Key Financial Indicators
Subscribers (million)
Revenue (KD million)
EBITDA (KD million)
EBITDA margin (%)
Net profit margin (%)
Shareholder’s equity (KD million)
EPS (fils)*
Cash dividends (fils)*
Company Profile
- About Kuwait Telecommunications Company (stc)
Who we are
Kuwait Telecommunications Company (stc) is a Kuwaiti shareholding company incorporated pursuant to the Amiri Decree No. 187 on 22 July 2008, to operate and manage with the third GSM versatile system in Kuwait according to Law No. 2 of 2007. Kuwait Telecommunications Company (stc), a leading brand in the telecommunications industry, was established in December 2008 as a subsidiary of stc Group, the worldclass digital leader, providing innovative services and platforms, and enabling the digital transformation of the region. With a share capital of KD 50 million, stc was listed on Boursa Kuwait in December 2014. In 2019, stc acquired 100% of the share capital of Qualitynet General Trading and Contracting Company - the leading Internet Service Provider in Kuwait – with the aim to capitalize on the new opportunities in the Kuwaiti telecom market.
What we do
stc has always aimed to support the vision of His Highness Sheikh Sabah Al-Ahmad Al-Jaber Al-Sabah for Kuwait 2035, in positioning Kuwait as a major financial and commercial hub in the region. Throughout a decade of excellence in service, transparency and proactivity, in addition to being the fastest-growing and most advanced telecom operator with the largest 5G network in Kuwait, stc’s customer base has proudly reached 1.9 million. stc strives to provide its customers, both consumers and enterprise, with a unique pool of products and services that satisfy their aspirations and cater to their needs. stc offers numerous opportunities in the fields of telecommunications, entertainment, information, digital and data transfer services, besides delivering the best customer experience around the clock.
Our new brand
On 19 December 2019, Kuwait Telecommunications Company changed its brand name from “VIVA” to "stc" as a unified brand of the group in the KSA, the State of Kuwait and the Kingdom of Bahrain which will contribute in enhancing the brand of stc as one of the most expensive and valuable brands in the Middle East.
Our subsidiary
On 11 November 2020, stc announced the launch of the new brand name of its subsidiary “Qualitynet” to become solutions by stc to serve as the company’s specialized arm offering one-stop business solutions for the first time ever in Kuwait. This initiative counts as an additional step in stc’s journey to elevate and strengthen the quality of the solutions offered by stc through combining the strengths of two powerful companies as well as setting the stage for a transformative and empowering future to achieve the desired goals of both individual and corporate customers.
Our accomplishments
stc has succeeded in attracting the private sector investments, driving the economy and repositioning the telecom market as one of the most vital and active sectors in the evolution of global technology. stc has also extended its services to provide the best wireless coverage in Kuwait, and thus, played a key role in improving the nation’s urban infrastructure.Since 2008, stc’s accomplishments have transformed the Kuwaiti telecom market, including changing wireless pricing models and fees. In 2016, stc entered the International Telecommunications Union (ITU). In 2018, stc became the first network, in the MENA region, to offer its customers the 5G service and to enable enterprises in mobility. stc has invested in building the most advanced network, and proudly owns the largest number of sites covered by the 5G service in Kuwait. Additionally, stc is currently working on enriching its services, products and solutions offered to its customers, individuals and enterprises, through its collaboration with Qualitynet General Trading and Contracting Company’s experienced and competent team.Last but not least, stc succeeded in creating job opportunities and focusing on the Kuwaitization plan, reaching 64% of the company’s workforce, by attracting the top talents through partnerships and collaborations in the Kuwaiti market. stc is committed to a rich Corporate Social Responsibility (CSR) program and has launched multiple initiatives for supporting talents in the fields of healthcare, sports, entrepreneurship, education and environment.
Vision, Mission, Values and Purpose
Our vision
Our vision is to be a world-class digital leader, providing innovative services and platforms to our customers and enable the digital transformation in Kuwait. stc is keen on presenting its customers with numerous telecommunications opportunities with the goal of boosting existing relationships and providing customers with the best experience around the clock, which will, in turn, earn us their trust.
Our mission
Our strategy outlines the key pillars to expand stc’s topline, create value with greater efficiencies, while preparing the company for the future: • End-to-end digital experience • Enhance core performance • Reinvent customer experience at world-class standards • Leveraging on group synergies
Our Values
Dynamism
Outstanding energy to enhance and enrich our performance. We are agile, collaborative and fresh.
Devotion
Determined to be a “customer-centric” company for our clients and an inspirational workplace for our employees. We are caring, committed and trustworthy.
Drive
Moving forward and enabling best possible solutions for our clients and employees. We are proactive, inventive and inquisitive.
Our purpose
stc aspires to a new digital age transforming our nations and economies. stc creates products and services beyond the traditional telecommunications services to enable the digital pillars of the new digital economy. At stc, we combine smart technologies with the most advanced systems to harness the digital capabilities and the full power of technologies to better serve our customers, stakeholders, government entities and the local community as a whole. We develop digital platforms, solutions and services based on the data science, cloud computing, artificial intelligence and advanced digital analytics driven by the 5G services. By empowering the leading industries, businesses and governmental entities to thrive through providing the most innovative digital services, stc focuses on shaping a sustainable future to the local community with a deeper insight and accelerated growth.
2020 Awards
stc's recgnitions in the amidst of COVID-19
Forbes “Global 2000”
stc Group is ranked the 1st as the top telecom company in the MENA region and the 44th amongst the best digital companies worldwide according to Forbes’ annual “Global 2000” list.
Forbes “Global 2000”
stc Group is ranked the 1st as the top telecom company in the MENA region and the 44th amongst the best digital companies worldwide according to Forbes’ annual “Global 2000” list.
Best IR
stc won the “Leading Corporate for Investor Relations” in Kuwait for the year 2020, while being ranked amongst the top 5 companies and 10 Best Digital IR in the Middle East - 2020.
Best IR
stc won the “Leading Corporate for Investor Relations” in Kuwait for the year 2020, while being ranked amongst the top 5 companies and 10 Best Digital IR in the Middle East - 2020.
Kuwait’s Most Supportive Brands
Based on a survey done by IPSOS, a leader in the market research, stc was ranked among the best companies to support the Kuwaiti society during the “COVID-19” crisis.
Kuwait’s Most Supportive Brands
Based on a survey done by IPSOS, a leader in the market research, stc was ranked among the best companies to support the Kuwaiti society during the “COVID-19” crisis.
Oprational Highlights
stc's commitment towards enhancing customer experience and delivering results to its shareholders
Rebranding "Qualitynet" to "solutions by stc"
stc launched the new brand name of its subsidiary solutions by stc to serve as the company’s specialized arm offering one-stop business solutions for the first time in Kuwait.
Key Milestones
stc's journey of growth
-
2008 • Launches commercially • stc abolishes incoming calls fees and other operators follow • First Operator in the world to have all IP network -
2009 • stc introduces high speed Mobile Broadband in Kuwait • stc launches innovative prepaid offerings and acquires 500K customers in one year -
2010 • Expands retail network and launches joint promotions with retailers • stc wins Comms MEA Best Telecom Finance Deal -
2011 • First to introduce Apple iPhone • Strategic partnership with Manchester United • First to introduce newest HSPA+ (42.2 Mbps) Broadband network -
2012 • stc launches Elite Program for loyal, VIP and high value customers • stc turns into profitability during the fourth year of operation • stc starts deployment of 4G LTE network -
2013 • Completes nationwide 4G LTE Coverage and awarded Best LTE deployment in the Middle East • Number portability and stc acquires majority of ported numbers between operators -
2014 • Partnership with Real Madrid • Listing on KSE • Retained earnings turned to be positive • Ranked 2nd in terms of revenue and subscriber market share -
2015 • The first in Kuwait to introduce the all-new (VoLTE) technology • stc branches network reached a total of 70 across Kuwait • First to introduce the LTE Advanced -
2016 • Best Telecom Co. by Arabian Business • Member of (ITU ) • Leading Corporate for IR • Business Innovation in Risk Management -
2017 • VIP Customer Service Award • Won the "2017 Speedtest Award“ by Ookla company • Excellence in Governance Award • Won the “Best Operator Network” from telecom world Middle East • 5G Innovator of the Year Awards -
2018 • Best Network Development Award at 5G MENA • stc Reap Three Accolades at ME Call Centre Awards • Leading for Investor Relations in Kuwait 2018 - third in the MEA • Wins "Advertising Creativity Award" at Arab Media Forum -
2019 • stc wins Sharjah Gulf Top 10 Business Award 2018 • Acquisition of Qualitynet • Launched 5G services in June 2019 • stc and Huawei sign MOU to develop 5G services • Launches the new brand stc -
2020 • stc Group was ranked the 1st in the MENA region, by Forbe’s "Global 2000" list • Leading for Investor Relations in Kuwait 2020 – Top 5 in the MENA region • stc rebrands “Qualitynet” to “solutions by stc”• stc signs an AoA for establishing Connect Arabia W.L.L with Mobility Telecom Kuwait Limited (BVI) which will be the main partner
Statements
Management's review of stc in the Kuwaiti telecommunications market
Dr. Mahmoud Ahmed Abdulrahman
Chairman
Dear Shareholder,
I am delighted to present Kuwait Telecommunications Company’s ( stc) Annual Report for the year ended 31 December 2020. This report demonstrates stc’s outstanding performance during an unprecedented period due to the COVID-19 crisis and the disruption it has caused to our daily life. Not to mention the considerable damage which inflicted many sectors due to the global fears from the uncertainty and the near-absence of future prospects in this regard. This report also addresses the company’s strategy, which has been highly streamlined and has significantly assisted the local community to adapt to the new digital age. Whereby, stc succeeded in providing its customers with the most innovative business solutions in collaboration with its specialized arm, solutions by stc. Despite the negative impact of the COVID-19 crisis on the global financial markets in various industries, stc was able to achieve financial and operational achievements that meet the aspirations of the company’s shareholders, recording a net profit of KD 32.1 million.As economic uncertainty and financial pressures worsened, stc took it upon itself to launch a wide range of products that meet customers’ demands in that period. As a result, stc has strengthened its position in the market as a leader in the digital and latest technological advances arena driven by the growing demand for the digital services in Kuwait and all over the world. Seizing opportunities, developing plans and innovative solutions in addition to providing innovative services to customers have been amongst the strategic foundations of stc since its inception in 2008. Hence, stc is keen to lead and enable the digitization process in the region leveraging the synergies resulting from the company’s integration with solutions by stc.
The Telecommunications Market and COVID-19
The Kuwaiti telecommunications market has shown flexibility in addressing economic challenges and risks through playing a key role in helping the community and meeting its needs. Throughout the pandemic’s outbreak in 2020 up until today, stc has been using the latest global technologies in addition to doing its utmost to provide innovative digital services aimed at meeting the community’s various needs during closure periods, curfews and beyond. With the advent and increased usage of digital platforms, mobile service providers have rushed to offer 5G backed products and services to mitigate the negative effects of the COVID-19 crisis on the Kuwaiti society. Thus, in response to the challenges and changes in the demand for digital communication services, stc has undertaken several initiatives aimed at facilitating remote working in addition to enabling online education as well as many digital and technical services targeting the B2B and B2C sectors. Through combining the latest technologies that distinguish us and the recent urgent need for digitization, stc has expanded its range of products, services and designs to keep pace with the rapid developments in telecommunications, technology and digitization services on a global level.
Creating Shareholders Value
At stc, we focus on creating shareholders value by establishing long-term growth from sustainable profits in addition to increasing total returns that are in the best interests of the company’s shareholders. With the support of the company’s business continuity plans, stc has been firmly keen to adhere to the corporate goals and values while monitoring developments and finding solutions, as well as enhancing the enthusiasm of the working teams in an effort to make a positive impact not only on employees and customers, but also on the community as a whole. Over the past years, stc’s performance has been evident through its operational efficiency, financial stability and the strength of its products, in addition to its distinctive and well-established brand in the telecommunications sector.
