Saudi Telecom Company Case Study

Current Performance

Headquartered in Riyadh, the Saudi Telecom Company (herein STC) is the largest in the Middle East and North Africa. This is based on its revenue that currently stands at 51,825 riyals or 13,825 billion dollars in 2016. The company operates a net income of 8,539 billion riyals ($2,277 billion). With 19 years in the telecommunication market since inception, the STC currently boasts of over 100, million customers around the world. The STC provides its customers with high technological bases innovations and solutions (Global Data, 2017).

The company is committed in providing service to its customer through fibre optic network that stretches over 137, 000km through Asia, the Middle East and Europe. Since its main site of operation is based in Saudi Arabia, STC boast of the largest modern network in region with the coverage of 99% of the countrys populated areas offering 4G mobile broadband to more than 85% of the total population across the Saudi Arabia. Besides the ownership of 100% of the Saudi Arabias total investments, STC also owns 100% Viva Bahrain and 51.8% shares in Viva Kuwait. The company also manages a contract worth 35% of the Oger Telecom Limited in UAE which in turn controls Turk Telecom, Avea in Turkey, and Cell-C in South Africa. STC also controls 25% shares of Binariang GSM Holding in Malaysia that in turn has a share in Maxis of Malaysia and Aircel of India. STC has investments in different areas such as in information technology, content, distribution, and contact centres

Strategic Posture

Mission Statement: To be the leader in world of constant changes by striving to exceed customers expectations so that together they can reach new horizons.

Vision: The company vision is honesty, commitment, cooperation, respect, Initiative, and loyalty

Strategies: The STC strategy is to enhance the economic, environmental, and social value of a community.

Porter's FOUR Corner for a Competitor

Porter's four corners model is a predictive tool that was formulated to help in determining a competitor's course of action. There is an intense mobile competition in the region. This is especially so after the introduction of Mobily in 2004. The introduction of Mobily triggered what is referred to as market share in the telecommunication industry in the region. In 2014, STC was able to command a 44% lead in the market share while Mobily and Zain followed behind with 35% and 17% respectively. Since Mobily is the closest competitor to STC, the paper uses the Porter's FOUR Corner for a Competitor analysis and explore tactics that STC has used to acquire a competitive advantage.

Motivation

Actions

Future Goals Mobily Company Profile Current Strategy

Continued growth & long-term profitability

Forecasting Global trends for easier penetration

Deep understanding of customers needs, for instance, provide flexible data bundles

Accessible to people across borders

Innovation & quality Mobily is a telecommunication company offering fixed line, mobile telephony and internet services. It is owned by Etihad Etidalat Co. But operate under the brand of Mobily. Mobily was incepted in 2004 and the same year won the bid to own and run Saudi Arabia second GSM licence giving the company an upper hand to launch mobile service in region. The launch broke the Saudi Arabias telecom monopoly in the wireless industry. The company has since launched both 3.5 and 4G services. Currently, the company runs revenue of SAR 6.7 billion as of June 2016 data. It has an operating income of SAR 6.7 million with a profit of SAR 35.4 million. Horizontal Growth by extending their coverage to 99% of Saudi Arabia

regional growth with coverage of 99% of Saudi population

Mobily engages in Cost leadership by offering service bundle with the highest number of packages

Diversification of products for instance, pre-paid and post paid services

Price Differentiation for example Mobily has 6 pre-paid service bundles while STC has 3.

Management Assumptions

There are many opportunities in the market to exploit for example cloud computing

Stiff competition from local & international competitors 1.e. STC and Zain

The company is relatively big with same coverage of 99% like that of STC Capabilities

Skilled management

Economies of scale

Diversification of services, for instance service bundles

Comprehensive coverage in the region i.e. 99% coverage. Competitive prices

Relatively Strong brand & good products image

Leader in mobile broadband

Industry characteristics

Saudi Telecom Company has a consolidated platform where it has been able to gain the most significant market share of the telecommunication industry in region amidst the market share occupied by competitors. The consolidated platform is of critical importance in various ways, for instance, allows access to new technologies and techniques including clients. For instance, the Need for STC to Develop Broadband Infrastructure has motivated it to partner with Agile Optical Network, the fiber backbone for the Kingdom.

