Financial Results Presentation - STC...stc has announced digital solutions to facilitate access to...

Financial Results Presentation

Investor Relations

Q3, 2020

2

Saudi Telecom Company (stc) has prepared this presentation to the best of its abilities, however, no warranty or representation, express or implied is made as to the

adequacy, correctness, completeness or accuracy of any numbers, statements, opinions, estimates, or other information contained in this presentation.

This presentation has been prepared as an informative guide that might assist interested parties in gaining an insight into the history and background of

telecommunications within Saudi Arabia, as they relate to stc. Furthermore, it does not constitute an invitation or inducement to purchase or dispose of any securities,

either in stc, or any companies in which stc has a financial interest.

The information contained in this presentation is subject to change and we disclaim any obligation to update you of any such changes, particularly those pertaining to

the forward-looking statements.

In addition, there may also be ‘forward looking’ statements included within the meaning of current securities laws and regulations. In this context, any opinions expressed

within this document, regarding the company’s potential future performance, should be viewed as being accurate at the time of preparation. However, cognizance should

be taken of the fact that uncertainty may dictate that actual performance differs substantially from any views articulated herein.

For further information about Saudi Telecom Company, or the materials contained within this presentation, please direct your enquiries to our Investor Relations team

via email at [email protected]

Disclaimer Financial Results Q3,2020 | stc group

Agenda

I. Strategy Overview

II. KSA Telecom Market Overview

III. Financial Highlights

Financial Results Q3,2020 | stc group

I. Strategy Overview

stc DARE Strategy

5

Digitally transform stc’s operational capabilities

Extract more value from our core assets and traditional segments

Redefine customer experience through personalization of every interaction Pursue concrete opportunities for growth

igitize stc

einvent Customer Experience At World-class

Standards

ccelerate Core Asset Performance

xpand Aggressively Scale And Scope

dare


Aligning stc Strategy with Saudi Arabia’s 2020 NTP 2020 & 2030 Vision

To raise our ranking on the E-Government Survey Index from our current

position of 36 to be among the top five nations;

To increase the private sector's contribution from 40% to 65% of GDP;

To increase women’s participation in the workforce from 22% to 30%;

To move from our current position as the 19th largest economy in the world into

the top 15;

To lower the rate of unemployment from 11.6% to 7%;

To increase SME contribution to GDP from 20% to 35%;

To increase our capacity to welcome Umrah visitors from 8 million to 30 million

every year.

Provide broadband services to all KSA regions by stimulating investment in

infrastructure and regulatory frameworks;

Support e-commerce;

Bridge the digital gap in the skills of ICT users;

Increase the IT industry’s contribution in the non-oil GDP;

Rehabilitation of specialized Saudi human capital and employment in CITC

sector;

Develop and activate smart government transactions based on a common

infrastructure.

Lead market in digital services and creative solutions

Digitalise processes, internal operations, delivery engine and commercial approach

Elements of stc Strategy:

Drive efficiencies through digital transformation

Instill culture change

Grow B2G and B SME segments

Lead technological advancement and provide best in class connectivity platform

6


II. KSA Telecom Market Overview

KSA & Telecom Industry (Q3 2020)

8

• Saudi bank loans granted to the public and private sectors increased 15% year-on-year (YoY) by the end of August 2020 to SAR 1.776 trillion compared to SAR 1.544 trillion a year earlier, according to data issued by the Saudi Arabian Monetary Authority (SAMA)..

• Qualified foreign investors (QFIs) were net purchasers of SAR 2.6 billion worth of stocks on the Saudi Stock Exchange (Tadawul) in September 2020, according to data issued by the bourse.

• The unemployment rate among Saudis rose to 15.4% quarter-on-quarter (QoQ) in Q2 2020, compared to 11.8% in Q1 2020, according to data from the Saudi General Authority for Statistics.

• Saudi Arabia’s GDP forecast to shrink 3.8% in 2020 with better performance in H2 2020.• Saudi Arabia's expenditure for the 2021 state budget is expected to reach SAR 990 billion, with estimated revenue of SAR 846 billion.

