MIRA INFORM REPORT

Report Date :

15.03.2014

IDENTIFICATION DETAILS

Name :	SAUDI TELECOMMUNICATIONS CO (STC)
Registered Office :	STC Building Al Mursalat City PO Box 88945 & 87912 & 67668 Riyadh 11652
Country :	Saudi Arabia
Financials (as on) :	31.12.2013
Date of Incorporation :	1965
Com. Reg. No.:	1010150269, Riyadh
Legal Form :	Joint Stock Company
Line of Business :	National telecommunication company
No. of Employees :	23,000

RATING & COMMENTS

MIRA’s Rating :

A

RATING		STATUS	PROPOSED CREDIT LINE
56-70	A	Financial & operational base are regarded healthy. General unfavourable factors will not cause fatal effect. Satisfactory capability for payment of interest and principal sums	Fairly Large

Status :	Good
Payment Behaviour :	Regular
Litigation :	Clear

NOTES :

Any query related to this report can be made on e-mail : infodept@mirainform.com while quoting report number, name and date.

ECGC Country Risk Classification List – September 30, 2013

Country Name	Previous Rating (30.06.2013)	Current Rating (30.09.2013)
Saudi Arabia	A2	A2

Risk Category	ECGC Classification
Insignificant	A1
Low	A2
Moderate	B1
High	B2
Very High	C1
Restricted	C2
Off-credit	D

SAUDI ARABIA - ECONOMIC OVERVIEW

Saudi Arabia has an oil-based economy with strong government controls over major economic activities. It possesses about 16% of the world's proven petroleum reserves, ranks as the largest exporter of petroleum, and plays a leading role in OPEC. The petroleum sector accounts for roughly 80% of budget revenues, 45% of GDP, and 90% of export earnings. Saudi Arabia is encouraging the growth of the private sector in order to diversify its economy and to employ more Saudi nationals. Diversification efforts are focusing on power generation, telecommunications, natural gas exploration, and petrochemical sectors. Over 6 million foreign workers play an important role in the Saudi economy, particularly in the oil and service sectors, while Riyadh is struggling to reduce unemployment among its own nationals. Saudi officials are particularly focused on employing its large youth population, which generally lacks the education and technical skills the private sector needs. Riyadh has substantially boosted spending on job training and education, most recently with the opening of the King Abdallah University of Science and Technology - Saudi Arabia's first co-educational university. As part of its effort to attract foreign investment, Saudi Arabia acceded to the WTO in 2005. The government has begun establishing six "economic cities" in different regions of the country to promote foreign investment and plans to spend $373 billion between 2010 and 2014 on social development and infrastructure projects to advance Saudi Arabia's economic development

Source : CIA

SUMMARY

Company Name : SAUDI TELECOMMUNICATIONS CO (STC)

Doing Business As : SAUDI TELECOM CO

Country of Origin : Saudi Arabia

Legal Form : Joint Stock Company

Start Date : 1965

Registration Date : 29^th June 1998

Commercial Registration Number : 1010150269, Riyadh

Chamber Membership Number : 90247

Issued Capital : SR 20,000,000,000

Paid up Capital : SR 20,000,000,000

Total Workforce : 23,000

Activities : National telecommunication company.

Financial Condition : Good

Payments : Nothing detrimental uncovered

Operating Trend : Steady

COMPANY NAME

SAUDI TELECOMMUNICATIONS CO (STC)

DOING BUSINESS AS

SAUDI TELECOM CO

ADDRESS

Registered & Physical Address

Building : STC Building

Area : Al Mursalat City

PO Box : 88945 & 87912 & 67668

Town : Riyadh 11652

Country : Saudi Arabia

Telephone : (966-1) 4637225 / 4525555

Facsimile : (966-1) 4052310 / 4525229

Email : contact@stc.com.sa

Premises

Subject operates from a large suite of offices that are owned and located in the Central Business Area of Riyadh.