The STC is operated under Umbrella of many other companies, thus, has superior bargaining power compared to Mobily, Zain and other Mobile Virtual Network Operators (MVNOs). With the consolidated platform, STC was able to launch its commercial 4G long-term evolution (LTE) broadband services in 2011 and now finalizing to launch LTE subscribers before others. This being the case, STC is offering a relatively high barrier to entry of new firms in the industry. STC is well established globally, and young companies entering the industry will face a difficulty trying to reach the market share of STC Company. To this end, it can be said that STC consolidation is giving it easy time to access to new geographies and it make it easier to finance for other companies.

Barriers to Entry in the Telecommunication Industry

STC is facing competition from Mobily Telephony Company at quite a close distance at 35% and Zain at a further distance of 17.3%. STC is the leading operator in the region of Saudi Arabia and its extension to other 11 countries internationally gives its uncompromised competitive advantage. For instance, continued challenges facing Zain to remain competitive is positive for STC. This is true given that the market is rapidly shifting from the voice calls to advanced data and therefore, STC has superior bargaining power to withstand any paradigm shift in the telecommunication market compared to its competitors. To this end, barriers to the telecommunication industry include, among others, Liberalisation of the Telecoms Sector, Government Policy, Competition a Challenge to Mobile Entry, and a need to Develop Broadband Infrastructure

STC Major Competitors

Strategic Group

STC is the leading telecommunication company in Saudi Arabia. The company has the latest strategies focused on collective energy in identifying and capturing new emerging opportunities to provide comprehensive, innovative services and solutions. According to data from the Global Communication database, STCs share of the mobile market in September 2014 was 44.5%, down from 47.3%, but still significantly higher than Mobily with 35% and Zain with a 17.3% share. As such, it is clear that Mobily company has moderately high product categories of which makes it one of the closest competitor of STC. However, Zain`s low market share with its establishment in several counties makes it a distant strategic group for STC Company. This is visually presented in the graph below.

High

Low

Low

High

Mobile Virtual Network Operators (MVNOs)

Mobily

STC

Zain

Market Share

Quality and performance in the market

Industry Matrix

STC is way ahead of its competitors in the telecommunication industry. Its critical success factors such as expansions through partnerships and acquisitions are making the firm a highly rated company of the technology age. Its annual revenue of 2017 is expected to be high considering that the company has reaped a lot of profit in previous years. Market share is everything for a company and finding that the company has the most significant market share of an ever increasing population of the Saudi Arabia population is a critical success factor to the company`s realization of its goals and objectives. Despite the stiffness in competition, STC is bitterly placed to conquer the telecommunication industry.

Key Success Factors Weight STC Rating STC Weighted Rating Mobily rating Mobily Weighted Score

International presence 0.20 5 1.0 4 0.5

Revenue 0.20 5 1.0 4 0.5

Price Differentiation 0.15 4 0.6 5 1

Technology 0.15 5 1.0 4 0.3

Diversification of products 0.15 4 0.6 5 1

Management Skills 0.15 4 0.6 4 05

TOTAL 1.0 4.8 3.8

Analyzed from global research

Summary of External Factors

Technology: Information technology is one of the external factors that place STC Company on top of competitors.

Segmentation: The company`s ability to streamline its operations according to the needs of consumers is an opportunity for the company to thrive.

Demography: with an increased population rate of 2.52% where the population is of over 32.5 million people, there is an opportunity for STC to increase its market share. Moreover, the ability of consumers to identify the advantage of using quality products is strength for STC.

External Factors Weight Rating Weighted Score Comments

External Factors Weight Rating Weighted Score Comments

Opportunities 2 3 4 5

Expansion by acquisitions, joint ventures 0.15 4 0.6 STC should continue partnering and acquiring new companies and products

Cloud Computing Market 0.1 4 0.4 It is a key to competitive advantage

Technology Advances 5G Network 0.1 3 0.3 Opportunity to serve consumer needs better

Entry Barrier 0.1 3.5 0.35 Good for increased market share

The younger generations 0.05 5 0.25 More products should be customized to their needs

Threats Competition 0.1 4 0.4 New strategies

Rapid change of Technology 0.1 3.5 0.35 Innovative employees

Government Regulation 0.15 3 0.45 Rules must be tough

Substitute Products and Services 0.05 3 0.15 Competitors provide products at lower price

Industry becomes maturity 0.1 3 0.3 Affects the competitive advantage

Total Scores 1.00 3.55 Moderate responding

References

Global Data (2017). Saudi Telecom Company (7010) Financial and Strategic SWOT Analysis Review