This has, in turn, enabled stc to succeed in expanding its footprint in the telecom industry and attract a large number of investors. Since the onset of the crisis, stc has been at the forefront in providing innovative and integrated digital solutions based on the latest technological developments for its customers, individuals and corporates. We have been able to achieve good results throughout the pandemic through adopting a flexible operating model, in addition to being flexible in implementing the company’s digital transformation strategy. stc also provided advanced technical solutions in line with the government’s expectations and social distancing plan. In order to win the trust of our valued shareholders, we follow a career path that elevates the best global practices to show our ability to deliver good results in both revenues and net profit, also to enhance our operational efficiency. Despite the 2020 crisis, stc managed to achieve a total revenue of KD 283.2 mn, where EBITDA reached KD 73.4 mn with an EBITDA margin of 26%. As a result, stc recorded a net profit of KD 32.1 mn. On the other hand, shareholders’ equity increased by 3.2% at the end of 2020, reaching a book value of 445 fils per share. The Board of Directors has recommended distributing cash dividends of 60 fils per share representing 60% of the share nominal value for the year ended 2020, subject to the approval of the Ordinary General Assembly of the company. This decision was based on stc’s confidence in its sustainability, strong financial position and ongoing cash flow generation during economic downturns.
These results reflect stc’s ability to overcome unprecedented challenges represented by the current global pandemic. Furthermore, the results demonstrated the quality of the company’s strategy and the dedication of each of the Board of Directors, the executive management and its employees. At stc, we are committed to enhancing the quality of our products, services, customer relationships and operational efficiency in order to maintain our market position during difficult times and economic uncertainties in addition to the ongoing societal changes.
Corporate Governance
stc is committed to adhering to the corporate governance rules and regulations issued by the Capital Markets Authority in the State of Kuwait which aims to uphold transparency, protect shareholders value and improve company’s operating environment. In conjunction with all the recent changes imposed by the regulatory bodies with regards to the Annual General Meeting and the disclosures of the financial implications of COVID-19 outbreak, stc ensured applying all laws and regulations that conform to its values and the professional foundations that guide our work to better serve the interests of our shareholders. The corporate governance report in a later chapter of this report outlines our framework in further details.
Corporate Social Responsibility
stc deals highly professionally with its customers, employees, shareholders, and the local community as a whole, who, in turn, contribute to our company’s success. Through contributing to the Kuwaiti society, stc aims to leave a positive footprint to be felt by the future generations.
As a matter of our concern for the social responsibility towards our local community, stc ensured its presence to lend a helping hand and support throughout COVID-19 outbreak in order to alleviate the negative consequences of the current crisis on the Kuwaiti community. In this regard, stc has contributed to many initiatives and activities in support of the preventive measures adopted by the government to mitigate the harsh negative effects of the COVID-19 crisis on the Kuwaiti society. Consequently, the company has collaborated with various entities to support a number of groups and sectors across Kuwait including, health, sports, education and entrepreneurship. In addition, stc has also worked alongside with some governmental agencies and medical companies to prevent the infectious diseases in addition to undertaking several preventive measures in accordance with the health guidelines and instructions issued by the Ministry of Health.
As part of its corporate social responsibility initiatives, stc has also adopted the highest safety standards and instilled the culture of performance among its staff to continue providing high quality services while protecting its customers and employees. During 2020, stc has heavily invested in its human capital through conducting virtual training courses throughout the lockdown period and thereafter. Up until this moment, stc has been keen to ensure employees’ safety, as it was amongst the first companies in Kuwait to adopt the remote working criteria while keeping the working teams engaged through conducting virtual conferences and sending them feedback surveys on a continuous basis.
In compliance with the instructions imposed by the Kuwaiti government with regards to COVID-19 pandemic, it is worth highlighting stc’s internal campaign “Don’t Compromise” that was initiated to raise awareness among the employees following their return to work from the full lockdown, in order to ensure their safety as the company’s first priority. Furthermore, the CSR section of this report is dedicated to include the company’s efforts in these different areas.
Appreciation
On behalf of the Board of Directors, I would like to thank His Highness, the Amir Sheikh Nawaf Al Ahmed Al Jaber Al Sabah, H.H. the Crown Prince Sheikh Meshaal Al Ahmed Al Jaber Al Sabah, H.H. the Prime Minister Sheikh Sabah Al Khalid Al Sabah and his distinguished government for their continued support to the telecommunications sector, which puts our precious country on the map of the advanced and developed countries in the field of telecommunications.
would also like to express my thanks and gratitude to all stc family members for their significant efforts, dedication and great sacrifices during 2020 in light of the challenges we have witnessed. Moreover, I would like to shed light on their continued enthusiasm and dedication in making stc a fascinating and successful company at times when the global economy has been greatly affected. I particularly thank our loyal customers for their continued trust in stc, which motivates us to provide the best services with the highest possible quality. Our sincere appreciation to our valued shareholders for their continued support and for placing their trust in us. We strongly believe that this commitment has been instrumental in enabling stc to continue on its successful journey of growth over the past years.
Dr. Mahmoud Ahmed Abdulrahman
Chairman
Eng. Maziad Bin Nasser Al Harbi
Chief Executive Officer
Dear Shareholders,
2020 was a remarkable year for Kuwait Telecommunications Company (stc) despite the unprecedented crisis witnessed by different sectors in Kuwait and around the globe. The global crisis has led to a radical shift in the quality of services and the strategy of current as well as future businesses due to the rapid spread of COVID-19 and the imposed restrictions on movements which negatively impacted most businesses and economic activities, and has in turn, led to a complete shift from the traditional working systems towards digitization of businesses of all kinds. In addition, the digitalization process assisted businesses to continue operating remotely resulting in more data usages and a significant reliance on the capabilities of telecommunications companies with regards to offering digital services and solutions to the consumer and enterprise customers. It is worth noting that such services would provide flexibility for business continuity, working from home and studying in addition to an access to all medical, financial, entertainment, retail and other basic services.
Recovery Strategy
In response to the unforeseeable events, the company formed a specialized team at the onset of the pandemic to deal with the crisis through developing a business continuity plan and adopting new initiatives to face the challenges and adhere to the national measures imposed to combat the virus’s outbreak. The specialized team has requested detailed business continuity plans to be developed by all the sectors at stc in addition to their request of monitoring the logistical work required to ensure the continuity of the company’s business and services provided to its customers. These plans are likely to reduce the negative economic impact of the crises on stc while ensuring the safety of its employees and customers.
The company also took important steps at the onset of the crises to ensure stc’s continuity of providing full services to all its customers during the full and partial lockdown periods. Furthermore, the steps taken shall also ensure the implementation of working from home and return to work plans, in addition to enhancing the digital transformation strategy and enriching the customer experience.
stc was keen to protect its financial position and its shareholder’s rights by extensively managing its cash flows and monitoring collections, while activating the cost optimization program to support the company’s profit margins for the year 2020.
In 2020, stc relied heavily on its infrastructure, being the most powerful in the region in terms of mobile services, through 5G networks which is the cornerstone of our expansion plan throughout the current crises. stc counts on the 5G network to keep pace with the needed developments of all private sectors and government agencies necessary to invest in the digital transformation process in order to meet the needs of consumers and enterprises capitalizing on the 5G, the latest technologies and digital services. Thus, stc offers a wide range of services including entertainment and the digital services in addition to its concern for meeting the growing demand for fixed and wide mobile broadband services at high speeds and huge capacity. stc also ensures meeting all business requirements related to online institutional and educational interaction with the highest possible quality and efficiency. stc has also proved its ability to overcome the challenges and potential risks in addition to keeping up with business operations and opening its doors to serve its customers in the current circumstances. Moreover, stc was placed in the forefront within the private sectors as a result of the great efforts and dedication of its staff, who have demonstrated their determination to face the health risks associated with COVID-19. As a result, stc was able to continue providing its services with the same quality standards despite the increasing demand and the shift towards digital platforms to communicate and deliver its products to the customers.
Capturing Business Opportunities
2020 opened the door for stc to undertake several initiatives aimed at developing the scope of work and sharing expertise in order to support the digital transformation process and provide the best services, products as well as solutions that meet the growing demand for the enterprise services. Thus, stc leverages on the parent company’s (stc Group) expertise and capabilities in the area of digitization in addition to the advanced technology services captured from the successful integration project with our subsidiary, solutions by stc. This has enabled stc to switch from providing traditional services to offering digital, cloud, Internet of Things (IoT), data, as well as cyber security and advanced IT solutions and services. It is worth noting that our digital services are designed to target all the private and governmental sectors through designing packages of integrated and services. with the highest possible technical and operational efficiency. Consequently, stc has worked hard to capture business opportunities achieving an outstanding growth in its operations that target enterprises and governmental entities.
The Negative Impacts on the Consumer Sector
On the other hand, COVID-19 crisis has had a negative impact on the telecommunications sector, specifically some activities targeting the consumer services, which were greatly affected by the full lockdown in the country and the interruption of air traffic in most countries around the world. Thus, sales of roaming packages almost entirely dropped due to the suspension of flights and the reluctance to travel during 2020, in addition to the decline in device sales and its accessories resulting from the full closure of shopping malls and retail sales. Furthermore, the decline in the production process of mobile devices and ICT equipment due to COVID-19 effects on the producing and suppling countries have negatively impacted stc’s revenue. Not to mention the suspension of import and export activities which also contributed to the decline in the company’s revenue stream during 2020. However, stc’s strategy has demonstrated its flexibility to adapt with the difficult reality of the company’s operational performance through meeting all the services needed by the consumer as well as the private and public sectors, with the highest possible efficiency.
Positioning stc among the best companies in Kuwait and the region within one of the most operationally and financially defensive sectors, affected by the global economic crisis of COVID-19, gives us great impetus to move forward in expanding stc’s business and achieve the best operational and financial results.
Financial Performance of 2020
Despite COVID-19’s repercussions and the strong competition in the Kuwaiti telecommunications market, stc has managed to achieve good financial results that meet the anticipation of our shareholders during unstable and unprecedented circumstances. Whereby, stc’s revenue reached KD 283.2 million by the end of 2020, compared to KD 293.7 million in the previous year. This decline is attributed to the full and partial lockdown that was imposed in Kuwait due to COVID-19 pandemic, which, in turn, resulted in a decline in the consumer sector’s revenue. Furthermore, the significant near-total drop in the company’s revenue from the roaming services, due to the suspension of flights and closure of airports of most countries around the globe, was also translated into the decline in stc’s total revenue. In addition, stc’s social contribution that we are proud of through providing its customers with unlimited free local calls for all mobile networks, in addition to a 5GB internet package per day from 22 March to 20 April 2020, in collaboration with the Communications and Information Technology Regulatory Authority (CITRA) in support of the Kuwaiti community during COVID-19 crisis. On the other hand, sales of the enterprise sector witnessed a growth in its volume as a result of the current need and the growing demand for digital and IT services.
