the-ground presence,” Cowles said. He immediately began to put in place the executive team needed to run the revived Citi operation in the Kingdom.
“Getting the CMA license was a real highlight for us in 2017 and of course we hope it’s just the beginning. We’ve already started the hiring process on the ground and appointed two excellent local bankers to run banking and markets, as well as having tasked Carmen Haddad (a top Citi executive with extensive experience in the Middle East) with continuing to build our on-the-ground presence,” Cowles said.
Only one thing is needed to complete Citi’s return to the Saudi banking scene — a full license from the Saudi Arabian Monetary Authority — and that could come sooner rather than later. “In time I hope we look at a SAMA license which would allow us to expand into trade banking and treasury services, and also the cash management business,” he said.
A SAMA license would not be a foregone conclusion. It would, of course, need approval from the Saudi authorities, but also from the department of the US Treasury that oversees foreign involvement by American banks. The requirements for getting these approvals have been tightened up since the global financial crisis.
But Cowles is sure that a SAMA license would bring further business opportunities for Citi and for Saudi Arabia. “We would be able to add Saudi to our global banking network. It would be another significant opportunity to bring those services into the Kingdom,” he said.
Citi’s return to the Kingdom — expected to be marked by a formal ceremony in Riyadh next month — places it firmly in the top tier of international banks advising the Kingdom’s policymakers on the financial and economic aspects of the transformation underway there.
Recent reports suggested that Citi, Goldman Sachs, Morgan Stanley and HSBC had been appointed to arrange the best phase of its global borrowing program, involving the refinancing and extension of the $10 billion loan from two years ago, and a new bond which could rival the record-breaking $17.5 billion issue of 2017.
Cowles declined to comment on that possibility, though it is clear that such an involvement would be very much within the scope of its business capabilities.
“We’re market leaders across our institutional franchise. We are currently top of the league tables in equity capital markets, for example. Our global network is something that only Citi really can offer. We are on the ground in 100 countries around the world and there really isn’t anyone else who has this network. It’s a real advantage to be able to serve our clients’ needs with more products and more markets than anyone else as they grow and transact globally,” he said.
Such global firepower would be invaluable for the Kingdom if it decided to go ahead with the international element to the planned initial public offering (IPO) of Saudi Aramco, which is slated as the biggest IPO in history but about which recent doubts have arisen, at least with regard to the sale of shares on foreign markets, including Citi’s home city of New York.
Cowles, conscious of the delicate state of the Aramco situation ahead of the imminent royal visit to the US, declined to talk about Aramco. But Citi is believed to have been among a group of banks that made presentations to Aramco regarding the possible IPO earlier in the year. Whatever the outcome of the Aramco deliberations, Citi is keen to be involved in the rest of the Vision 2030 program, especially the big privatization program of other state-owned entities, which government officials have said could raise as much as $200 billion in a series of IPOs and trade sales.
Citi is relying on its track record of successful privatization in Pakistan and Greece as evidence of its capability in the potential Saudi sell-off, which would be among the biggest in history. The bank has already been involved in strategic advisory work with the National Center for Privatization, the government body charged with implementing the program.
“We continue to believe in and be supportive of Vision 2030. We think it’s a bold and appropriate plan. It will help to achieve the Saudi ambitions of attracting foreign direct investment, diversifying the economy, providing employment opportunities, especially for young people, and get more women into the workforce,” Cowles said.
One aspect of the Vision 2030 strategy is another sensitive issue for Citi. The anti-corruption drive launched last November included investigation of the affairs of Prince Alwaleed Bin Talal who, in addition to his Kingdom Holding business, is also an investor in many foreign companies including Citi.
His shareholding is believed to be less than 3 percent, but there has been no word yet from either the bank or Alwaleed himself whether it will remain at the current level.
Cowles declined to speak specifically about the shareholder, but gave some views on the wider anti-corruption drive. “What are the considerations foreign investors take into account when they make decisions? They look at the economic opportunities, the position of the country in the global marketplace, and they also take into consideration government policies that are robust in fighting corruption,” he said.
For an American doing business in Saudi Arabia, these are challenging times. Despite a generally benign global economic background, regional security issues are still at the forefront and the wider global picture has seen an increase in levels of political risk. Cowles is relying on Citi’s heritage and global network to see it through successfully.
“It’s a challenging time. The geopolitical situation is, of course, uncertain. But while these global issues are not things we can control, we are focused on taking our execution to the next level by building upon the work we’ve done over many years and continuing to put our clients first. “We’re a 205-year-old institution, and have a long history of serving our clients while managing our risk. We’re well equipped and experienced in adapting our risk profile as the environment changes and we will continue to do so,” he said. “There are also challenges in terms of globalization and equality. The world has to do a better job in terms of distributing the benefits of globalization. But overall we certainly believe globalization is a positive force.”
That cautious view on the geo-political issue is counterbalanced to some degree by the global economy. “When we look around the world from an economic point of view, the environment is very positive. There are very significant growth opportunities in developed markets and emerging markets. In the Middle East, you have to look country by country, but Citi has had record years in the MENA region in 2016 and 2017, and our presence in Saudi will add significantly to our growth prospects,” Cowles said.
Citi will play a role in the royal visit to the US over the folowing weeks, especially at the gathering of chief executive officers from the two countries in New York City planned toward the end of the trip.
“I’m sure it will be a very successful visit. Saudi Arabia is an extremely important strategic market for Citi and many other American multinational companies. I also believe it is important for Americans to learn more about Vision 2030 and understand how it
will transform the country,”
Cowles said.