Macro Economy & Liquidity

• The General Organization for Social Insurance (GOSI) announced that an approval was issued to extend support for Saudi workers in private sector establishments that are still affected by COVID-19, through the unemployment insurance system (SANED), for an additional period of three months.

• Saudi Arabia announced on Sept. 28, that the 2020 G20 Leaders’ Summit will be held virtually on Nov. 21–22, chaired by King Salman.• Saudi Arabia announced four phases to resume Umrah, amid compliance with the required preventive health procedures. • The Saudi Ministry of Interior announced that the GCC nationals and non-Saudis, who hold valid exit and re-entry, work, residence or visit

visas will be allowed to leave and re-enter the Kingdom starting from Tuesday, Sept. 15.

• CITC issued the "Cyber Security Regulatory Framework for Service Providers in the Information and Communications Technology and Postal Sector"; Through which it seeks to raise the level of cybersecurity maturity within these sectors.

• CITC announced the extension of the competition to licenses new mobile virtual network operators (MVNOs) to provide services in Saudi Arabia.• CITC announced the entry into force of the open access agreement between all six telecommunications companies. This agreement aims to expand

choices for subscribers, as they will be able to choose their broadband service provider independently of fiber infrastructure ownership, which will increase broadband subscriptions and improve service quality.

Regulatory Environment

Government Initiatives


NEOM launches infrastructure work for the world’s leading cognitive cities in an agreement with stc

The Diplomatic Quarter General Authority has recently partnered with the leading integrated ICT Infrastructure service provider in the Kingdom, TAWAL, for the development of the area’s telecommunication infrastructure.

stc group has awarded as the 1st Saudi national company to be CREST accredited and certified for Cybersecurity penetration test services.

stc increased the coverage of the 5G network in Makkah and the holy sites during the Hajj season of 1441 AH by 119% compared to last year.

stc has achieved ISO/IEC 27001:2013 certification for its adherence to stringent data security practices in overall company operations.

Saudi Arabia has jumped five places globally in terms of mobile internet speed, ranking 5th worldwide with a speed of 71.73 MB/s as announced by Speedtest website.

stc won, for the 4th consecutive year, the award for the fastest mobile network speed, and the award for the best mobile coverage provided by a telecommunication company in the KSA.

stc has announced digital solutions to facilitate access to educational e-platforms. The company has introduced the "Education Package" offering unlimited access to the Ministry of Education's applications and platforms.

In continuation of its leading role in sales and distribution, stc Channels provided its SME clients POS solution systems provided by SUNMI to enhance digital transformation and improve sales solutions of the business sector.

stc pay has launched its first virtual payment card for its digital wallet in the kingdom of Saudi Arabia.

The World Summit on the Information Society Forum 2020 (WSIS+15) being held at the International Telecommunication Union's Headquarters in Geneva has honored stc for its Digital Empowerment in Remote Areas Project, proving its excellence once again through global recognition.

stc announced the first deployment of 5G SA and “5G Voice over New Radio” service in live network. This technologically innovative accomplishment will enable stc to deploy enhanced data and voice services over an agile, cloud native, next generation end-to-end 5G network.

stc received the third-place award for the best digital investor relations in the Middle East. The award was presented by the Middle East Investor Relations Association (MEIRA), which is an independent non-profit organization dedicated to promoting the Investor Relations (IR) profession and industry standards in corporate governance, as well as enhancing the reputation, efficiency, and attractiveness of capital markets in the Middle East.

stc announced its new impactUprogram by inspireU, the program aims to achieve sustainability initiatives provided by stc to lead the digital transformation of our society as an innovative, caring and inclusive company, and lead social responsibility programs with strategic guidance that includes the community, environment, business and governance.

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Business Highlights


III. Financial Highlights

stc – Q3, 2020 Financial Highlights

11

14.11

13.27

13.93

14.92 14.88

Q3-19 Q4-19 Q1-20 Q2-20 Q3-20

All figures are in SAR Billions

5.43%

-0.26%

Revenue

Top line growth of 5.43% and 6.41% was a result of a 25.2% increase in FTTH and 8.5% increase in broadband subscribers, in addition to a 10.1% increase in data revenue for the current period compared to the previous

period (9M). As well as, overall increase of revenue for all business units.

41.10

43.74

9M-19 9M-20

6.41%



7.92

8.36

8.208.34

8.97

56.1%

63.0%

58.8%

55.9%

60.3%

54.0%

56.0%

58.0%

60.0%

62.0%

64.0%

66.0%

68.0%

6.0

8.0

10.0

Q3-19 Q4-19 Q1-20 Q2-20 Q3-20

Gross Margin

Gross Profit

12


9M Gross Margin remains in line with the same period last year

24.03

25.51

58.47% 58.32%

1.00%

11.00%

21.00%

31.00%

41.00%

51.00%

61.00%

71.00%

81.00%

91.00%

20.00

9M-19 9M-20

6.14%


13.26%

7.55%


3.33

2.40

3.00 3.06

3.46

23.58%

18.09%

21.56%20.52%

23.25%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

40.00%

1.00

1.50

2.00

2.50

3.00

3.50

4.00

4.50

5.00

Q3-19 Q4-19 Q1-20 Q2-20 Q3-20

Operating Margin

3.96%

12.99%

Operating Profit (EBIT)

13


A healthy EBIT Margin which is above the average of the past 4 financial quarter

10.08

9.53

24.53%21.79%

1.00%

6.00%

11.00%

16.00%

21.00%

26.00%

31.00%

36.00%

41.00%

46.00%

6.00

6.50

7.00

7.50

8.00

8.50

9.00

9.50

10.00

10.50

11.00

9M-19 9M-20

-5.50%


5.24

4.99

5.33 5.34

5.79

37.11%

37.59%38.25%

35.80%38.91%

30.00%

32.00%

34.00%

36.00%

38.00%

40.00%

42.00%

44.00%

46.00%

48.00%

4.40

4.60

4.80

5.00

5.20

5.40

5.60

5.80

6.00

Q3-19 Q4-19 Q1-20 Q2-20 Q3-20

EBITDA Margin


10.50%

8.43%

EBITDA

14


EBITDA witnessed growth by SAR 446 million compared with the previous quarter

16.28

16.46

39.60%37.63%

1%

10%

19%

28%

37%

46%

55%

64%

14.00

14.50

15.00

15.50

16.00

16.50

17.00

9M-19 9M-20

1.12%



2.75

2.32

2.91

2.722.77

19.46%

17.49%

20.90%

18.26%18.62%

15%

16%

17%

18%

19%

20%

21%

22%

2

2

2

3

3

3

Q3-19 Q4-19 Q1-20 Q2-20 Q3-20

Net Profit Margin

1.54%

Net Profit

15

0.73%


The increase of SR 41m in net profit for Q3 2020 as compared to the previous quarter was attributed mainly to the increase in gross profit by 7.55%

8.344 8.40

20.30% 19.20%

10%

15%

20%

25%

30%

35%

40%

4.0004.0124.0244.0364.0484.0604.0724.0844.0964.1084.1204.1324.1444.1564.1684.1804.1924.2044.2164.2284.2404.2524.2644.2764.2884.3004.3124.3244.3364.3484.3604.3724.3844.3964.4084.4204.4324.4444.4564.4684.4804.4924.5044.5164.5284.5404.5524.5644.5764.5884.6004.6124.6244.6364.6484.6604.6724.6844.6964.7084.7204.7324.7444.7564.7684.7804.7924.8044.8164.8284.8404.8524.8644.8764.8884.9004.9124.9244.9364.9484.9604.9724.9844.9965.0085.0205.0325.0445.0565.0685.0805.0925.1045.1165.1285.1405.1525.1645.1765.1885.2005.2125.2245.2365.2485.2605.2725.2845.2965.3085.3205.3325.3445.3565.3685.3805.3925.4045.4165.4285.4405.4525.4645.4765.4885.5005.5125.5245.5365.5485.5605.5725.5845.5965.6085.6205.6325.6445.6565.6685.6805.6925.7045.7165.7285.7405.7525.7645.7765.7885.8005.8125.8245.8365.8485.8605.8725.8845.8965.9085.9205.9325.9445.9565.9685.9805.9926.0046.0166.0286.0406.0526.0646.0766.0886.1006.1126.1246.1366.1486.1606.1726.1846.1966.2086.2206.2326.2446.2566.2686.2806.2926.3046.3166.3286.3406.3526.3646.3766.3886.4006.4126.4246.4366.4486.4606.4726.4846.4966.5086.5206.5326.5446.5566.5686.5806.5926.6046.6166.6286.6406.6526.6646.6766.6886.7006.7126.7246.7366.7486.7606.7726.7846.7966.8086.8206.8326.8446.8566.8686.8806.8926.9046.9166.9286.9406.9526.9646.9766.9887.0007.0127.0247.0367.0487.0607.0727.0847.0967.1087.1207.1327.1447.1567.1687.1807.1927.2047.2167.2287.2407.2527.2647.2767.2887.3007.3127.3247.3367.3487.3607.3727.3847.3967.4087.4207.4327.4447.4567.4687.4807.4927.5047.5167.5287.5407.5527.5647.5767.5887.6007.6127.6247.6367.6487.6607.6727.6847.6967.7087.7207.7327.7447.7567.7687.7807.7927.8047.8167.8287.8407.8527.8647.8767.8887.9007.9127.9247.9367.9487.9607.9727.9847.9968.0088.0208.0328.0448.0568.0688.0808.0928.1048.1168.1288.1408.1528.1648.1768.1888.2008.2128.2248.2368.2488.2608.2728.2848.2968.3088.3208.3328.3448.3568.3688.3808.3928.4048.4168.4288.4408.4528.4648.4768.4888.5008.5128.5248.5368.5488.5608.5728.5848.5968.6088.6208.6328.6448.6568.6688.6808.6928.7048.7168.7288.7408.7528.7648.7768.7888.8008.8128.8248.8368.8488.8608.8728.8848.8968.9088.9208.9328.9448.9568.9688.9808.9929.0049.0169.0289.0409.0529.0649.0769.0889.1009.1129.1249.1369.1489.1609.1729.1849.1969.2089.2209.2329.2449.2569.2689.2809.2929.3049.3169.3289.3409.3529.3649.3769.3889.4009.4129.4249.4369.4489.4609.4729.4849.4969.5089.5209.5329.5449.5569.5689.5809.5929.6049.6169.6289.6409.6529.6649.6769.6889.7009.7129.7249.7369.7489.7609.7729.7849.7969.8089.8209.8329.8449.8569.8689.8809.8929.9049.9169.9289.9409.9529.9649.9769.98810.000

9M-19 9M-20

0.70%


Price Vs. Yield Fluctuation

Earnings Per Share (EPS) Payout Ratio/Dividend Yield

3.0%

3.8%

4.6%

88

96

104

Price Div Yield

*Annualized Dividend

3.68%3.93%

4.57%4.04%

3.98%

73.0%

86.2%

68.5%73.5%

72.5%

30%

40%

50%

60%

70%

80%

90%

100%

1%

2%

2%

3%

3%

4%

4%

5%

5%

Q3-19 Q4-19 Q1-20 Q2-20 Q3-20

Div Yeild* Payout Ratio

stc commits to pay a fixed minimum dividend of a SR 1 per share per quarter. Further, the company may consider and pay additional dividend subject to the Board approval after assessment and determination of the Company's financial situation, outlook and capital expenditure requirements. Additional dividends are likely to vary on quarterly basis depending on the company’s performance.

The dividends policy will remain subject to:

1. Any material changes in the strategy and business of the company (including the business environment it operates in);

2. Laws and regulations that are applicable on the company;3. Any banking, other funding or credit rating covenants that the company may be

bound to follow from time to time.

1.37

1.16

1.461.36 1.38

Q3-19 Q4-19 Q1-20 Q2-20 Q3-20


16


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