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stc
Annual Report
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A brief overview of stc
Group

 

,The performance, activities

and investments of stc Group

and its subsidiaries during

the year 2022

 

Risks management

and transactions with

related parties

 

Board of Directors and
Committees

 

Dividends Policy and Distribution

and Board Recommendations and

Compensation

 

Conclusion

 

Financial Consolidated

Statements

A brief overview of stc Group The performance, activities, and
nvestments of stc Group and
its subsidiaries during the year 2022 Risks management and transactions
with related parties Board of Directors and Committees Dividends Policy and
Distribution and Board
Recommendations and Compensation Conclusion Financial Consolidated
Statements
stc Group

stc Group

group

Commercial Unit

stc achieved exceptional growth in 2022 capitalizing on the easing of COVID-19 restrictions and a positive macroeconomic outlook in the Kingdom, as revenues streams increased such as roaming, prepaid expat segments, etc. Indeed, stc has over performed compared to the market across its product categories. It is noteworthy that stc were able to achieve this performance while maintaining a premium value positioning in the market. This is testament of stc’s continued leadership in the market across customer experience, service quality as well as go-to-market capabilities such as data-driven base management, retention, and sales.

Our agile, data-driven decision-making framework has been instrumental in navigating a highly dynamic and evolving market. stc’s leadership leveraged its multi-functional task forces to closely monitor and manage any market challenges which resulted in being able to deliver on time. stc also maintained its focus and efforts to evolve its flagship digital capabilities, elevating customers’ experience, improving digital journeys, leveraging on data analytics and targeting capabilities across the customers’ lifecycle. These initiatives resulted in providing a unified digital experience for customers and maintaining competitive advantages in terms of digital sales, services, communications and others.

It is noteworthy that the users of the Mystc application have reached more than

9 million users.

In terms of mobile services, stc not only maintained its leadership in the mobile market, but also increased its market share thru

1

providing exceptional, segment-specific offerings that capitalize on our leading 5G-network,

2

leveraging go-to-market thru communications, sales, fulfillment, customers’ management, and loyalty management; all of which were boosted by our ever-growing digital and analytical capabilities. stc benefited from easing COVID-19 restrictions where we were able to fully recover our roaming revenues, capture a growing share of the returning expats market and uplift prepaid customers’ attachment. On both postpaid and prepaid, we grew our customers’ base to ensure solid start of 2023.

On the residential front, stc continued its growth and retained the market it captured during COVID-19’s work-from-home and e-Learning period. Overall market growth has slowed down in the aftermath of easing COVID-19’s restrictions. However, stc was able to sustain its growth due to

1

migration of legacy copper and wireless bases to FTTH and FWA,

2

evolving Open Access frameworks,

3

new real estate projects,

4

an FTTH land grab push on both stc and non-stc networks as Open Access frameworks mature

5

repowered sales push on FWA,

6

increase the efforts to retain and migrate our legacy base to new technologies

7

solid customers base management thru switching customers to Triple play and higher-end plans. On overall, stc has recorded an impressive growth on FTTH and FWA, as stc leveraged its full suite of capabilities and managed to exceed expectations across the Kingdom.

Beyond core telco services, stc has achieved new feats across digital and growth services including consumer electronics, digital media, gaming, eSports, and last mile delivery and distribution. stc expanded its consumer electronics portfolio to cover wearables, hearables, tablets, laptops, smart home devices and TVs. Also expanded consumer electronics services such as trade-ins, repair, insurance, and etc. stc’s consumer electronics business has achieved notable growth despite lingering supply chain issues and consumer risk-averseness post COVID-19. stc, however, was able to mitigate multiple supply chain disruptions risk through our exceptional relationships with manufacturers and suppliers.

On digital media, stc repowered both its KSA and regional go-to-markets achieving more than

0% growth in active stc tv base.

stc also doubled down on content aggregation to achieve a super-aggregator positioning, enhanced its cross-bundling and promotions, and expanded its regional distribution partnerships. Moreover, stc has achieved exceptional growth on stc play, almost tripling its registered customers’’ base.