INTERVIEW: CEO Mazen Sheikh sees business soar as Saudi viewers turn to streaming services

Updated 29 min 38 sec ago

INTERVIEW: CEO Mazen Sheikh sees business soar as Saudi viewers turn to streaming services

  • All eyes on Starzplay as lockdown reaps rewards

Mazen Sheikh has had a good lockdown.

The founder and CEO of Starzplay, the Middle East’s leading entertainment streaming channel, saw his business soar as curfews, social distancing and travel restrictions left people with little to do apart from slump in front of a TV and binge watch for hours on end.

“I think when the whole situation was unfolding, we were trying to think which way is up and which was down, both on a personal level and also as a company — what it means for our subscribers. It was nerve-wracking in the beginning,” Mazen Sheikh told Arab News.

In the region, it was Starzplay subscribers chose to watch, rather than Netflix or other streaming services, in English and in Arabic.

“What we benefited from, of course, was all the people staying home, but one of the things that worked in our favor was that we are an organization based and headquartered here, and we were able to adapt and localize our services much faster than anyone else,” he said.

“In Saudi Arabia, you can sign up for Starzplay via STC, Mobily or any of the other services. You can sign up with your mobile phone number. Netflix came to this region with a very US-centric mindset, thinking that everyone had a credit card and that having a credit card is a norm in the world. In fact, the reality is different, especially in Saudi. Not everyone has a credit card,” he added.

“So, through one bill where you pay your landline and your broadband, you can also have access to Starzplay on the same bill. You can just download onto your smart TV,” he added.

Starzplay has been in business for five years, and while it is probably not as well known as Netflix, it has been making big inroads into the region, especially Saudi Arabia.

The Kingdom accounts for 40 percent of total revenue, while almost half of all consumption in the Middle East and North Africa region comes from Saudi viewers.

And what have they been watching during the long weeks of lockdown? 

Lots of “Vikings,” “The Office” and Turkish-made romantic soap “Jusoor Wal Jamila.” 

Saudis on average watched more than 18 hours of Starzplay in May, compared with less than 12 a year before.


BIO

BORN: Islamabad 1970.

EDUCATION

  • Schooling in Dubai, UAE.
  • Oklahoma State University, US.
  • University of Kansas, MBA.

CAREER

  • Various executive roles in media and communications, US.
  • Chief sales and operations officer, OSN, Dubai.
  • CEO and founder, Starzplay.

“The beauty is that everyone has a mobile phone. We were there in the market with the right product, the right content, but also the right distribution so the masses can actually sign up for our service. It really benefited us.

“It was not just that we were a streaming service. The whole category benefited from the lockdown, but we were the only one in the market that had this kind of distribution and payment arrangements. We were the only one available to the masses,” Sheikh said.

It is not just the distribution platform that is different from Netflix. Starzplay takes a distinct stance on content, too, as Sheikh explained.

“Our industry is evolving in a simple and predictable way. What is happening is that the more Netflix has gone into its own originals, the more studios see them as a competitor. So studios have been pulling their content away from Netflix.

