JEDDAH, 10 September — Saudi Telecom Company will put on sale 30 percent of its shares before the end of this year, it was announced here yesterday. The decision was taken by the Council of Ministers, chaired by Prince Abdullah, the regent.
The Cabinet also decided to increase the company’s capital from SR12 billion to SR15 billion ($4 billion) by dipping into profits. The telecom sector in the Kingdom would be opened for competition by the last quarter of 2004, the Cabinet said. Partial opening up of mobile phone services will start in 2004 and land phone services in 2008, it added.
"The Cabinet approved a decision made by the Supreme Economic Council to sell part of Saudi Telecom Company, which is fully state-owned," Information Minister Dr. Fouad Al-Farsy told the Saudi Press Agency. "The sale will be made through an Initial Public Offering (IPO) with two-thirds of the shares sold only to Saudi citizens and the rest to the state-run Pension Department and the General Organization for Social Insurance," Al-Farsy said quoting the Cabinet decision.
"The sale of shares will be made in the last quarter of this year at the rate of SR170 per share," the Cabinet said. Each individual will be offered to buy not less than 10 shares or multiples of that number. Purchasing of these shares through powers of attorney is acceptable, with each agent representing not more than 10 clients. Banks will give credit facilities up to not more than 50 percent of the value of shares to be purchased.
Al-Farsy said the company would start a media campaign to sell the shares soon after the completion of necessary formalities. The government’s share in the company’s revenues would be reduced from 27 to 20 percent in return for communication services, the Cabinet said, adding that this decision will come into effect on Jan. 1, 2003.
"The government will review this reduction after opening up the telecom sector," Al-Farsy said. The Public Investment Fund will manage the share sale — the biggest state sell-off in the Kingdom for 20 years — in coordination with STC.
The Saudi telecom giant was set up in 1998, with over SR12 billion ($3.2 billion) in assets. Its sales rose from SR9 billion ($2.4 billion) in the first year to SR17 billion ($4.53 billion) in the second year.
STC awarded an SR2.545 billion ($678.66 million) project to Ericsson and Nokia to expand the Kingdom’s mobile phone system by adding 2.8 million lines to the network within two years. The Swedish companies won the multibillion riyal contract in competition with other international companies, including Lucent and Motorola of the United States.
As per the contract, the cost of a single mobile line will be SR909 ($242) instead of SR1,028 ($274) in the last expansion project. But Saleh Al-Jasser, director general of marketing, told Arab News that the cost would exceed SR909 as expenditures linking the lines with the ground network would be added to it. At present, the company has 2.2 million mobile lines. "Once the expansion is completed, the number of mobile lines will double," Jasser said.
The project will help expand the GSM network to 12 main roads in the cities, thereby bringing 95 percent of the Kingdom’s roads within the expansion program.
There are 2,505 towers and 19 exchanges in the Kingdom’s mobile network, which covers 17 main roads with a total length of 6,000 kilometers.
Meanwhile, Saudi shares dropped one percent yesterday after the government announced the sale of 30 percent of the STC. The Tadawul All-Shares Index (TASI) closed on 2,636.58 points compared to Sunday’s closing of 2,662.62 points, shedding 26.04 points.