In addition, stc has been building all the key capabilities to monetize its growing stc play’s base and capture a share of the gaming and eSports market. On last mile delivery and distribution, stc exploited core telco market and last mile delivery market growth to expand its client base, which resulted in achieving growth in the distribution business by around 18%, and almost triple last mile deliveries on behalf of new clients. stc will continue upholding and monetizing world-class capabilities such as last mile delivery and distribution in the Kingdom and beyond.

Moving forward, stc’s future aspirations aim to become the consumer’s go-to digital lifestyle provider. stc will maintain its leadership in the core telco market capturing a higher-value base through a next-generation value proposition, providing best-in-class experience, and exploiting the vast opportunities that exist in the market. stc will become the largest regional digital lifestyle provider across consumer electronics, digital media, and gaming and eSports.

group

  • Enterprise Unit:

    As the world continued to readjust to the new norm, trends that emerged or accelerated as a result of the pandemic continue to impact the Information and Communication Technology sector and how they provide B2B services. The main trends of 2022 included the widespread of remote work, a surge of e-commerce and online retail, online education and health technology, artificial intelligence, machine learning and last but not least, the importance of cybersecurity.

    The main aspects stc focused on during 2022 were expanding and providing new products and services, as well as producing and implementing multiple solutions to contribute in achieving the objectives of Vision 2030. stc continued to play the role of digital enabler and partner with key market and investment influencers such as PIF to launch the biggest IoT company in the region (IoT squared) in order to drive the next era of digital economies, smart cities, and state-of-the-art logistics operations and manufacturing. Additionally, stc and Alibaba Cloud established a Joint venture company in order to meet the demand for hyperscaler cloud services, while enhancing information security by localizing it in the Kingdom that would support attracting foreign investments.

    To culminate the year, stc won the Communications, Space & Technology Commission’s 15-year auction for the 2100 MHz spectrum for non-terrestrial networks, which allows the provision of communications services on aircraft and the provision of mobile communications services via satellite (MSS).

    stc continued to play a pivotal role in the region by signing over 10 global and local strategic partnerships in 2022, including partnerships to contribute in creating a safe and more stable global cyberspace, foster investment, build the foundations for global cooperation in cyberspace, and catalyze socioeconomic change. Furthermore, stc signed agreements with local car rental providers for fleet control services; the agreement aims at ensuring automated and agile management of vehicles using Internet of Things (IoT). Another agreement was also signed with the Ministry of Tourism and the Saudi Tourism Authority, aiming to support and implement the digital tourism strategy in the Kingdom.

    Along with that, stc signed a memorandum of understanding to promote the development of the virtual reality platform “Metaverse” to drive the digital economy and create more opportunities to empower businesses. This includes solutions in areas such as green tech and zero net targets emission, oil and gas, and developing go-to-market strategy for AI solutions for industries that have potential for good use-cases included the health fields, smart cities and infrastructure.

    stc also signed a memorandum of understanding with King Abdulaziz City for Science and Technology (KACST) with the aim of building a strategic relationship and providing satellite solutions to leverage stc's networks and digital infrastructure in order to discover available options for satellite imagery products produced by KACST.

    Through the business unit sector, stc sponsored many global and local events and participated in a number of exhibitions to showcase stc's capabilities in different domains such as education, health and industry to name a few. The main highlights of these events were stc participation in the "Future Initiative Institute" and the "International Cybersecurity Forum 2022", where stc showcased advanced cyber solutions to enhance innovation in future technologies.

    Additionally, stc was present at the flagship event, "Seamless KSA” where it presented the latest solutions that enable the FinTech sector. stc was also the digital sponsor at the Gartner International Expo in Barcelona where it showcased its digital solutions and capabilities through our subsidiaries.