“Until now, with what comes out of Hollywood and the UK, 95 percent of English-language content was produced by seven or eight studios. In the UK it’s the likes of the BBC and ITV, while in the US it’s Warner, Disney, Sony, Showtime, CBS, all the major studios,” he said.

“So, the way the industry is evolving is that if you want Netflix originals, you go to Netflix, if you want anything else you go to Starzplay,” he said.

Sheikh reeled off an impressive list of top shows on his platform. “Big Bang Theory,” “Billions,” “Grey’s Anatomy” and “Britannia” are among them, while younger viewers soak up “The Flash,” “Supergirl” and other DC titles made by Warner Studios.

Starzplay has also made its first foray into original content, tailored for a Middle East audience, with the series “Baghdad Central.”

“Data is the new oil, they say, and ‘Baghdad Central’ was the result of our experience over five years of consumption history, with billions and billions of minutes consumed. So based on what people were consuming in our key markets and with those insights, we produced our first original,” Sheikh said.

“Baghdad Central” was launched in March with a big name Hollywood actor — Corey Stoll from the award-winning series “House of Cards” — as well as top British and Arab actors.

“We wanted to bring a show to the region that combined the best of the three. It was shot in Morocco in partnership with UK and US producers,” he explained.

That kind of content has pulled in the viewers during lockdown. The figures show Starzplay hit a peak of 6.5 million daily minutes of consumption in Saudi Arabia in the middle of April, compared with about 2 million before the pandemic lockdowns.

Existing viewers are also watching more. The average Saudi spent 28 minutes daily in front of a Starzplay show before the lockdown. That more than doubled to one hour as movement outside the home was restricted.

“To put that into perspective, it took us five years to go from zero to 2 million minutes a day, and it took us six weeks to go from 2 million to 6.5 million. We did more consumption growth in six weeks than we did in the first five years,” Sheikh said.

He is reluctant to forecast how many of these consumers will stay with Starzplay as the lockdowns are eased around the world and the region. 

“I’m expecting some churn, so it’s tough to predict what the base will look like later in the year. We saw tremendous growth, but as the lockdown eases I think we’ll see some churn on those subscribers,” he said.

But even as the lockdown are eased significantly in the region, consumers are not going back to pre-pandemic levels. There is likely to be a permanent shift in demand for Starzplay in the “new normal” environment.

“Unlike Netflix, one of the challenges we had in the region is that the brand awareness and content awareness of our service was comparatively low. One of the things that has happened is that because of increasing demand and awareness, people got to find out about Starzplay. People experienced that and connected the content to our brand.

“That is going to be an enduring and lasting benefit for our company. You cannot unlearn it. I’m expecting some churn in high sign-ups and reduced consumption volumes, but the lasting benefit we’re hoping for is the brand awareness and content awareness that was created,” he said.

That kind of growth is likely to accelerate Starzplay’s evolution from a privately funded startup to a listed public company. It has raised $125 million over its five years, from some pretty impressive investors, including US media giant Lionsgate, the big financial firm State Street Global Advisers, and Nordic investment firm SEQ, which backed Starzplay from the beginning.

With profitability just around the corner, Sheikh does not see the need for further funding, especially as investment sources have dried up during the uncertainty of the pandemic period.

“During COVID times, when consumption and new subscribers were going through the roof, the flip side was that we realized that capital markets were going to be out for 2020. Lucky for us, we are well capitalized, and we are not in a situation where we need to use funds. This is not a good time to be out there raising money,” he said.

“The goal is to serve our customers and also create shareholder value. There are multiple ways of doing that. One is that you generate cash and shareholders benefit from cash dividends. That’s the traditional model. The more high-growth model that is more applicable to companies like us is shareholders push for more growth and expansion to increase the enterprise value of the company,” he said.

Sheikh has set his medium-term sights on a public listing. “In the long run the goal is to continue to grow the business, and in the next three to five years to get into a position where we can list the company on the London Stock Exchange.

“We haven’t absolutely decided that, as it’s so far out. I’d say what we’re looking to do is list ourselves, and if not in London, then other markets, local or London. That’s the ambition, to look to IPO on London or other markets. We’re not there yet. We’re still two to three years away from a decision, but that’s our ambition,” he said.