On the other hand, EBITDA reached KD 73.4 million in 2020 with an EBITDA margin of 26% during 2020. Consequently, stc’s net profit recorded KD 32.1 million (earnings per share of 64 fils) with a profit margin of 11%. The company also structured its capital and operational expenditures, particularly after the negative effects of the current economic crisis to ensure liquidity of cash flows under the current conditions. Furthermore, the company achieved these results despite COVID-19’s global economic challenges, during which stc was able to achieve good revenue levels in addition to enhancing its operational efficiency to create an added value for its customers and better returns for its shareholders. stc’s financial results throughout 2020 also reflected its competitiveness and strengthened its position as the second largest telecommunications company in terms of its market share of revenue in the Kuwait telecommunications sector with a market share of approx. 35%. Moreover, stc’s customer base reached 1.9 million customers at the end of 2020.
stc’s Future Plans
Following the negative effects of COVID-19’s economic crisis, all the local and regional enterprises have sought the urgent need for the digital transformation, which has become one of the most important pillars of the strategic plans for many local and international institutions and corporates. Through its AHEAD strategy, stc’s future plans focused on enriching customer experience, gaining market leadership and being a pioneer through improving the company’s capabilities as well as providing an effective model based on its digital platforms. Furthermore, AHEAD strategy also focused on instilling the culture of performance within the company. stc also seeks to enter into strategic partnerships to provide the basic infrastructure necessary to develop stc’s ICT portfolio. Additionally, stc is always keen to provide integrated working teams, innovate in its services and products, and explore more smart investments in order to achieve the best results. In light of market challenges resulting from the highly competitive prices, stc aims to focus on the value and quality of its products and services. Hence, one of stc’s most important future aspirations is to provide its customers, individuals and enterprises, with products and services that are beyond the traditional mobile services. It also strives to attract opportunities related to providing enterprise services and transforming the technical capabilities, in addition to empowering those capabilities renewably, leveraging from stc group’s expertise and capabilities in the digital transformation area. stc also capitalizes on the advanced technical services provided by solutions by stc which operates in Kuwait and is fully owned by stc. Accordingly, stc currently focuses on providing a wide range of services and solutions based on its strong infrastructure and its innovative 5G network to provide an excellent experience to its customers in various areas to facilitate digital transformation in Kuwait. It is worth noting that such services and digital solutions are specifically designed to help stc’s customers to cope with the repercussions of the current crisis that is likely to continue throughout 2021.
The Role of Governmental and Regulatory Entities in Supporting the Telecom Sector
In light of the current circumstances and present developments, the importance of the role that the governmental and regulatory entities can play to make a paradigm shift in the communications and IT sector in Kuwait, with an aim to upgrade the digital services so that they match best services available globally, depending on the telecommunication companies’ private sector’s capabilities. Government’s support for implementing the digital transformation in Kuwait is essential to enable the Kuwaiti telecommunications sector to keep pace with its global counterparts. Whereby, regional governments as well as those of different countries have begun to realize the importance of digital transformation and are working on applying it to execute the business of private companies, governmental entities as well as commercial, health and educational activities. The State of Kuwait also possesses all the geographical credentials that gives the country a distinctive feature to be a corridor and a hub for international cables to connect the countries of the region and the world. This is CITRA’s vision of transforming Kuwait into a regional data storage and processing center, in addition to the privately owned infrastructure of telecommunications companies, aimed at making Kuwait a leader and exporter of information technology in the region. Accordingly, this is likely to reinforce the “Kuwait 2035” vision for transforming Kuwait into a financial and commercial center. I would also like to commend CITRA’s positive and regulatory role, which has been supportive in making the Kuwaiti telecommunications sector take its leading regional and global position.
Human Capital Development
Throughout 2020, stc was keen to invest in its human capital and develop the capabilities of its employees to enable them to adapt to all the circumstances that we have witnessed. In particular, this has helped stc’s employees to better implement the remote working business plan as efficiently as possible and without any impact on the company’s administrative and operational activities, in line with the company’s strategy to meet the future challenges. Therefore, our investment in the workforce is one of the key elements of stc’s action plan, as we are committed to supporting the Kuwaiti employment replacement program “Kuwaitization” as one of the main pillars of our human resources strategy. Whereby, the Kuwaiti employees at stc reached 64% of company’s total employees by the end of 2020. We always strive to enhance and raise the efficiency and capacity of the company’s human resources through providing training courses and disseminating knowledge in the working environment to encourage our employees to achieve their goals and improve their expertise.
Appreciation and Gratitude
In conclusion, I am pleased to express my gratitude and thank our valued customers for their loyalty and confidence in stc, which has enabled us to achieve these results despite the difficult times we faced due to the COVID-19 crisis. Furthermore, I would like to thank the Board of Directors, Executive Management, stc family members and partners for their contributions in achieving this remarkable operational performance through their outstanding teamwork. I would also like to shed the light on their contributions to the company’s success during these difficult and unprecedented times through their cooperation, enthusiasm, dedication and continued support. This, in turn, has paid off with the fact that stc is now at the forefront of the most innovative digital communications services providers. Through your support and our productivity in implementing the company’s new strategy, transformation plan and investment activities, we are confident that stc will be able to move forward in achieving its future goals.
Eng. Maziad Bin Nasser Alharbi
Chief Executive Officer
Mr. Mohammed Bin AbdulMohsen Al Assaf
Chief Financial Officer
Overview
Despite the economic distortions caused by COVID-19’s current global crisis, stc was able to maintain satisfying cash flows driven by the company’s continuous investments in its key areas. stc’s strong financial and solvency positions supported the company to respond quickly and build up countercyclical buffers to support to the emergency contingency plans arising from external shocks. While working remotely under exceptional circumstances, stc defined its core areas and the required future strength capabilities necessary to execute its operations, administrative activities as well as desired financial results.stc ensured providing convergent offerings on a continuous basis in addition to implementing its updated strategy that was designed to cope with the latest developments associated with the COVID-19 crisis. While the current crisis has exposed the weakness of the digital infrastructure of most companies, particularly mediumsized firms, to cope with the related repercussions, stc demonstrated its ability to provide a wide range of digital, cloud and IT services through which it can reach the best secure business process with the highest possible technical and operational efficiency. This has, in turn, enabled stc to maintain its financial and operational flexibility throughout the general abnormal market and economic conditions.stc succeeded in capturing the opportunities created by the current crisis driven by the increasing demand for business solutions and digital services through increasing its investments in data services backed by the 5G network. Consequently, stc viewed this event as a valuable opportunity to increase its cost efficiency while investing in growth opportunities through the implementation of strategic cost management initiatives and expanding its digitization efforts. Despite the stiff competition among digital services and solutions providers, stc was able to capitalize on the new opportunities raised from the growing and wide demand on digital services through utilizing its flexible operating model. Additionally, stc has successfully reaped the benefits of the new digital economy capitalizing on its prior achievements over the past years with regards to adopting the digital transformation strategy and offering integrated technical solutions to its customers, individuals and enterprises, representing new areas of sustainable growth.
Concrete financial performance throughout an unprecedented crisis
The uncertain global financial market environment and the volatility of business operations during the lockdown period have made it challenging for most companies from different sectors to keep their financial wheels turning throughout that period. However, stc was able to maintain both its strong financial position and performance during 2020 which were reflected in achieving good levels in its revenue, EBITDA, EBITDA margin and net profit.
Throughout the current crisis, stc reported consolidated financial results for the year ended 2020 that satisfy the anticipation of its shareholders. Driven by the high demand on data services and digital platforms especially from the enterprise segment, stc’s revenues reached KD 283.2 million at the year ended 31 December 2020. The exceptional efforts of the company’s working teams significantly contributed in driving stc’s business efficiency and its efforts to offset the negative impacts of COVID-19 pandemic is demonstrated by its good EBITDA results reaching KD 73.4 million with an EBITDA margin of 26%. Thus, the net income reached KD 32.1 million (earnings per share 64 fils) with a net profit margin of 11%.
stc has dramatically expanded its offerings related to the 5G network backed products and services, building on its previous as well as ongoing investments in this area. Hence, the company’s total capex spending reached KD 26.2 million over the year, representing 9% of stc’s total revenue in 2020, compared to KD 58.5 million representing 20% of stc’s total revenues in 2019. On the other hand, stc’s total assets reached KD 374.2 million. In addition, the company’s total shareholders’ equity grew by 3.2% reaching KD 222.2 million, with a book value of 445 Kuwaiti fils per share. It is worth highlighting that one of stc’s competitive advantage is having a strong solvency position among its peers in the MENA region, where the debt to equity ratio reached 0.05x by the end of 2020, which is considered low compared to the industry average.
Financial strategy
Throughout this year, stc succeeded by acting proactively in providing a wide range of innovative products and services valued using an adequate pricing mechanism which supports the needs of the local community. This has also helped stc to maintain satisfactory levels of profitability margins enabling the company to gain a competitive advantage and maintain its leadership position in the Kuwaiti telecommunications market. As we carry out this historic astonishing work and exceptional continuous efforts of the company’s working teams throughout the unusual period, stc strives to provide products and services that exceed customers’ expectations during not only critical situations but also all the way through relaxed economic and market conditions.
During the financial year 2020, stc directed its financial resources to achieve the company’s vision, mission and values by investing in its people, technologies, operational processes and internal capabilities. The company also contributed in a number of initiatives in collaboration with the governmental bodies aimed at alleviating the negative consequences of COVID-19 pandemic on the local community. Furthermore, stc remained focused on building its financial strategy based on smart investments and cost optimization frameworks aligned with the company’s corporate strategy of enabling the digital transformation while catering to customers’ needs and developing structured frameworks to streamline its costs. This will, in turn, help the company to achieve its operational and financial objectives.
Remote working didn’t hold stc back from measuring its financial performance against the targeted KPIs, through the post-implementation analysis mechanism that was initiated in 2019. Hence, at stc, we are proud to be one of the few companies that succeeded in controlling the negative impacts of COVID-19 crisis while enhancing its operational efficiency during such an unprecedented event.
Moving Forward
As our acquisition to solutions by stc has enabled stc to deliver better value to its customers and shareholders despite the stressful economic conditions, we are keen to seek similar strategic potential valuecreating digital opportunities in the near future. With an aim to sustain our leadership position in the Kuwaiti telecom market, stc will hold onto investing in its human capital, internal processes and the latest advanced technologies as a means of uplifting the company’s efficiency and strengthening its core activities.
From a future perspective, stc is keen to ensure putting its disbursements on the right direction by investing more on digital platforms, creating strategic partnerships with digital providers and spending on its R&D function to provide the best-in-class services to its customers, individuals and enterprises.
Mr. Mohammed Bin AbdulMohsen Al Assaf
Chief Financial Officer
Dr. Mahmoud Ahmed Abdulrahman
Chairman
Dear Shareholder,
I am delighted to present Kuwait Telecommunications Company’s ( stc) Annual Report for the year ended 31 December 2020. This report demonstrates stc’s outstanding performance during an unprecedented period due to the COVID-19 crisis and the disruption it has caused to our daily life. Not to mention the considerable damage which inflicted many sectors due to the global fears from the uncertainty and the near-absence of future prospects in this regard. This report also addresses the company’s strategy, which has been highly streamlined and has significantly assisted the local community to adapt to the new digital age. Whereby, stc succeeded in providing its customers with the most innovative business solutions in collaboration with its specialized arm, solutions by stc. Despite the negative impact of the COVID-19 crisis on the global financial markets in various industries, stc was able to achieve financial and operational achievements that meet the aspirations of the company’s shareholders, recording a net profit of KD 32.1 million.As economic uncertainty and financial pressures worsened, stc took it upon itself to launch a wide range of products that meet customers’ demands in that period. As a result, stc has strengthened its position in the market as a leader in the digital and latest technological advances arena driven by the growing demand for the digital services in Kuwait and all over the world. Seizing opportunities, developing plans and innovative solutions in addition to providing innovative services to customers have been amongst the strategic foundations of stc since its inception in 2008. Hence, stc is keen to lead and enable the digitization process in the region leveraging the synergies resulting from the company’s integration with solutions by stc.
The Telecommunications Market and COVID-19
The Kuwaiti telecommunications market has shown flexibility in addressing economic challenges and risks through playing a key role in helping the community and meeting its needs. Throughout the pandemic’s outbreak in 2020 up until today, stc has been using the latest global technologies in addition to doing its utmost to provide innovative digital services aimed at meeting the community’s various needs during closure periods, curfews and beyond. With the advent and increased usage of digital platforms, mobile service providers have rushed to offer 5G backed products and services to mitigate the negative effects of the COVID-19 crisis on the Kuwaiti society. Thus, in response to the challenges and changes in the demand for digital communication services, stc has undertaken several initiatives aimed at facilitating remote working in addition to enabling online education as well as many digital and technical services targeting the B2B and B2C sectors. Through combining the latest technologies that distinguish us and the recent urgent need for digitization, stc has expanded its range of products, services and designs to keep pace with the rapid developments in telecommunications, technology and digitization services on a global level.