    Thru our participation in the "Global Defense Exhibition", the largest gathering of the security and military sectors, stc revealed a set of cyber technical solutions and medical technologies to enable specialized teams to perform their tasks across field hospitals and during emergencies.

    stc has sponsored the Hajj and Umrah Conference and Exhibition, during which it showcased the most important leading digital solutions to enrich the experience of pilgrims. stc was also a strategic partner of the Saudi Ports Authority to enable Saudi ports digitally to achieve the targets of the ports in accordance with the national strategy for transport and logistics services.

    stc also complemented its role as a digital enabler to support business sectors by launching multiple digital solutions: such as SD-WAN, Soft-POS and GPU. SD-WAN is a managed service, which allows enterprises to securely connect any location using any combination of WAN services that are all managed by stc, such as, MPLS and/or internet services including wireless and fixed broadband, which would allow optimizing the bandwidth and improving business continuity for users by having consistent experiences regardless of the WAN technology. With stc SD-WAN service, businesses will receive full visibility into their applications, network, and users under one unified portal. As for SoftPOS, it is revolutionary new technology that allows merchants to accept card payments directly on phones or NFC-supported devices without the need of any additional hardware, additionally, stc is offering a comprehensive MSP POS bundle that includes all EFT POS components and add-ons with flexible & innovative business models on top of a comprehensive managed service offering. SD-WAN service will position stc as a one-stop-shop for payment solutions and makes it one of the largest player in this filed. Finally, GPUaaS (Graphics Processing Unit) High-performing compute resources that are available on-demand. It is an essential element in enabling sophisticated emerging tech opportunities, AI and machine learning use cases in the kingdom, which positioned stc as the leading digital solution provider and high-tech economy enabler.

  • Carrier & Wholesale Unit

    stc continuously seeks to be fit for the future by leveraging the full force of its talents, expertise and assets to make numerical achievements and work to meet the stakeholders’ needs and services locally and internationally in the fields of data center and internet services.

    During 2022, stc actively asserted its international presence in infrastructure space with the most advanced and modern network in the MENA region and seek the development and expansion of its land and marine cables.

    In 2022, stc has reached major milestones. Foremost, the successful launch of Digital Centers for Data and Telecommunications Company (center3) with a focus on global connectivity and data center (DC) infrastructure, towards the evolution of a highly interconnected digital ecosystem for customers regionally and globally, while ensuring high availability of data, content, and business continuity for KSA and the MENA region. It is considered the owner of stc Group's digital infrastructure assets, including data centers, submarine cables, international presence points, and Internet exchange points.

    Additionally, stc Group launched

    'Saudi Vision Cable,'

    a high-capacity cable with four landing stations (Jeddah, Yanbu, Dhaba and Haql) along the Red Sea coast of the Kingdom of Saudi Arabia (KSA). The Saudi Vision Cable spans 1,160,000 meters and it is fully by stc. It is the first ever high-capacity submarine cable in the Red Sea region that will provide smooth PoP to other PoP communication for up to 18 terabytes with a total of 16 pairs of optic fibers. The Saudi Vision Cable will be one of the submarine cables that will be connected to center3, the regional digital center for the Middle East, which aims to connect three continents, taking advantage of the strategic location of the Kingdom of Saudi Arabia.

    The new cable will join the submarine cables in which stc Group invested in, which increased to 16 submarine cables with 9 landing stations connecting three continents of the globe in addition to digital submarine capacity control centers across 5 coastal cities in the Kingdom. Also, will support the inaugurated 10 data centers, and the additional 6 data centers that are under construction across the Kingdom to ensure business sustainability through the diversity and flexibility of assets that operate as a one-stop shop to improve customers’ experience. These centers would contribute in localizing content and services through investments provided by stc to these multiple centers, which have a capacity and DC access of up to 125 MW to be raised to 300 MW according to the plan being developed by stc.

    To maintain and strengthen its position as the key provider of wholesale services in the region, stc signed an agreement with London Internet Exchange (LINX) for the expansion of JEDIX interconnection service to Riyadh and Dammam cities. Moreover, an agreements have been signed with China Telecom Global to establish a new PoP in Jeddah Data Center. Furthermore, an agreement with Virgin Mobile SA has been singed to extend the MVNO services for another 6 years.

