Saudi Telecom Company

2021-05-09 21:04:14
5 pages
1218 words
University/College: 
Type of paper: 
This essay has been submitted by a student. This is not an example of the work written by our professional essay writers.

Saudi Arabia is an absolute monarchy under a King and is the worlds largest oil exporter among OPEC (Organization of Petroleum Exporting Countries). The country became part of the World Trade Organization in 2005 seeking to enhance foreign investment and economic diversification. The nation faces a few political challenges such as security threats from ISIS.

Regulations in Saudi Arabias Telecom Sector

Up until 1998, MoPTT (Ministry of Post, Telephone, and Telegraph) controlled the telecom industry in Saudi Arabia. During this tenure, the industry was characterized by a publicly owned STC monopoly. There was little investment incentives. In 2003, the foundation of Communications and Information Technology Commission (CITC) revolutionized the industry. Additionally, the entry of Mobily in 2004 further intensified competition. Mobily was launched by the Etihad-Etisalat consortium. The establishment of CITC and the intensified competition as a result of the new player in the market boosted telecommunication investment by a great deal. The telecommunication sector was beginning to take shape and becoming lucrative in the face of both local and foreign global investors. The presence and tenure of CITC led to the issuance of extra mobile licenses and three fixed licenses in 2007. CITC continues to be the governing body up to date, but there have been numerous revolutionary changes in the sector. The commission continually sets and implements regulations that ensure transparency and promote fair competition in the sector.

Most remarkably, the telecommunications sector has been through a dynamic transformation over the recent years, transformations that have revolutionized the industry to the dynamic sector it is today. In light of the ever-changing and dynamic nature of technology, ICT policies, plans, and programs have been changing in line with the sector. Regulations governing the implementation of these policies, plans, and programs have also been changing in line with technology to avoid redundancy and prevent them from being absolute. After taking over from MoPTT, CICT has also revolutionized regulations pertaining issue of licenses for ICT provisioning. The last few years have seen an increase in foreign investments following new regulations in the market. These new regulations protect consumer interests and increased security. Saudi Arabia like many Arab countries faces security threats from ISIS, threats that have necessitated stringent security regulatory measures in the telecommunications industry.

Labor Market Regulation

The business domain plausibly necessitates the adaptability of labor market regulations which encompass employment zones, working hours, and repetition. It is, therefore, imperative to explore the labor market indicators. Rapid enhancements have been made to adjust the system for the labor market regulation pointers parallel to the International Work Organization (ILO) traditions. These labor market enhancements revolve around but are not limited to terminations, contracts, remuneration, and reviews. A comprehensive report by the World Bank clearly depicts the nature and the progression of labor regulations in Saudi Arabia over the recent past CITATION Wor16 \l 1033 (WorldBank, 2016). According to the report, the regulations encompass hiring, working hours, redundancy rules, redundancy costs, and job quality.

Corporate Governance Regulations

Corporate administration and regulations in Saudi Arabia are mainly centered around listed organizations despite the fact that it is progressively turning into a key issue for the huge number of most if not all organizations in Saudi Arabia. The Capital Markets Authority (CMA) has been in charge of the progressive regulation of all listed companies about the 2009 strategic plan. The authority has since then clearly outlined and shaped the capital markets vision and mission and sought transparency. CMA has also implemented regulations that guide financial companies and assessment of foreign investment. Listed companies now structure their foreign shareholding strategies based on CMA rules and regulations. Consequently, the presence of foreign directors and foreign participation in the country has doubled since the authoritys plan implementation.

Rules on authorized persons conducting security related operations are required to abide to set code of conduct, a process overseen by the CMA. Comprehensive reviews aimed at improving the oversight environment have been put in place by enhancing lucidity and adopting a transparency-oriented approach. Additional improvements are on family companies as pointed in the Pearl Initiative in 2012. The regulation of family companies is of great concern especially about capital access and accountability. Finally, the business sector at large has been sensitized to the importance of embracing corporate social responsibility services.

Saudi Telecom Company Financial Reports

STC has a market capitalization of approximately $21 billion as depicted in the consolidated financial statements. In spite of the huge amounts the company has invested in foreign assets, competition has also compelled it to turn to domestic investment strategies. Projections indicate that annual profits have been declining on average, hitting a 40% downfall from 2006 when the companys profits were at their peak. The move by the company to partly privatize the corporation have further hindered its operations. Economies in the region have lately been keen on instilling market discipline and in so doing sought to issue shares in state organizations which improves efficiency. This is evident in the Saudi government which has already rolled out a plan to privatize sections of the nations Arabian Airlines such as the catering unit whose shares have already been listed. A plan is also in motion to list shares of Qatar Petroleum shortly. STCs financial statements, however, signal the challenges that the company is facing as a result of these privatization strategies as well as their benefits gave the difficulties in staff reorganization and competition in the private sector. In synopsis, the revenue of STC has been increasing, but the profits seem to be falling. It, therefore, seems only imperative for the company to rethink its cost structure if it is to maintain its dominant position in the market in light of the realization that some companies in the same sector have managed to pull it off.

The backdrop above points out the governments continued presence and involvement in the telecommunication sector. In 1998, MOTT was abolished, and STC was established as a publicly traded company. Today, government institutions have interests in over 80% of the company. Through the progressive evolution of the market regulations, issuance of shares has provided a suitable platform for modernizations and correction of the previously ineffective economy. Financial performance reports have been promising since the companys inception. In 2005, however, the Saudi government put an end to STCs dominance as the only player in the market, a move that hindered its operations and ultimately its profitability. In 2012, profits dived by close to 80% in the last quarter, a year that had commenced on profits at a low of 39% which was attributed to the write-downs on foreign involvement and an additional 17% increase in operating expenses. The companys share price further went down later that year to underachieve in the countrys key stock index.

Towards the last quarter of the financial year 2013, the companys subscribers had hit the 160million mark with 78% of the subscribers being foreign. The increase in subscribers had doubled from the previous year. The companys revenue accounted for more than 50% of the sectors total revenues. Aggregate domestic mobile subscribers were now at 2.3million with a penetration rate of 43%. STC was determined to extend its presence the dynamic business segment. To achieve this goal offered business solutions for corporate members as well as technology solutions for upcoming economic hubs. Further investments were channeled towards infrastructure aimed at expanding the companys network.

In 2014, STC recorded a net income of $26 billion which was not only an increase from the previous yea...

Have the same topic and dont`t know what to write?
We can write a custom paper on any topic you need.

Request Removal

If you are the original author of this essay and no longer wish to have it published on the SuperbGrade website, please click below to request its removal: