STC's privatisation plans run into trouble

Japan's NTT, France Telecom and Southern Bell Corp have all backed-off from negotiations with Saudi Arabia's telecom operator, according to the Economist Intelligence Unit.

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By  Rob Corder Published  December 6, 2000

Saudi Arabia's planned sale of its telecoms monopoly, Saudi Telecommunications Company (STC), appears to have run into problems reports Business Middle East, a publication of the Economist Intelligence Unit.

Negotiations have broken down with the three potential strategic investors. NTT of Japan and France Telecom both opted out amid tough negotiations during the past year. Now, US-based Southern Bell Corp (SBC) is no longer in active talks, after Saudi Arabia rejected its proposed terms.

To all appearances, STC is a prize worth pursuing. Valued at $15bn-20bn, with revenue of $4bn last year, STC provides fixed and mobile services to a young, affluent and rapidly growing population. The density of fixed-line telephones is low, and demand for mobile services is rapidly rising, leaving plenty of room for growth.

Nonetheless, the planned sell-off has moved slowly. Potential investors say the company suffers from poor account-keeping, faulty asset valuation and unresponsive management. They also wonder how long STC will keep its monopoly over mobile services and whether the mobile licence will be included in the sale. And they note that STC faces service problems requiring urgent attention. Complaints about the quality of mobile services, in particular, continue to mount.

The suspension of talks notwithstanding, STC says it will press on with the privatisation. It is choosing among four Arab banks as the lender of $666.7m to finance the installation of 600,000 new fixed lines and improve the mobile network. Executive president Abd ar-Rahman al-Yami is overseeing a management reorganisation, to prepare for selling part of the company and operating in a competitive environment.

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