    Group

  • Technology Unit

    stc’s commitment towards the kingdom, vision 2030, its customers and citizens is clear and firm. stc’s Technological Strategy is maintained to cater for effectiveness and efficiency and ensuring the sustainability of its technology leadership, and smartly over-delivering on its promise to its customers and shareholders’ expectation which can be witnessed thru the following achievements:

    • ▪ Infrastructure

      Quicken Infrastructure Modernization and simplification in a fast-changing environment from a market as well as technology trending perspective, through:

      +7,300K 5G sites deployed, including 900 sites to increase network capacity on (N40) scale, in 78 cities reaching 40.40% population coverage across the kingdom and connect 95% of all 5G sites with optic fibers.

      546 P2P fiber connectivity to support the Enterprise and Wholesale sectors demand. In addition to 53K FTTH Dwelling units to support Consumer sector.

      +17% capacity added to expand transport network (IP/MPLS) to cater Mobile and Fixed traffic.

      In preparing for 3G shutdown, 15% of Mobile sites have been modernized to 4G for efficient utilization of spectrum resources as well as improving customer experience. Additionally, VoLTE capacity has been expanded by 53%.

      Completed the first Global 1.2T/channel trial in stc DWDM optical network, this would help to increase network capacity and reduce capital and operational costs.

      Successfully tested Air to Ground (A2G) trail to provide broadband services on commercial airlines from Riyadh to Jeddah route.

      stc exclusively acquisitioned new frequency bands for (A2G) for civil aircraft broadband services and satellites mobile communications services.

      75 (5G / LTE) sites have been deployed to cover NEOM project.

      Successfully completed 1st commercial engagement with SABIC on Edge computing domain with Edge DC within the premises of the Customer MEC.

      Exceptional preparation of required infrastructure to support high quality services for Hajj & Umrah Season, and also supporting other significant events across the Kingdom (Riyadh season, Al Ula, and World Cup).

      Successful deployment for the vision submarine cable with 2 landing stations along the cable route.

      stc Launched the world's first triple-frequency microwave link to provide speeds of up to 10G using a single antenna.

      Middle-East’s First Ever Long-Haul Microwave Link with height of 125 meter tower in Farasan Island, which spans over the sea by 52km with great efficiency which increased the total data capacity by 400% to enriching the customer experience.

      Successfully constructed data centers in (eastern region, Riyadh and Jeddah) as first phase with 14.4 M/watt capacity.

      Achieved 23 virtualized Network Function carrying live traffic to accelerate the physical network migration to Cloud platform.

      Achieved solar power installation in new DC Buildings (adopting green energy) with achieved target of 2500 KW by end of 2022.

      753 Legacy nodes powered-off & dismantled to enhance the customer experience and save space and power.

      stc has obtained some excellence Awards in 2022, Telecom Review Excellence Award for “Best 5G User Growth” , Middle East Technology Excellence Awards for Cloud networking Data Center Automation, and Glotel Prestigious award for Private Networks Perfection -Non-public Mobile Networks/Private Campus

      Also, stc has been shortlisted in five excellence awards in 2022, Glotel Excellence Awards, for Best Operator- Enabling digital transformation in Saudi Arabia, NETWORK TRANSFORMATION AWARDS 2022, for 5G Service Excellence - 5G Carrier Aggregation.

    • send

  • Operations & Technology Performance:

    stc’s objective aims to develop and improve technical operations capabilities by focusing on performance results, operational processes calibration, resources skillset enhancement through trainings, processes reengineering digitization & automation, network risk mitigation, enhancement of network resilience & reliability, and business continuity in order to reach high efficiency, and contain disasters that might threaten stc’s services towards the market. All those resulted in huge performance improvements in 2022 which can be illustrated below:

    .

    Mobile network download median speed has increased significantly by 31% during 2022 as compared to 2021.

    .

    stc maintained #1 ranking in the kingdom for Mobile download Speed.