Creating Shareholders Value
At stc, we focus on creating shareholders value by establishing long-term growth from sustainable profits in addition to increasing total returns that are in the best interests of the company’s shareholders. With the support of the company’s business continuity plans, stc has been firmly keen to adhere to the corporate goals and values while monitoring developments and finding solutions, as well as enhancing the enthusiasm of the working teams in an effort to make a positive impact not only on employees and customers, but also on the community as a whole. Over the past years, stc’s performance has been evident through its operational efficiency, financial stability and the strength of its products, in addition to its distinctive and well-established brand in the telecommunications sector.
This has, in turn, enabled stc to succeed in expanding its footprint in the telecom industry and attract a large number of investors. Since the onset of the crisis, stc has been at the forefront in providing innovative and integrated digital solutions based on the latest technological developments for its customers, individuals and corporates. We have been able to achieve good results throughout the pandemic through adopting a flexible operating model, in addition to being flexible in implementing the company’s digital transformation strategy. stc also provided advanced technical solutions in line with the government’s expectations and social distancing plan. In order to win the trust of our valued shareholders, we follow a career path that elevates the best global practices to show our ability to deliver good results in both revenues and net profit, also to enhance our operational efficiency. Despite the 2020 crisis, stc managed to achieve a total revenue of KD 283.2 mn, where EBITDA reached KD 73.4 mn with an EBITDA margin of 26%. As a result, stc recorded a net profit of KD 32.1 mn. On the other hand, shareholders’ equity increased by 3.2% at the end of 2020, reaching a book value of 445 fils per share. The Board of Directors has recommended distributing cash dividends of 60 fils per share representing 60% of the share nominal value for the year ended 2020, subject to the approval of the Ordinary General Assembly of the company. This decision was based on stc’s confidence in its sustainability, strong financial position and ongoing cash flow generation during economic downturns.
These results reflect stc’s ability to overcome unprecedented challenges represented by the current global pandemic. Furthermore, the results demonstrated the quality of the company’s strategy and the dedication of each of the Board of Directors, the executive management and its employees. At stc, we are committed to enhancing the quality of our products, services, customer relationships and operational efficiency in order to maintain our market position during difficult times and economic uncertainties in addition to the ongoing societal changes.
Corporate Governance
stc is committed to adhering to the corporate governance rules and regulations issued by the Capital Markets Authority in the State of Kuwait which aims to uphold transparency, protect shareholders value and improve company’s operating environment. In conjunction with all the recent changes imposed by the regulatory bodies with regards to the Annual General Meeting and the disclosures of the financial implications of COVID-19 outbreak, stc ensured applying all laws and regulations that conform to its values and the professional foundations that guide our work to better serve the interests of our shareholders. The corporate governance report in a later chapter of this report outlines our framework in further details.
Corporate Social Responsibility
stc deals highly professionally with its customers, employees, shareholders, and the local community as a whole, who, in turn, contribute to our company’s success. Through contributing to the Kuwaiti society, stc aims to leave a positive footprint to be felt by the future generations.
As a matter of our concern for the social responsibility towards our local community, stc ensured its presence to lend a helping hand and support throughout COVID-19 outbreak in order to alleviate the negative consequences of the current crisis on the Kuwaiti community. In this regard, stc has contributed to many initiatives and activities in support of the preventive measures adopted by the government to mitigate the harsh negative effects of the COVID-19 crisis on the Kuwaiti society. Consequently, the company has collaborated with various entities to support a number of groups and sectors across Kuwait including, health, sports, education and entrepreneurship. In addition, stc has also worked alongside with some governmental agencies and medical companies to prevent the infectious diseases in addition to undertaking several preventive measures in accordance with the health guidelines and instructions issued by the Ministry of Health.
As part of its corporate social responsibility initiatives, stc has also adopted the highest safety standards and instilled the culture of performance among its staff to continue providing high quality services while protecting its customers and employees. During 2020, stc has heavily invested in its human capital through conducting virtual training courses throughout the lockdown period and thereafter. Up until this moment, stc has been keen to ensure employees’ safety, as it was amongst the first companies in Kuwait to adopt the remote working criteria while keeping the working teams engaged through conducting virtual conferences and sending them feedback surveys on a continuous basis.
In compliance with the instructions imposed by the Kuwaiti government with regards to COVID-19 pandemic, it is worth highlighting stc’s internal campaign “Don’t Compromise” that was initiated to raise awareness among the employees following their return to work from the full lockdown, in order to ensure their safety as the company’s first priority. Furthermore, the CSR section of this report is dedicated to include the company’s efforts in these different areas.
Appreciation
On behalf of the Board of Directors, I would like to thank His Highness, the Amir Sheikh Nawaf Al Ahmed Al Jaber Al Sabah, H.H. the Crown Prince Sheikh Meshaal Al Ahmed Al Jaber Al Sabah, H.H. the Prime Minister Sheikh Sabah Al Khalid Al Sabah and his distinguished government for their continued support to the telecommunications sector, which puts our precious country on the map of the advanced and developed countries in the field of telecommunications.
would also like to express my thanks and gratitude to all stc family members for their significant efforts, dedication and great sacrifices during 2020 in light of the challenges we have witnessed. Moreover, I would like to shed light on their continued enthusiasm and dedication in making stc a fascinating and successful company at times when the global economy has been greatly affected. I particularly thank our loyal customers for their continued trust in stc, which motivates us to provide the best services with the highest possible quality. Our sincere appreciation to our valued shareholders for their continued support and for placing their trust in us. We strongly believe that this commitment has been instrumental in enabling stc to continue on its successful journey of growth over the past years.
Dr. Mahmoud Ahmed Abdulrahman
Chairman
Eng. Maziad Bin Nasser Al Harbi
Chief Executive Officer
Dear Shareholders,
2020 was a remarkable year for Kuwait Telecommunications Company (stc) despite the unprecedented crisis witnessed by different sectors in Kuwait and around the globe. The global crisis has led to a radical shift in the quality of services and the strategy of current as well as future businesses due to the rapid spread of COVID-19 and the imposed restrictions on movements which negatively impacted most businesses and economic activities, and has in turn, led to a complete shift from the traditional working systems towards digitization of businesses of all kinds. In addition, the digitalization process assisted businesses to continue operating remotely resulting in more data usages and a significant reliance on the capabilities of telecommunications companies with regards to offering digital services and solutions to the consumer and enterprise customers. It is worth noting that such services would provide flexibility for business continuity, working from home and studying in addition to an access to all medical, financial, entertainment, retail and other basic services.
Recovery Strategy
In response to the unforeseeable events, the company formed a specialized team at the onset of the pandemic to deal with the crisis through developing a business continuity plan and adopting new initiatives to face the challenges and adhere to the national measures imposed to combat the virus’s outbreak. The specialized team has requested detailed business continuity plans to be developed by all the sectors at stc in addition to their request of monitoring the logistical work required to ensure the continuity of the company’s business and services provided to its customers. These plans are likely to reduce the negative economic impact of the crises on stc while ensuring the safety of its employees and customers.
The company also took important steps at the onset of the crises to ensure stc’s continuity of providing full services to all its customers during the full and partial lockdown periods. Furthermore, the steps taken shall also ensure the implementation of working from home and return to work plans, in addition to enhancing the digital transformation strategy and enriching the customer experience.
stc was keen to protect its financial position and its shareholder’s rights by extensively managing its cash flows and monitoring collections, while activating the cost optimization program to support the company’s profit margins for the year 2020.
In 2020, stc relied heavily on its infrastructure, being the most powerful in the region in terms of mobile services, through 5G networks which is the cornerstone of our expansion plan throughout the current crises. stc counts on the 5G network to keep pace with the needed developments of all private sectors and government agencies necessary to invest in the digital transformation process in order to meet the needs of consumers and enterprises capitalizing on the 5G, the latest technologies and digital services. Thus, stc offers a wide range of services including entertainment and the digital services in addition to its concern for meeting the growing demand for fixed and wide mobile broadband services at high speeds and huge capacity. stc also ensures meeting all business requirements related to online institutional and educational interaction with the highest possible quality and efficiency. stc has also proved its ability to overcome the challenges and potential risks in addition to keeping up with business operations and opening its doors to serve its customers in the current circumstances. Moreover, stc was placed in the forefront within the private sectors as a result of the great efforts and dedication of its staff, who have demonstrated their determination to face the health risks associated with COVID-19. As a result, stc was able to continue providing its services with the same quality standards despite the increasing demand and the shift towards digital platforms to communicate and deliver its products to the customers.
Capturing Business Opportunities
2020 opened the door for stc to undertake several initiatives aimed at developing the scope of work and sharing expertise in order to support the digital transformation process and provide the best services, products as well as solutions that meet the growing demand for the enterprise services. Thus, stc leverages on the parent company’s (stc Group) expertise and capabilities in the area of digitization in addition to the advanced technology services captured from the successful integration project with our subsidiary, solutions by stc. This has enabled stc to switch from providing traditional services to offering digital, cloud, Internet of Things (IoT), data, as well as cyber security and advanced IT solutions and services. It is worth noting that our digital services are designed to target all the private and governmental sectors through designing packages of integrated and services. with the highest possible technical and operational efficiency. Consequently, stc has worked hard to capture business opportunities achieving an outstanding growth in its operations that target enterprises and governmental entities.
The Negative Impacts on the Consumer Sector
On the other hand, COVID-19 crisis has had a negative impact on the telecommunications sector, specifically some activities targeting the consumer services, which were greatly affected by the full lockdown in the country and the interruption of air traffic in most countries around the world. Thus, sales of roaming packages almost entirely dropped due to the suspension of flights and the reluctance to travel during 2020, in addition to the decline in device sales and its accessories resulting from the full closure of shopping malls and retail sales. Furthermore, the decline in the production process of mobile devices and ICT equipment due to COVID-19 effects on the producing and suppling countries have negatively impacted stc’s revenue. Not to mention the suspension of import and export activities which also contributed to the decline in the company’s revenue stream during 2020. However, stc’s strategy has demonstrated its flexibility to adapt with the difficult reality of the company’s operational performance through meeting all the services needed by the consumer as well as the private and public sectors, with the highest possible efficiency.
Positioning stc among the best companies in Kuwait and the region within one of the most operationally and financially defensive sectors, affected by the global economic crisis of COVID-19, gives us great impetus to move forward in expanding stc’s business and achieve the best operational and financial results.
Financial Performance of 2020
Despite COVID-19’s repercussions and the strong competition in the Kuwaiti telecommunications market, stc has managed to achieve good financial results that meet the anticipation of our shareholders during unstable and unprecedented circumstances. Whereby, stc’s revenue reached KD 283.2 million by the end of 2020, compared to KD 293.7 million in the previous year. This decline is attributed to the full and partial lockdown that was imposed in Kuwait due to COVID-19 pandemic, which, in turn, resulted in a decline in the consumer sector’s revenue. Furthermore, the significant near-total drop in the company’s revenue from the roaming services, due to the suspension of flights and closure of airports of most countries around the globe, was also translated into the decline in stc’s total revenue. In addition, stc’s social contribution that we are proud of through providing its customers with unlimited free local calls for all mobile networks, in addition to a 5GB internet package per day from 22 March to 20 April 2020, in collaboration with the Communications and Information Technology Regulatory Authority (CITRA) in support of the Kuwaiti community during COVID-19 crisis. On the other hand, sales of the enterprise sector witnessed a growth in its volume as a result of the current need and the growing demand for digital and IT services.