KEY PRINCIPALS

Name Position

· Abdulaziz A Al Sugair Chairman

· Mohamed Abdullah Al Kharachi Vice Chairman

· Mohammed Bin Omran Al Omran Board Member

· Abdulaziz Bin Haban Alhabdan Board Member

· Dr Hamed Bin Suleiman Al Qassumi Board Member

· Mohammed Bin Saleh Al Daham Board Member

· Ibrahim Bin Ali Al Hassan Board Member

· Mohamed Dhayyan Al Dhayyan Board Member

· Saleh Ali Al Azal Board Member

· Abdullah Abdulrahman A Alzmame Networks Manager

· Krishnan Ravi Kumar Chief Financial Officer

· Fraser Curley Planning Manager

· Cyril Pourrat Procurement Manager

· Saud Bin Abdul Aziz Al Shammari Human Resources Manager

· Omer Abdullah Al Nomany IT Manager

· Ayman S Alsuhaim Operations Manager

LEGAL FORM & OWNERS

Date of Establishment : 29^th June 1998

History : Subject was originally established in 1965 as a department of the Ministry of Post,

Telegraphs and Telephones.

However, in 1998, subject became a legal entity and was registered as a Joint Stock

Company. This was a result of the Saudi government’s approval of the plan to privatise the telecommunications sector.

In December 2002, 90,000,000 shares in the subject were made available in an initial public

offering, which was fully subscribed in early 2003.

Legal Form : Joint Stock Company

Commercial Reg. No. : 1010150269, Riyadh

Chamber Member No. : 90247

Issued Capital : SR 20,000,000,000

Paid up Capital : SR 20,000,000,000

Name of Shareholder (s) Percentage

· Pubic Investment Fund * 70%

· General Organisation for Social Insurance 5%

· Public Pension Fund 5%

· Saudi nationals & private investors 20%

* The Pubic Investment Fund is directly responsible to the Saudi Government.

AFFILIATED COMPANIES

Name Percentage Held

· Arabian Internet and Communications Services LLC 100%

Saudi Arabia

· Telecom Investment Company Ltd 100%

Saudi Arabia

· STC Bahrain BSCC 100%

Bahrain

· Aqalat Limited Company 100%

Saudi Arabia

· PT Axis Telecom Indonesia 80.10%

Indonesia

· Intigral Holding Company BSCC 71.00%

Bahrain

· Sale for Distribution & Communication Co Ltd 60.00%

Saudi Arabia

· Arab Submarine Cables Company Ltd 50.00%

Saudi Arabia

· Call Center Company 50.00%

Saudi Arabia

· Arab Satellite Communications Organization (Arabsat) 36.66%

Saudi Arabia

· Oger Telecom Ltd 35.00%

United Arab Emirates

· Kuwait Telecom Company KSCC 26.00%

Kuwait

· Binariang GSM Holding Group 25.00%

Malaysia

OPERATIONS

Activities: Subject is responsible for the national and international telecommunication services throughout the

Kingdom of Saudi Arabia.

Services include full feature telephones for home, office and commercial sites, as well as wireless communications that include GSM, paging and satellite technologies. The company has 3.3 million working lines at the end of July 2002.

Al Jawal

This division is responsible for STC’s mobile network. By the end of 2002 it had increased the number of mobile lines to reach a total of 5,007,965 for the Kingdom, a 98% increase that is an average of 23.5 mobile subscribers out of a possible 100.

Import Countries: United States of America and Europe.

Operating Trend: Steady

Subject has a workforce of approximately 23,000 employees.

FINANCIAL DATA

Financial highlights provided by local sources are given below:

Currency: Saudi Riyals (SR 000’s)

Consolidated Balance Sheet 31/12/13 31/12/12

ASSETS
Current assets:
Cash and cash equivalents	960,074				1,614,361
Short-term investments	16,828,933				8,670,447
Accounts receivable, net	7,679,909				7,705,006
Prepaid expenses and other current assets	3,151,488				3,442,661
28,620,404	21,432,475
Assets held for sale Total current assets	3,540,292 32,160,696				- 21,432,475
Non-current assets:
Investments accounted for under equity method and others	9,591,925				13,394,050
Investments in sukuk	1,687,500				1,687,500
Property, plant and equipment, net	38,402,069				39,873,248
Intangible assets, net	4,607,753				5,053,784
Other non-current assets	909,852				1,063,943
Total non-current assets			55,199,099			61,072,525
Total assets		87,359,795				82,505,000
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	2,761,428				4,283,553
Other credit balances – current	2,959,389				2,950,735
Accrued expenses	7,067,781				6,360,712
Deferred revenues – current portion			1,227,370			1,780,651
Murabahas – current portion	1,560,571				1,411,491
		15,576,539		16,787,142
Liabilities related to assets held for sale	4,073,763				-
Total current liabilities		19,650,302				16,787,142
Non-current liabilities:
Murabahas – non-current portion	6,976,494				9,953,061
Provisions for end of service benefits	3,395,451				2,891,380
Other credit balances - non-current	1,174,855				1,688,196
Total non-current liabilities		11,546,800		14,532,637
Total liabilities		31,197,102		31,319,779
Equity
Shareholders’ equity:
Authorized, issued and outstanding share capital: 2,000,000,000 shares, par value SR 10 per share	20,000,000				20,000,000
Statutory reserve	10,000,000				10,000,000
Retained earnings		28,689,090				22,792,023
Other reserves	(1,031,887)				(606,881)
Financial statements’ translation differences		(1,800,422)				(848,014)
55,856,781	51,337,128
Reserves relating to assets held for sale	372,846				-
Total shareholders’ equity		56,229,627				51,337,128
Non-controlling interests		494,603				(151,907)
Non-controlling interests recognized and relating to assets held for sale	(561,537)				-
Total equity		56,162,693				51,185,221
Total liabilities and equity		87,359,795				82,505,000