    .

    Achieved an increase in Mobile data volume by 21.4% in 2022 as compared to 2021.

    .

    Achieved a considerable increase in HD voice services through 4G technology (VoLTE) by 22% in 2022 as compared to 2021.

    .

    Achieved an increase in 5G data volume by 122.8% in 2022 as compared to 2021.

    .

    Obtained Platinum Award for game mode from Communications, Space & Technology Commission (CST) during first half of 2022.

    .

    stc was recognized by the Telecom Review organization as the receiver of the global excellence award for "the most innovative product or service in the Middle East" for their work in developing and using artificial intelligence to measure performance and optimally employ it throughout the Hajj season (using UPM tools).

    .

    stc operates the Technical Facilities with high availability of 99.9%, with 117 Technical Facilities upgraded to host new technology.

    .

    The outstanding performance of stc networks (mobile, fixed, data circuits) during Ramadan and Hajj seasons.

    .

    Enhance the strategy critical systems solutions.

    .

    Successfully installed over 167 circuits in major events such as Riyadh Seasons, Global Entrepreneurship Congress, Future Investment Initiative, Global Cyber Security and similar events.

    .

    Obtained the first Recognition & Certification of stc with Saudi authority for intellectual property by designing a new ATB that had low loss which would improve signal at 60% of the FTTH customers.

    .

    Quality Assurance improvement, where FTTX Quality improved by 8%, 23% increase in closing ticket KPIs within SLA, and 9% Partners (Suppliers & Contractors) Warehouse Quality improvements were achieved.

    .

    Innovative solutions for Sand Stabilization Polymer: provided a solution to protect the cable from exposure, environmentally friendly use, support stc commitment to ESG, and enrich the local content.

    .

    Innovative solutions for Pre-Cast Concrete Slap Solution, which reduced the cost by 25% and enhanced the customers’ experience.

    .

    stc has been awarded ISO 9001:2015 (Quality Management System) for the second year in a row.

    .

    stc has received international certifications (ISO 9001: 2015، ISO 9004: 2018) related to data quality management and best practices which increases trust in AI applications built on stc data, and stc also received ISO 24028: 2020 certification related to AI trustworthiness, with stc being the first organization in Middle East to receive this certification.

  • Digital transformation:

    Improving and developing capabilities and digital solutions to support business and enable new ways of work inspired by digital transformation, through:

    .

    stc promoted innovation with local and international partners and Saudi talents by introducing novel ideas, prototype it and transform it to value such as 5G satellites services and AI applications.

    .

    A partnership agreement with Oracle to modernize and rationalize the databases of business support systems to the Oracle cloud platform. This is hosted in stc’s data centers, which allows flexibility in storing data with the highest security standards through consumption-based pricing model

    Faster Time to Market:

    reduce the average project processing time
    from budget announcement until PR issuance by

    0%

    Projects Awarding Efficiency:

    Increase the awarding performance during
    the year compared to the previous year, by

    0%

    .

    Digitization: support decision making through digital command to track technology projects lifecycle in all its stages, which includes more than 300 major projects.

    .

    Launched mystc auction, revamp mobility postpaid, migrated Intelligent network and launched our first digital service catalogue JAWWY.

    .

    Focus on enabling major platforms/products such as smart cars platform for a major car manufacturer and SDWAN service, along with focusing on enterprise dynamics in launching platforms that will underlay the business model in the future such as IOT connectivity platform, market place and communication platform as a service.

    .

    From smart energy use cases to full MVNO enablement, we launched smart meter M2M project and introduced smart revenue costing and margin.

    .

    Driven by the war of talents, quick adaption to experience and meeting expectations of supply and demand we leveraged Software-As-A-Service (SAAS), as a game changer to accelerate our HR system transformation resulting in reducing workforce planning time by 70%.

    .

    stc converged all the streams toward a unified command center overlaying all the governance components.

    .

    stc seeks to promote and accelerate culture of artificial intelligence adoption and building trust in data. It continues the development of artificial intelligence models while complying with national data regulations and governance ensuring the protection and privacy of stc's customers' data.

    .

    The analytics strategy and data governance maturity measurement model were launched at stc Group level to take the lead in AI at regional level, as an extension of the dare 2.0 strategy and stc's transformation journey.

    .

    More than 40 AI models have been developed to serve more than twenty entities, which include many of the Group's companies such as IoT squared, sirar and stc Play.

    .

    Intellectual property rights of the Data Quality Health Index measurement product have been registered, which supports the concept of proactive data quality. It contributes to the success of internally developed artificial intelligence solutions.

    .

    stc adopted sharing of AI expertise, its concepts , applications, framework and concepts of data governance through holding awareness workshops for Group companies, specialist development programs, and the InspireU business incubator program.

    .

    stc continues its journey in developing its self-services to design and create reports and dashboards to serve all sectors, which increases operational efficiency and speed of response to commercial requirements.

    .

    stc seeks to support many data initiatives for cultural change towards building institutional decisions based on a deep understanding of data to support and improve decision-making.

    .

    AI models developed internally using various technologies were showcased through participation in many local and international events such as LEAP and the Global AI Summit.

    .

    Building a unified system for data based on internationally approved communication data structure models that link all areas of services and products.

    Increasing the technical capacity of the system by

    0%

    in processing customers’ data per second,
    and improving customers’ service by
    expanding the fifth generation network.

    .

    Modernizing the data analytics platform by adopting the capabilities of the new generation of analytical capabilities that contribute to improving multiple data storage technologies and accelerating the construction of machine learning and self-learning processes to be used to further raise the rate of customer satisfaction and improve operational efficiency.

    .

    Building a unified system that facilitates access to analytical data in accordance with approved data governance controls.

    .

    Building and developing a gaming environment and entertainment content in order to improve the quality of service and improve the customers’ experience through a system that measures the quality of customers’ experiences for fixed networks.

  • Cyber Security

    Group

    stc has embarked various initiatives and implemented innovative solutions to protect its customers’ data and elevated the maturity level of Cyber Security towards all stc Infrastructure and Services, through:

    .

    Protect customers' Call, SMS, and internet browsing against external threats where on monthly average (3.9 M malicious SMS’s are blocked, 5.83B connections to malicious sites are Blocked, 325 Hours Prevented Down Time from blocked denial of service attacks). Also stc has protected its brand by taking down 1,874 social media impersonations in 2022.

    .

    stc promoted the Cyber security culture by conducting +25 awareness campaigns to the public through different channels such as Twitter, LinkedIn & Podcast. Additionally, we have built videos, which are published via gaming platforms for kids to make them cyber aware.

    .

    stc continuously maintaining ISO27001:2013 Certification (Information Security Management System)

    .

    stc has achieved a new certificate ISO27032:2012 Certification (Information technology Security techniques Guidelines for cybersecurity)

    .

    stc is the 1st Saudi national company to achieve CREST accreditation for Cybersecurity penetration test services and FIRST (global forum for Incident Response) member and acts as a certifier for other organizations.

    .

    stc is actively contributing in GSMA roaming and interconnect fraud security sub-group RIFS to secure roaming voice calls, also it became a member of GMSA T-ISAC committee which has only 8 members worldwide. This committee is considered as central hub of information sharing for the Telecommunication Industry.

    .

    stc in its drive to innovate, has collaborated and published various white papers sharing its innovations with the world, These publications include; (A white paper in collaboration with Boston Consulting Group (BCG) outlining how to turn a Cyber Security strategy into a reality, elevate & maintain organizations maturity to desired level), (A white paper in collaboration with Huawei outlining the emerging security challenges being faced by artificial intelligence from misuse, data theft and potential attacks and provided recommendations to secure the AI ecosystem), (A white paper published via GSMA on an innovative approach for securing roaming subscribers).

    .

    Started Cyber Security Hackathon to promote innovation and enhance collaboration among the cyber security talent across stc Group.