On the other hand, EBITDA reached KD 73.4 million in 2020 with an EBITDA margin of 26% during 2020. Consequently, stc’s net profit recorded KD 32.1 million (earnings per share of 64 fils) with a profit margin of 11%. The company also structured its capital and operational expenditures, particularly after the negative effects of the current economic crisis to ensure liquidity of cash flows under the current conditions. Furthermore, the company achieved these results despite COVID-19’s global economic challenges, during which stc was able to achieve good revenue levels in addition to enhancing its operational efficiency to create an added value for its customers and better returns for its shareholders. stc’s financial results throughout 2020 also reflected its competitiveness and strengthened its position as the second largest telecommunications company in terms of its market share of revenue in the Kuwait telecommunications sector with a market share of approx. 35%. Moreover, stc’s customer base reached 1.9 million customers at the end of 2020.
stc’s Future Plans
Following the negative effects of COVID-19’s economic crisis, all the local and regional enterprises have sought the urgent need for the digital transformation, which has become one of the most important pillars of the strategic plans for many local and international institutions and corporates. Through its AHEAD strategy, stc’s future plans focused on enriching customer experience, gaining market leadership and being a pioneer through improving the company’s capabilities as well as providing an effective model based on its digital platforms. Furthermore, AHEAD strategy also focused on instilling the culture of performance within the company. stc also seeks to enter into strategic partnerships to provide the basic infrastructure necessary to develop stc’s ICT portfolio. Additionally, stc is always keen to provide integrated working teams, innovate in its services and products, and explore more smart investments in order to achieve the best results. In light of market challenges resulting from the highly competitive prices, stc aims to focus on the value and quality of its products and services. Hence, one of stc’s most important future aspirations is to provide its customers, individuals and enterprises, with products and services that are beyond the traditional mobile services. It also strives to attract opportunities related to providing enterprise services and transforming the technical capabilities, in addition to empowering those capabilities renewably, leveraging from stc group’s expertise and capabilities in the digital transformation area. stc also capitalizes on the advanced technical services provided by solutions by stc which operates in Kuwait and is fully owned by stc. Accordingly, stc currently focuses on providing a wide range of services and solutions based on its strong infrastructure and its innovative 5G network to provide an excellent experience to its customers in various areas to facilitate digital transformation in Kuwait. It is worth noting that such services and digital solutions are specifically designed to help stc’s customers to cope with the repercussions of the current crisis that is likely to continue throughout 2021.
The Role of Governmental and Regulatory Entities in Supporting the Telecom Sector
In light of the current circumstances and present developments, the importance of the role that the governmental and regulatory entities can play to make a paradigm shift in the communications and IT sector in Kuwait, with an aim to upgrade the digital services so that they match best services available globally, depending on the telecommunication companies’ private sector’s capabilities. Government’s support for implementing the digital transformation in Kuwait is essential to enable the Kuwaiti telecommunications sector to keep pace with its global counterparts. Whereby, regional governments as well as those of different countries have begun to realize the importance of digital transformation and are working on applying it to execute the business of private companies, governmental entities as well as commercial, health and educational activities. The State of Kuwait also possesses all the geographical credentials that gives the country a distinctive feature to be a corridor and a hub for international cables to connect the countries of the region and the world. This is CITRA’s vision of transforming Kuwait into a regional data storage and processing center, in addition to the privately owned infrastructure of telecommunications companies, aimed at making Kuwait a leader and exporter of information technology in the region. Accordingly, this is likely to reinforce the “Kuwait 2035” vision for transforming Kuwait into a financial and commercial center. I would also like to commend CITRA’s positive and regulatory role, which has been supportive in making the Kuwaiti telecommunications sector take its leading regional and global position.
Human Capital Development
Throughout 2020, stc was keen to invest in its human capital and develop the capabilities of its employees to enable them to adapt to all the circumstances that we have witnessed. In particular, this has helped stc’s employees to better implement the remote working business plan as efficiently as possible and without any impact on the company’s administrative and operational activities, in line with the company’s strategy to meet the future challenges. Therefore, our investment in the workforce is one of the key elements of stc’s action plan, as we are committed to supporting the Kuwaiti employment replacement program “Kuwaitization” as one of the main pillars of our human resources strategy. Whereby, the Kuwaiti employees at stc reached 64% of company’s total employees by the end of 2020. We always strive to enhance and raise the efficiency and capacity of the company’s human resources through providing training courses and disseminating knowledge in the working environment to encourage our employees to achieve their goals and improve their expertise.
Appreciation and Gratitude
In conclusion, I am pleased to express my gratitude and thank our valued customers for their loyalty and confidence in stc, which has enabled us to achieve these results despite the difficult times we faced due to the COVID-19 crisis. Furthermore, I would like to thank the Board of Directors, Executive Management, stc family members and partners for their contributions in achieving this remarkable operational performance through their outstanding teamwork. I would also like to shed the light on their contributions to the company’s success during these difficult and unprecedented times through their cooperation, enthusiasm, dedication and continued support. This, in turn, has paid off with the fact that stc is now at the forefront of the most innovative digital communications services providers. Through your support and our productivity in implementing the company’s new strategy, transformation plan and investment activities, we are confident that stc will be able to move forward in achieving its future goals.
Eng. Maziad Bin Nasser Alharbi
Chief Executive Officer
Mr. Mohammed Bin AbdulMohsen Al Assaf
Chief Financial Officer
Overview
Despite the economic distortions caused by COVID-19’s current global crisis, stc was able to maintain satisfying cash flows driven by the company’s continuous investments in its key areas. stc’s strong financial and solvency positions supported the company to respond quickly and build up countercyclical buffers to support to the emergency contingency plans arising from external shocks. While working remotely under exceptional circumstances, stc defined its core areas and the required future strength capabilities necessary to execute its operations, administrative activities as well as desired financial results.stc ensured providing convergent offerings on a continuous basis in addition to implementing its updated strategy that was designed to cope with the latest developments associated with the COVID-19 crisis. While the current crisis has exposed the weakness of the digital infrastructure of most companies, particularly mediumsized firms, to cope with the related repercussions, stc demonstrated its ability to provide a wide range of digital, cloud and IT services through which it can reach the best secure business process with the highest possible technical and operational efficiency. This has, in turn, enabled stc to maintain its financial and operational flexibility throughout the general abnormal market and economic conditions.stc succeeded in capturing the opportunities created by the current crisis driven by the increasing demand for business solutions and digital services through increasing its investments in data services backed by the 5G network. Consequently, stc viewed this event as a valuable opportunity to increase its cost efficiency while investing in growth opportunities through the implementation of strategic cost management initiatives and expanding its digitization efforts. Despite the stiff competition among digital services and solutions providers, stc was able to capitalize on the new opportunities raised from the growing and wide demand on digital services through utilizing its flexible operating model. Additionally, stc has successfully reaped the benefits of the new digital economy capitalizing on its prior achievements over the past years with regards to adopting the digital transformation strategy and offering integrated technical solutions to its customers, individuals and enterprises, representing new areas of sustainable growth.
Concrete financial performance throughout an unprecedented crisis
The uncertain global financial market environment and the volatility of business operations during the lockdown period have made it challenging for most companies from different sectors to keep their financial wheels turning throughout that period. However, stc was able to maintain both its strong financial position and performance during 2020 which were reflected in achieving good levels in its revenue, EBITDA, EBITDA margin and net profit.
Throughout the current crisis, stc reported consolidated financial results for the year ended 2020 that satisfy the anticipation of its shareholders. Driven by the high demand on data services and digital platforms especially from the enterprise segment, stc’s revenues reached KD 283.2 million at the year ended 31 December 2020. The exceptional efforts of the company’s working teams significantly contributed in driving stc’s business efficiency and its efforts to offset the negative impacts of COVID-19 pandemic is demonstrated by its good EBITDA results reaching KD 73.4 million with an EBITDA margin of 26%. Thus, the net income reached KD 32.1 million (earnings per share 64 fils) with a net profit margin of 11%.
stc has dramatically expanded its offerings related to the 5G network backed products and services, building on its previous as well as ongoing investments in this area. Hence, the company’s total capex spending reached KD 26.2 million over the year, representing 9% of stc’s total revenue in 2020, compared to KD 58.5 million representing 20% of stc’s total revenues in 2019. On the other hand, stc’s total assets reached KD 374.2 million. In addition, the company’s total shareholders’ equity grew by 3.2% reaching KD 222.2 million, with a book value of 445 Kuwaiti fils per share. It is worth highlighting that one of stc’s competitive advantage is having a strong solvency position among its peers in the MENA region, where the debt to equity ratio reached 0.05x by the end of 2020, which is considered low compared to the industry average.
Financial strategy
Throughout this year, stc succeeded by acting proactively in providing a wide range of innovative products and services valued using an adequate pricing mechanism which supports the needs of the local community. This has also helped stc to maintain satisfactory levels of profitability margins enabling the company to gain a competitive advantage and maintain its leadership position in the Kuwaiti telecommunications market. As we carry out this historic astonishing work and exceptional continuous efforts of the company’s working teams throughout the unusual period, stc strives to provide products and services that exceed customers’ expectations during not only critical situations but also all the way through relaxed economic and market conditions.
During the financial year 2020, stc directed its financial resources to achieve the company’s vision, mission and values by investing in its people, technologies, operational processes and internal capabilities. The company also contributed in a number of initiatives in collaboration with the governmental bodies aimed at alleviating the negative consequences of COVID-19 pandemic on the local community. Furthermore, stc remained focused on building its financial strategy based on smart investments and cost optimization frameworks aligned with the company’s corporate strategy of enabling the digital transformation while catering to customers’ needs and developing structured frameworks to streamline its costs. This will, in turn, help the company to achieve its operational and financial objectives.
Remote working didn’t hold stc back from measuring its financial performance against the targeted KPIs, through the post-implementation analysis mechanism that was initiated in 2019. Hence, at stc, we are proud to be one of the few companies that succeeded in controlling the negative impacts of COVID-19 crisis while enhancing its operational efficiency during such an unprecedented event.
Moving Forward
As our acquisition to solutions by stc has enabled stc to deliver better value to its customers and shareholders despite the stressful economic conditions, we are keen to seek similar strategic potential valuecreating digital opportunities in the near future. With an aim to sustain our leadership position in the Kuwaiti telecom market, stc will hold onto investing in its human capital, internal processes and the latest advanced technologies as a means of uplifting the company’s efficiency and strengthening its core activities.
From a future perspective, stc is keen to ensure putting its disbursements on the right direction by investing more on digital platforms, creating strategic partnerships with digital providers and spending on its R&D function to provide the best-in-class services to its customers, individuals and enterprises.
Mr. Mohammed Bin AbdulMohsen Al Assaf
Chief Financial Officer
Dr. Mahmoud Ahmed Abdulrahman
Chairman
Dear Shareholder,
I am delighted to present Kuwait Telecommunications Company’s ( stc) Annual Report for the year ended 31 December 2020. This report demonstrates stc’s outstanding performance during an unprecedented period due to the COVID-19 crisis and the disruption it has caused to our daily life. Not to mention the considerable damage which inflicted many sectors due to the global fears from the uncertainty and the near-absence of future prospects in this regard. This report also addresses the company’s strategy, which has been highly streamlined and has significantly assisted the local community to adapt to the new digital age. Whereby, stc succeeded in providing its customers with the most innovative business solutions in collaboration with its specialized arm, solutions by stc. Despite the negative impact of the COVID-19 crisis on the global financial markets in various industries, stc was able to achieve financial and operational achievements that meet the aspirations of the company’s shareholders, recording a net profit of KD 32.1 million.As economic uncertainty and financial pressures worsened, stc took it upon itself to launch a wide range of products that meet customers’ demands in that period. As a result, stc has strengthened its position in the market as a leader in the digital and latest technological advances arena driven by the growing demand for the digital services in Kuwait and all over the world. Seizing opportunities, developing plans and innovative solutions in addition to providing innovative services to customers have been amongst the strategic foundations of stc since its inception in 2008. Hence, stc is keen to lead and enable the digitization process in the region leveraging the synergies resulting from the company’s integration with solutions by stc.
