Global Insight Perspective | |
Significance | The deal will give STC exposure to lucrative Turkish and South African markets. |
Implications | Oger is looking for other acquisitions in Eastern Europe, making it an attractive company to invest in. |
Outlook | The deal allows STC to expand outside its domestic environment, which has recently been exposed to competition in both fixed-line and mobile services. |
Oger Telecom provides fixed-line, mobile and internet services in Saudi Arabia, Lebanon and Jordan. Its parent, Saudi Oger, is a construction company controlled by the Lebanese Hariri family. The operator has a 55% stake in the Turkish fixed-line operator, Turk Telekom, which in turn owns an 81% stake in the Turkish mobile operator, Avea. In South Africa, Oger has a 75% stake in the mobile operator, Cell C, which in turn is forming a 50% joint venture with Virgin Mobile. In Lebanon, Oger owns a 95% stake in the ISP, Cyberia. Recently, the Oger Group acquired a 50% stake in Inquam Ltd, which owns the Romanian mobile operator, Telemobil (branded Zapp), now giving Oger 100% ownership of Inquam and, thus, Telemobil.
STC is facing competition in both its fixed-line and mobile services in Saudi Arabia. In 2007, the operator lost its fixed-line monopoly to Bahrain's Batelco, Hong Kong's PCCW and U.S. firm Verizon Communications (see Saudi Arabia: 14 June 2007: Saudi Fixed-Line Winners to Receive Licence in July). It currently competes with Etisalat's Mobily for mobile services in Saudi Arabia and will have additional competition in 2008 when Zain enters as the third operator. In 2007, STC invested in the Asian mobile markets when it acquired a 25% stake in Malaysian mobile operator Maxis, and a direct stake of 51% in its Indonesian unit, PT Natrindo Telepon Seluler (NTS), in a deal worth US$3.01 billion (see Asia-Pacific: 13 September 2007: Saudi Telecom Completes Maxis Stake Purchase).
Outlook and Implications
The deal will greatly benefit STC as Saudi Oger is expected to have further exposure to markets outside the Middle East. It is, for example, a strong bidder for the Slovenian fixed-line incumbent, Telekom Slovenije (see Slovenia: 7 January 2008: Three Bidders for 49.13% Stake in Telekom Slovenije) and was recently in talks with Vivendi, the owner of Maroc Telecom, over potential investments in the Middle East (see Saudi Arabia: 20 November 2007: Vivendi in Talks with Oger Telecom for Middle East Investment).
STC is continuing to take opportunities to invest outside its domestic market. At the end of last year, the operator purchased a 26% stake in Kuwait's third mobile operator for US$908 million (see Kuwait: 27 November 2007: STC Wins 26% Stake in Kuwait's Third Mobile Operator). STC's continued actions to invest outside its domestic markets will help the operator in its long-term growth strategy.