Consolidated Statement of Income

Revenues from services	20 45,604,629	44,745,076
Cost of services	(18,191,385)	(19,483,373)
Gross Profit	27,413,244	25,261,703
Operating Expenses
Selling and marketing expenses	(6,018,859)		(6,095,286)
General and administrative expenses	(2,923,841)		(2,893,160)
Depreciation and amortization	(6,378,284)		(6,336,702)
Impairment losses relating to investments	(1,103,608)		(190,869)
Total Operating Expenses	(16,424,592)	(15,516,017)
Operating Income	10,988,652	9,745,686
Other Income and Expenses
Losses from investments accounted for under equity method	(939,823)		(2,002,774)
Finance costs	(143,252)		(677,714)
Commissions and interest	190,184	114,037
Losses resulted from assets held for sale	(597,867)		-
Others, net	950,398		198,608
Other income and expenses, net	(540,360)	(2,367,843)
Net Income before Zakat, Taxes and Non-controlling interests	10,448,292	7,377,843
Provision for Zakat and Taxes	(230,431)		(214,982)
Net Income before Non-controlling interests	10,217,861	7,162,861
Non-controlling interests	(320,794)	113,098
Net Income	9,897,067	7,275,959

Local sources consider subject’s financial condition to be Good.

BANKERS

· National Commercial Bank

Batha Branch

PO Box: 34

Riyadh 11411

Tel: (966-1) 4010076 / 4025084

Fax: (966-1) 4034625

· Saudi British Bank

PO Box: 2907

Riyadh 11462

Tel: (966-1) 4794400

PAYMENT HISTORY

No complaints regarding subject’s payments have been reported.

GENERAL COMMENTS

During the course of this investigation nothing detrimental was uncovered regarding subject’s operating history or the manner in which payments are fulfilled. As such the company is considered to be a fair trade risk.

FOREIGN EXCHANGE RATES

Currency	Unit	Indian Rupees
US Dollar	1	Rs.61.52
UK Pound	1	Rs.102.22
Euro	1	Rs.85.23

INFORMATION DETAILS

Report Prepared by :

NIS

RATING EXPLANATIONS

RATING		STATUS	PROPOSED CREDIT LINE
>86	Aaa	Possesses an extremely sound financial base with the strongest capability for timely payment of interest and principal sums	Unlimited
71-85	Aa	Possesses adequate working capital. No caution needed for credit transaction. It has above average (strong) capability for payment of interest and principal sums	Large
56-70	A	Financial & operational base are regarded healthy. General unfavourable factors will not cause fatal effect. Satisfactory capability for payment of interest and principal sums	Fairly Large
41-55	Ba	Overall operation is considered normal. Capable to meet normal commitments.	Satisfactory
26-40	B	Capability to overcome financial difficulties seems comparatively below average.	Small
11-25	Ca	Adverse factors are apparent. Repayment of interest and principal sums in default or expected to be in default upon maturity	Limited with full security
<10	C	Absolute credit risk exists. Caution needed to be exercised	Credit not recommended
--	NB	New Business	--

This score serves as a reference to assess SC’s credit risk and to set the amount of credit to be extended. It is calculated from a composite of weighted scores obtained from each of the major sections of this report. The assessed factors and their relative weights (as indicated through %) are as follows:

Financial condition (40%) Ownership background (20%) Payment record (10%)

Credit history (10%) Market trend (10%) Operational size (10%)

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This report is issued at your request without any risk and responsibility on the part of MIRA INFORM PRIVATE LIMITED (MIPL) or its officials.