The Telecommunications Market and COVID-19
The Kuwaiti telecommunications market has shown flexibility in addressing economic challenges and risks through playing a key role in helping the community and meeting its needs. Throughout the pandemic’s outbreak in 2020 up until today, stc has been using the latest global technologies in addition to doing its utmost to provide innovative digital services aimed at meeting the community’s various needs during closure periods, curfews and beyond. With the advent and increased usage of digital platforms, mobile service providers have rushed to offer 5G backed products and services to mitigate the negative effects of the COVID-19 crisis on the Kuwaiti society. Thus, in response to the challenges and changes in the demand for digital communication services, stc has undertaken several initiatives aimed at facilitating remote working in addition to enabling online education as well as many digital and technical services targeting the B2B and B2C sectors. Through combining the latest technologies that distinguish us and the recent urgent need for digitization, stc has expanded its range of products, services and designs to keep pace with the rapid developments in telecommunications, technology and digitization services on a global level.
Creating Shareholders Value
At stc, we focus on creating shareholders value by establishing long-term growth from sustainable profits in addition to increasing total returns that are in the best interests of the company’s shareholders. With the support of the company’s business continuity plans, stc has been firmly keen to adhere to the corporate goals and values while monitoring developments and finding solutions, as well as enhancing the enthusiasm of the working teams in an effort to make a positive impact not only on employees and customers, but also on the community as a whole. Over the past years, stc’s performance has been evident through its operational efficiency, financial stability and the strength of its products, in addition to its distinctive and well-established brand in the telecommunications sector.
This has, in turn, enabled stc to succeed in expanding its footprint in the telecom industry and attract a large number of investors. Since the onset of the crisis, stc has been at the forefront in providing innovative and integrated digital solutions based on the latest technological developments for its customers, individuals and corporates. We have been able to achieve good results throughout the pandemic through adopting a flexible operating model, in addition to being flexible in implementing the company’s digital transformation strategy. stc also provided advanced technical solutions in line with the government’s expectations and social distancing plan. In order to win the trust of our valued shareholders, we follow a career path that elevates the best global practices to show our ability to deliver good results in both revenues and net profit, also to enhance our operational efficiency. Despite the 2020 crisis, stc managed to achieve a total revenue of KD 283.2 mn, where EBITDA reached KD 73.4 mn with an EBITDA margin of 26%. As a result, stc recorded a net profit of KD 32.1 mn. On the other hand, shareholders’ equity increased by 3.2% at the end of 2020, reaching a book value of 445 fils per share. The Board of Directors has recommended distributing cash dividends of 60 fils per share representing 60% of the share nominal value for the year ended 2020, subject to the approval of the Ordinary General Assembly of the company. This decision was based on stc’s confidence in its sustainability, strong financial position and ongoing cash flow generation during economic downturns.
These results reflect stc’s ability to overcome unprecedented challenges represented by the current global pandemic. Furthermore, the results demonstrated the quality of the company’s strategy and the dedication of each of the Board of Directors, the executive management and its employees. At stc, we are committed to enhancing the quality of our products, services, customer relationships and operational efficiency in order to maintain our market position during difficult times and economic uncertainties in addition to the ongoing societal changes.
Corporate Governance
stc is committed to adhering to the corporate governance rules and regulations issued by the Capital Markets Authority in the State of Kuwait which aims to uphold transparency, protect shareholders value and improve company’s operating environment. In conjunction with all the recent changes imposed by the regulatory bodies with regards to the Annual General Meeting and the disclosures of the financial implications of COVID-19 outbreak, stc ensured applying all laws and regulations that conform to its values and the professional foundations that guide our work to better serve the interests of our shareholders. The corporate governance report in a later chapter of this report outlines our framework in further details.
Corporate Social Responsibility
stc deals highly professionally with its customers, employees, shareholders, and the local community as a whole, who, in turn, contribute to our company’s success. Through contributing to the Kuwaiti society, stc aims to leave a positive footprint to be felt by the future generations.
As a matter of our concern for the social responsibility towards our local community, stc ensured its presence to lend a helping hand and support throughout COVID-19 outbreak in order to alleviate the negative consequences of the current crisis on the Kuwaiti community. In this regard, stc has contributed to many initiatives and activities in support of the preventive measures adopted by the government to mitigate the harsh negative effects of the COVID-19 crisis on the Kuwaiti society. Consequently, the company has collaborated with various entities to support a number of groups and sectors across Kuwait including, health, sports, education and entrepreneurship. In addition, stc has also worked alongside with some governmental agencies and medical companies to prevent the infectious diseases in addition to undertaking several preventive measures in accordance with the health guidelines and instructions issued by the Ministry of Health.
As part of its corporate social responsibility initiatives, stc has also adopted the highest safety standards and instilled the culture of performance among its staff to continue providing high quality services while protecting its customers and employees. During 2020, stc has heavily invested in its human capital through conducting virtual training courses throughout the lockdown period and thereafter. Up until this moment, stc has been keen to ensure employees’ safety, as it was amongst the first companies in Kuwait to adopt the remote working criteria while keeping the working teams engaged through conducting virtual conferences and sending them feedback surveys on a continuous basis.
In compliance with the instructions imposed by the Kuwaiti government with regards to COVID-19 pandemic, it is worth highlighting stc’s internal campaign “Don’t Compromise” that was initiated to raise awareness among the employees following their return to work from the full lockdown, in order to ensure their safety as the company’s first priority. Furthermore, the CSR section of this report is dedicated to include the company’s efforts in these different areas.
Appreciation
On behalf of the Board of Directors, I would like to thank His Highness, the Amir Sheikh Nawaf Al Ahmed Al Jaber Al Sabah, H.H. the Crown Prince Sheikh Meshaal Al Ahmed Al Jaber Al Sabah, H.H. the Prime Minister Sheikh Sabah Al Khalid Al Sabah and his distinguished government for their continued support to the telecommunications sector, which puts our precious country on the map of the advanced and developed countries in the field of telecommunications.
would also like to express my thanks and gratitude to all stc family members for their significant efforts, dedication and great sacrifices during 2020 in light of the challenges we have witnessed. Moreover, I would like to shed light on their continued enthusiasm and dedication in making stc a fascinating and successful company at times when the global economy has been greatly affected. I particularly thank our loyal customers for their continued trust in stc, which motivates us to provide the best services with the highest possible quality. Our sincere appreciation to our valued shareholders for their continued support and for placing their trust in us. We strongly believe that this commitment has been instrumental in enabling stc to continue on its successful journey of growth over the past years.
Dr. Mahmoud Ahmed Abdulrahman
Chairman
Eng. Maziad Bin Nasser Al Harbi
Chief Executive Officer
Dear Shareholders,
2020 was a remarkable year for Kuwait Telecommunications Company (stc) despite the unprecedented crisis witnessed by different sectors in Kuwait and around the globe. The global crisis has led to a radical shift in the quality of services and the strategy of current as well as future businesses due to the rapid spread of COVID-19 and the imposed restrictions on movements which negatively impacted most businesses and economic activities, and has in turn, led to a complete shift from the traditional working systems towards digitization of businesses of all kinds. In addition, the digitalization process assisted businesses to continue operating remotely resulting in more data usages and a significant reliance on the capabilities of telecommunications companies with regards to offering digital services and solutions to the consumer and enterprise customers. It is worth noting that such services would provide flexibility for business continuity, working from home and studying in addition to an access to all medical, financial, entertainment, retail and other basic services.
Recovery Strategy
In response to the unforeseeable events, the company formed a specialized team at the onset of the pandemic to deal with the crisis through developing a business continuity plan and adopting new initiatives to face the challenges and adhere to the national measures imposed to combat the virus’s outbreak. The specialized team has requested detailed business continuity plans to be developed by all the sectors at stc in addition to their request of monitoring the logistical work required to ensure the continuity of the company’s business and services provided to its customers. These plans are likely to reduce the negative economic impact of the crises on stc while ensuring the safety of its employees and customers.
The company also took important steps at the onset of the crises to ensure stc’s continuity of providing full services to all its customers during the full and partial lockdown periods. Furthermore, the steps taken shall also ensure the implementation of working from home and return to work plans, in addition to enhancing the digital transformation strategy and enriching the customer experience.
stc was keen to protect its financial position and its shareholder’s rights by extensively managing its cash flows and monitoring collections, while activating the cost optimization program to support the company’s profit margins for the year 2020.
In 2020, stc relied heavily on its infrastructure, being the most powerful in the region in terms of mobile services, through 5G networks which is the cornerstone of our expansion plan throughout the current crises. stc counts on the 5G network to keep pace with the needed developments of all private sectors and government agencies necessary to invest in the digital transformation process in order to meet the needs of consumers and enterprises capitalizing on the 5G, the latest technologies and digital services. Thus, stc offers a wide range of services including entertainment and the digital services in addition to its concern for meeting the growing demand for fixed and wide mobile broadband services at high speeds and huge capacity. stc also ensures meeting all business requirements related to online institutional and educational interaction with the highest possible quality and efficiency. stc has also proved its ability to overcome the challenges and potential risks in addition to keeping up with business operations and opening its doors to serve its customers in the current circumstances. Moreover, stc was placed in the forefront within the private sectors as a result of the great efforts and dedication of its staff, who have demonstrated their determination to face the health risks associated with COVID-19. As a result, stc was able to continue providing its services with the same quality standards despite the increasing demand and the shift towards digital platforms to communicate and deliver its products to the customers.
Capturing Business Opportunities
2020 opened the door for stc to undertake several initiatives aimed at developing the scope of work and sharing expertise in order to support the digital transformation process and provide the best services, products as well as solutions that meet the growing demand for the enterprise services. Thus, stc leverages on the parent company’s (stc Group) expertise and capabilities in the area of digitization in addition to the advanced technology services captured from the successful integration project with our subsidiary, solutions by stc. This has enabled stc to switch from providing traditional services to offering digital, cloud, Internet of Things (IoT), data, as well as cyber security and advanced IT solutions and services. It is worth noting that our digital services are designed to target all the private and governmental sectors through designing packages of integrated and services. with the highest possible technical and operational efficiency. Consequently, stc has worked hard to capture business opportunities achieving an outstanding growth in its operations that target enterprises and governmental entities.
The Negative Impacts on the Consumer Sector
On the other hand, COVID-19 crisis has had a negative impact on the telecommunications sector, specifically some activities targeting the consumer services, which were greatly affected by the full lockdown in the country and the interruption of air traffic in most countries around the world. Thus, sales of roaming packages almost entirely dropped due to the suspension of flights and the reluctance to travel during 2020, in addition to the decline in device sales and its accessories resulting from the full closure of shopping malls and retail sales. Furthermore, the decline in the production process of mobile devices and ICT equipment due to COVID-19 effects on the producing and suppling countries have negatively impacted stc’s revenue. Not to mention the suspension of import and export activities which also contributed to the decline in the company’s revenue stream during 2020. However, stc’s strategy has demonstrated its flexibility to adapt with the difficult reality of the company’s operational performance through meeting all the services needed by the consumer as well as the private and public sectors, with the highest possible efficiency.
Positioning stc among the best companies in Kuwait and the region within one of the most operationally and financially defensive sectors, affected by the global economic crisis of COVID-19, gives us great impetus to move forward in expanding stc’s business and achieve the best operational and financial results.
Financial Performance of 2020
Despite COVID-19’s repercussions and the strong competition in the Kuwaiti telecommunications market, stc has managed to achieve good financial results that meet the anticipation of our shareholders during unstable and unprecedented circumstances. Whereby, stc’s revenue reached KD 283.2 million by the end of 2020, compared to KD 293.7 million in the previous year. This decline is attributed to the full and partial lockdown that was imposed in Kuwait due to COVID-19 pandemic, which, in turn, resulted in a decline in the consumer sector’s revenue. Furthermore, the significant near-total drop in the company’s revenue from the roaming services, due to the suspension of flights and closure of airports of most countries around the globe, was also translated into the decline in stc’s total revenue. In addition, stc’s social contribution that we are proud of through providing its customers with unlimited free local calls for all mobile networks, in addition to a 5GB internet package per day from 22 March to 20 April 2020, in collaboration with the Communications and Information Technology Regulatory Authority (CITRA) in support of the Kuwaiti community during COVID-19 crisis. On the other hand, sales of the enterprise sector witnessed a growth in its volume as a result of the current need and the growing demand for digital and IT services.
On the other hand, EBITDA reached KD 73.4 million in 2020 with an EBITDA margin of 26% during 2020. Consequently, stc’s net profit recorded KD 32.1 million (earnings per share of 64 fils) with a profit margin of 11%. The company also structured its capital and operational expenditures, particularly after the negative effects of the current economic crisis to ensure liquidity of cash flows under the current conditions. Furthermore, the company achieved these results despite COVID-19’s global economic challenges, during which stc was able to achieve good revenue levels in addition to enhancing its operational efficiency to create an added value for its customers and better returns for its shareholders. stc’s financial results throughout 2020 also reflected its competitiveness and strengthened its position as the second largest telecommunications company in terms of its market share of revenue in the Kuwait telecommunications sector with a market share of approx. 35%. Moreover, stc’s customer base reached 1.9 million customers at the end of 2020.
stc’s Future Plans
Following the negative effects of COVID-19’s economic crisis, all the local and regional enterprises have sought the urgent need for the digital transformation, which has become one of the most important pillars of the strategic plans for many local and international institutions and corporates. Through its AHEAD strategy, stc’s future plans focused on enriching customer experience, gaining market leadership and being a pioneer through improving the company’s capabilities as well as providing an effective model based on its digital platforms. Furthermore, AHEAD strategy also focused on instilling the culture of performance within the company. stc also seeks to enter into strategic partnerships to provide the basic infrastructure necessary to develop stc’s ICT portfolio. Additionally, stc is always keen to provide integrated working teams, innovate in its services and products, and explore more smart investments in order to achieve the best results. In light of market challenges resulting from the highly competitive prices, stc aims to focus on the value and quality of its products and services. Hence, one of stc’s most important future aspirations is to provide its customers, individuals and enterprises, with products and services that are beyond the traditional mobile services. It also strives to attract opportunities related to providing enterprise services and transforming the technical capabilities, in addition to empowering those capabilities renewably, leveraging from stc group’s expertise and capabilities in the digital transformation area. stc also capitalizes on the advanced technical services provided by solutions by stc which operates in Kuwait and is fully owned by stc. Accordingly, stc currently focuses on providing a wide range of services and solutions based on its strong infrastructure and its innovative 5G network to provide an excellent experience to its customers in various areas to facilitate digital transformation in Kuwait. It is worth noting that such services and digital solutions are specifically designed to help stc’s customers to cope with the repercussions of the current crisis that is likely to continue throughout 2021.
The Role of Governmental and Regulatory Entities in Supporting the Telecom Sector
In light of the current circumstances and present developments, the importance of the role that the governmental and regulatory entities can play to make a paradigm shift in the communications and IT sector in Kuwait, with an aim to upgrade the digital services so that they match best services available globally, depending on the telecommunication companies’ private sector’s capabilities. Government’s support for implementing the digital transformation in Kuwait is essential to enable the Kuwaiti telecommunications sector to keep pace with its global counterparts. Whereby, regional governments as well as those of different countries have begun to realize the importance of digital transformation and are working on applying it to execute the business of private companies, governmental entities as well as commercial, health and educational activities. The State of Kuwait also possesses all the geographical credentials that gives the country a distinctive feature to be a corridor and a hub for international cables to connect the countries of the region and the world. This is CITRA’s vision of transforming Kuwait into a regional data storage and processing center, in addition to the privately owned infrastructure of telecommunications companies, aimed at making Kuwait a leader and exporter of information technology in the region. Accordingly, this is likely to reinforce the “Kuwait 2035” vision for transforming Kuwait into a financial and commercial center. I would also like to commend CITRA’s positive and regulatory role, which has been supportive in making the Kuwaiti telecommunications sector take its leading regional and global position.
Human Capital Development
Throughout 2020, stc was keen to invest in its human capital and develop the capabilities of its employees to enable them to adapt to all the circumstances that we have witnessed. In particular, this has helped stc’s employees to better implement the remote working business plan as efficiently as possible and without any impact on the company’s administrative and operational activities, in line with the company’s strategy to meet the future challenges. Therefore, our investment in the workforce is one of the key elements of stc’s action plan, as we are committed to supporting the Kuwaiti employment replacement program “Kuwaitization” as one of the main pillars of our human resources strategy. Whereby, the Kuwaiti employees at stc reached 64% of company’s total employees by the end of 2020. We always strive to enhance and raise the efficiency and capacity of the company’s human resources through providing training courses and disseminating knowledge in the working environment to encourage our employees to achieve their goals and improve their expertise.
Appreciation and Gratitude
In conclusion, I am pleased to express my gratitude and thank our valued customers for their loyalty and confidence in stc, which has enabled us to achieve these results despite the difficult times we faced due to the COVID-19 crisis. Furthermore, I would like to thank the Board of Directors, Executive Management, stc family members and partners for their contributions in achieving this remarkable operational performance through their outstanding teamwork. I would also like to shed the light on their contributions to the company’s success during these difficult and unprecedented times through their cooperation, enthusiasm, dedication and continued support. This, in turn, has paid off with the fact that stc is now at the forefront of the most innovative digital communications services providers. Through your support and our productivity in implementing the company’s new strategy, transformation plan and investment activities, we are confident that stc will be able to move forward in achieving its future goals.
Eng. Maziad Bin Nasser Alharbi
Chief Executive Officer
Mr. Mohammed Bin AbdulMohsen Al Assaf
Chief Financial Officer
Overview
Despite the economic distortions caused by COVID-19’s current global crisis, stc was able to maintain satisfying cash flows driven by the company’s continuous investments in its key areas. stc’s strong financial and solvency positions supported the company to respond quickly and build up countercyclical buffers to support to the emergency contingency plans arising from external shocks. While working remotely under exceptional circumstances, stc defined its core areas and the required future strength capabilities necessary to execute its operations, administrative activities as well as desired financial results.stc ensured providing convergent offerings on a continuous basis in addition to implementing its updated strategy that was designed to cope with the latest developments associated with the COVID-19 crisis. While the current crisis has exposed the weakness of the digital infrastructure of most companies, particularly mediumsized firms, to cope with the related repercussions, stc demonstrated its ability to provide a wide range of digital, cloud and IT services through which it can reach the best secure business process with the highest possible technical and operational efficiency. This has, in turn, enabled stc to maintain its financial and operational flexibility throughout the general abnormal market and economic conditions.stc succeeded in capturing the opportunities created by the current crisis driven by the increasing demand for business solutions and digital services through increasing its investments in data services backed by the 5G network. Consequently, stc viewed this event as a valuable opportunity to increase its cost efficiency while investing in growth opportunities through the implementation of strategic cost management initiatives and expanding its digitization efforts. Despite the stiff competition among digital services and solutions providers, stc was able to capitalize on the new opportunities raised from the growing and wide demand on digital services through utilizing its flexible operating model. Additionally, stc has successfully reaped the benefits of the new digital economy capitalizing on its prior achievements over the past years with regards to adopting the digital transformation strategy and offering integrated technical solutions to its customers, individuals and enterprises, representing new areas of sustainable growth.
Concrete financial performance throughout an unprecedented crisis
The uncertain global financial market environment and the volatility of business operations during the lockdown period have made it challenging for most companies from different sectors to keep their financial wheels turning throughout that period. However, stc was able to maintain both its strong financial position and performance during 2020 which were reflected in achieving good levels in its revenue, EBITDA, EBITDA margin and net profit.
Throughout the current crisis, stc reported consolidated financial results for the year ended 2020 that satisfy the anticipation of its shareholders. Driven by the high demand on data services and digital platforms especially from the enterprise segment, stc’s revenues reached KD 283.2 million at the year ended 31 December 2020. The exceptional efforts of the company’s working teams significantly contributed in driving stc’s business efficiency and its efforts to offset the negative impacts of COVID-19 pandemic is demonstrated by its good EBITDA results reaching KD 73.4 million with an EBITDA margin of 26%. Thus, the net income reached KD 32.1 million (earnings per share 64 fils) with a net profit margin of 11%.
stc has dramatically expanded its offerings related to the 5G network backed products and services, building on its previous as well as ongoing investments in this area. Hence, the company’s total capex spending reached KD 26.2 million over the year, representing 9% of stc’s total revenue in 2020, compared to KD 58.5 million representing 20% of stc’s total revenues in 2019. On the other hand, stc’s total assets reached KD 374.2 million. In addition, the company’s total shareholders’ equity grew by 3.2% reaching KD 222.2 million, with a book value of 445 Kuwaiti fils per share. It is worth highlighting that one of stc’s competitive advantage is having a strong solvency position among its peers in the MENA region, where the debt to equity ratio reached 0.05x by the end of 2020, which is considered low compared to the industry average.
Financial strategy
Throughout this year, stc succeeded by acting proactively in providing a wide range of innovative products and services valued using an adequate pricing mechanism which supports the needs of the local community. This has also helped stc to maintain satisfactory levels of profitability margins enabling the company to gain a competitive advantage and maintain its leadership position in the Kuwaiti telecommunications market. As we carry out this historic astonishing work and exceptional continuous efforts of the company’s working teams throughout the unusual period, stc strives to provide products and services that exceed customers’ expectations during not only critical situations but also all the way through relaxed economic and market conditions.
During the financial year 2020, stc directed its financial resources to achieve the company’s vision, mission and values by investing in its people, technologies, operational processes and internal capabilities. The company also contributed in a number of initiatives in collaboration with the governmental bodies aimed at alleviating the negative consequences of COVID-19 pandemic on the local community. Furthermore, stc remained focused on building its financial strategy based on smart investments and cost optimization frameworks aligned with the company’s corporate strategy of enabling the digital transformation while catering to customers’ needs and developing structured frameworks to streamline its costs. This will, in turn, help the company to achieve its operational and financial objectives.
Remote working didn’t hold stc back from measuring its financial performance against the targeted KPIs, through the post-implementation analysis mechanism that was initiated in 2019. Hence, at stc, we are proud to be one of the few companies that succeeded in controlling the negative impacts of COVID-19 crisis while enhancing its operational efficiency during such an unprecedented event.
Moving Forward
As our acquisition to solutions by stc has enabled stc to deliver better value to its customers and shareholders despite the stressful economic conditions, we are keen to seek similar strategic potential valuecreating digital opportunities in the near future. With an aim to sustain our leadership position in the Kuwaiti telecom market, stc will hold onto investing in its human capital, internal processes and the latest advanced technologies as a means of uplifting the company’s efficiency and strengthening its core activities.
From a future perspective, stc is keen to ensure putting its disbursements on the right direction by investing more on digital platforms, creating strategic partnerships with digital providers and spending on its R&D function to provide the best-in-class services to its customers, individuals and enterprises.
Mr. Mohammed Bin AbdulMohsen Al Assaf
Chief Financial Officer
Dr. Mahmoud Ahmed Abdulrahman
Chairman
Dear Shareholder,
I am delighted to present Kuwait Telecommunications Company’s ( stc) Annual Report for the year ended 31 December 2020. This report demonstrates stc’s outstanding performance during an unprecedented period due to the COVID-19 crisis and the disruption it has caused to our daily life. Not to mention the considerable damage which inflicted many sectors due to the global fears from the uncertainty and the near-absence of future prospects in this regard. This report also addresses the company’s strategy, which has been highly streamlined and has significantly assisted the local community to adapt to the new digital age. Whereby, stc succeeded in providing its customers with the most innovative business solutions in collaboration with its specialized arm, solutions by stc. Despite the negative impact of the COVID-19 crisis on the global financial markets in various industries, stc was able to achieve financial and operational achievements that meet the aspirations of the company’s shareholders, recording a net profit of KD 32.1 million.As economic uncertainty and financial pressures worsened, stc took it upon itself to launch a wide range of products that meet customers’ demands in that period. As a result, stc has strengthened its position in the market as a leader in the digital and latest technological advances arena driven by the growing demand for the digital services in Kuwait and all over the world. Seizing opportunities, developing plans and innovative solutions in addition to providing innovative services to customers have been amongst the strategic foundations of stc since its inception in 2008. Hence, stc is keen to lead and enable the digitization process in the region leveraging the synergies resulting from the company’s integration with solutions by stc.
The Telecommunications Market and COVID-19
The Kuwaiti telecommunications market has shown flexibility in addressing economic challenges and risks through playing a key role in helping the community and meeting its needs. Throughout the pandemic’s outbreak in 2020 up until today, stc has been using the latest global technologies in addition to doing its utmost to provide innovative digital services aimed at meeting the community’s various needs during closure periods, curfews and beyond. With the advent and increased usage of digital platforms, mobile service providers have rushed to offer 5G backed products and services to mitigate the negative effects of the COVID-19 crisis on the Kuwaiti society. Thus, in response to the challenges and changes in the demand for digital communication services, stc has undertaken several initiatives aimed at facilitating remote working in addition to enabling online education as well as many digital and technical services targeting the B2B and B2C sectors. Through combining the latest technologies that distinguish us and the recent urgent need for digitization, stc has expanded its range of products, services and designs to keep pace with the rapid developments in telecommunications, technology and digitization services on a global level.
Creating Shareholders Value
At stc, we focus on creating shareholders value by establishing long-term growth from sustainable profits in addition to increasing total returns that are in the best interests of the company’s shareholders. With the support of the company’s business continuity plans, stc has been firmly keen to adhere to the corporate goals and values while monitoring developments and finding solutions, as well as enhancing the enthusiasm of the working teams in an effort to make a positive impact not only on employees and customers, but also on the community as a whole. Over the past years, stc’s performance has been evident through its operational efficiency, financial stability and the strength of its products, in addition to its distinctive and well-established brand in the telecommunications sector.
This has, in turn, enabled stc to succeed in expanding its footprint in the telecom industry and attract a large number of investors. Since the onset of the crisis, stc has been at the forefront in providing innovative and integrated digital solutions based on the latest technological developments for its customers, individuals and corporates. We have been able to achieve good results throughout the pandemic through adopting a flexible operating model, in addition to being flexible in implementing the company’s digital transformation strategy. stc also provided advanced technical solutions in line with the government’s expectations and social distancing plan. In order to win the trust of our valued shareholders, we follow a career path that elevates the best global practices to show our ability to deliver good results in both revenues and net profit, also to enhance our operational efficiency. Despite the 2020 crisis, stc managed to achieve a total revenue of KD 283.2 mn, where EBITDA reached KD 73.4 mn with an EBITDA margin of 26%. As a result, stc recorded a net profit of KD 32.1 mn. On the other hand, shareholders’ equity increased by 3.2% at the end of 2020, reaching a book value of 445 fils per share. The Board of Directors has recommended distributing cash dividends of 60 fils per share representing 60% of the share nominal value for the year ended 2020, subject to the approval of the Ordinary General Assembly of the company. This decision was based on stc’s confidence in its sustainability, strong financial position and ongoing cash flow generation during economic downturns.
These results reflect stc’s ability to overcome unprecedented challenges represented by the current global pandemic. Furthermore, the results demonstrated the quality of the company’s strategy and the dedication of each of the Board of Directors, the executive management and its employees. At stc, we are committed to enhancing the quality of our products, services, customer relationships and operational efficiency in order to maintain our market position during difficult times and economic uncertainties in addition to the ongoing societal changes.
Corporate Governance
stc is committed to adhering to the corporate governance rules and regulations issued by the Capital Markets Authority in the State of Kuwait which aims to uphold transparency, protect shareholders value and improve company’s operating environment. In conjunction with all the recent changes imposed by the regulatory bodies with regards to the Annual General Meeting and the disclosures of the financial implications of COVID-19 outbreak, stc ensured applying all laws and regulations that conform to its values and the professional foundations that guide our work to better serve the interests of our shareholders. The corporate governance report in a later chapter of this report outlines our framework in further details.
Corporate Social Responsibility
stc deals highly professionally with its customers, employees, shareholders, and the local community as a whole, who, in turn, contribute to our company’s success. Through contributing to the Kuwaiti society, stc aims to leave a positive footprint to be felt by the future generations.
As a matter of our concern for the social responsibility towards our local community, stc ensured its presence to lend a helping hand and support throughout COVID-19 outbreak in order to alleviate the negative consequences of the current crisis on the Kuwaiti community. In this regard, stc has contributed to many initiatives and activities in support of the preventive measures adopted by the government to mitigate the harsh negative effects of the COVID-19 crisis on the Kuwaiti society. Consequently, the company has collaborated with various entities to support a number of groups and sectors across Kuwait including, health, sports, education and entrepreneurship. In addition, stc has also worked alongside with some governmental agencies and medical companies to prevent the infectious diseases in addition to undertaking several preventive measures in accordance with the health guidelines and instructions issued by the Ministry of Health.
As part of its corporate social responsibility initiatives, stc has also adopted the highest safety standards and instilled the culture of performance among its staff to continue providing high quality services while protecting its customers and employees. During 2020, stc has heavily invested in its human capital through conducting virtual training courses throughout the lockdown period and thereafter. Up until this moment, stc has been keen to ensure employees’ safety, as it was amongst the first companies in Kuwait to adopt the remote working criteria while keeping the working teams engaged through conducting virtual conferences and sending them feedback surveys on a continuous basis.
In compliance with the instructions imposed by the Kuwaiti government with regards to COVID-19 pandemic, it is worth highlighting stc’s internal campaign “Don’t Compromise” that was initiated to raise awareness among the employees following their return to work from the full lockdown, in order to ensure their safety as the company’s first priority. Furthermore, the CSR section of this report is dedicated to include the company’s efforts in these different areas.
Appreciation
On behalf of the Board of Directors, I would like to thank His Highness, the Amir Sheikh Nawaf Al Ahmed Al Jaber Al Sabah, H.H. the Crown Prince Sheikh Meshaal Al Ahmed Al Jaber Al Sabah, H.H. the Prime Minister Sheikh Sabah Al Khalid Al Sabah and his distinguished government for their continued support to the telecommunications sector, which puts our precious country on the map of the advanced and developed countries in the field of telecommunications.
would also like to express my thanks and gratitude to all stc family members for their significant efforts, dedication and great sacrifices during 2020 in light of the challenges we have witnessed. Moreover, I would like to shed light on their continued enthusiasm and dedication in making stc a fascinating and successful company at times when the global economy has been greatly affected. I particularly thank our loyal customers for their continued trust in stc, which motivates us to provide the best services with the highest possible quality. Our sincere appreciation to our valued shareholders for their continued support and for placing their trust in us. We strongly believe that this commitment has been instrumental in enabling stc to continue on its successful journey of growth over the past years.
Dr. Mahmoud Ahmed Abdulrahman
Chairman
Eng. Maziad Bin Nasser Al Harbi
Chief Executive Officer
Dear Shareholders,
2020 was a remarkable year for Kuwait Telecommunications Company (stc) despite the unprecedented crisis witnessed by different sectors in Kuwait and around the globe. The global crisis has led to a radical shift in the quality of services and the strategy of current as well as future businesses due to the rapid spread of COVID-19 and the imposed restrictions on movements which negatively impacted most businesses and economic activities, and has in turn, led to a complete shift from the traditional working systems towards digitization of businesses of all kinds. In addition, the digitalization process assisted businesses to continue operating remotely resulting in more data usages and a significant reliance on the capabilities of telecommunications companies with regards to offering digital services and solutions to the consumer and enterprise customers. It is worth noting that such services would provide flexibility for business continuity, working from home and studying in addition to an access to all medical, financial, entertainment, retail and other basic services.
Recovery Strategy
In response to the unforeseeable events, the company formed a specialized team at the onset of the pandemic to deal with the crisis through developing a business continuity plan and adopting new initiatives to face the challenges and adhere to the national measures imposed to combat the virus’s outbreak. The specialized team has requested detailed business continuity plans to be developed by all the sectors at stc in addition to their request of monitoring the logistical work required to ensure the continuity of the company’s business and services provided to its customers. These plans are likely to reduce the negative economic impact of the crises on stc while ensuring the safety of its employees and customers.
The company also took important steps at the onset of the crises to ensure stc’s continuity of providing full services to all its customers during the full and partial lockdown periods. Furthermore, the steps taken shall also ensure the implementation of working from home and return to work plans, in addition to enhancing the digital transformation strategy and enriching the customer experience.
stc was keen to protect its financial position and its shareholder’s rights by extensively managing its cash flows and monitoring collections, while activating the cost optimization program to support the company’s profit margins for the year 2020.
In 2020, stc relied heavily on its infrastructure, being the most powerful in the region in terms of mobile services, through 5G networks which is the cornerstone of our expansion plan throughout the current crises. stc counts on the 5G network to keep pace with the needed developments of all private sectors and government agencies necessary to invest in the digital transformation process in order to meet the needs of consumers and enterprises capitalizing on the 5G, the latest technologies and digital services. Thus, stc offers a wide range of services including entertainment and the digital services in addition to its concern for meeting the growing demand for fixed and wide mobile broadband services at high speeds and huge capacity. stc also ensures meeting all business requirements related to online institutional and educational interaction with the highest possible quality and efficiency. stc has also proved its ability to overcome the challenges and potential risks in addition to keeping up with business operations and opening its doors to serve its customers in the current circumstances. Moreover, stc was placed in the forefront within the private sectors as a result of the great efforts and dedication of its staff, who have demonstrated their determination to face the health risks associated with COVID-19. As a result, stc was able to continue providing its services with the same quality standards despite the increasing demand and the shift towards digital platforms to communicate and deliver its products to the customers.
Capturing Business Opportunities
2020 opened the door for stc to undertake several initiatives aimed at developing the scope of work and sharing expertise in order to support the digital transformation process and provide the best services, products as well as solutions that meet the growing demand for the enterprise services. Thus, stc leverages on the parent company’s (stc Group) expertise and capabilities in the area of digitization in addition to the advanced technology services captured from the successful integration project with our subsidiary, solutions by stc. This has enabled stc to switch from providing traditional services to offering digital, cloud, Internet of Things (IoT), data, as well as cyber security and advanced IT solutions and services. It is worth noting that our digital services are designed to target all the private and governmental sectors through designing packages of integrated and services. with the highest possible technical and operational efficiency. Consequently, stc has worked hard to capture business opportunities achieving an outstanding growth in its operations that target enterprises and governmental entities.
The Negative Impacts on the Consumer Sector
On the other hand, COVID-19 crisis has had a negative impact on the telecommunications sector, specifically some activities targeting the consumer services, which were greatly affected by the full lockdown in the country and the interruption of air traffic in most countries around the world. Thus, sales of roaming packages almost entirely dropped due to the suspension of flights and the reluctance to travel during 2020, in addition to the decline in device sales and its accessories resulting from the full closure of shopping malls and retail sales. Furthermore, the decline in the production process of mobile devices and ICT equipment due to COVID-19 effects on the producing and suppling countries have negatively impacted stc’s revenue. Not to mention the suspension of import and export activities which also contributed to the decline in the company’s revenue stream during 2020. However, stc’s strategy has demonstrated its flexibility to adapt with the difficult reality of the company’s operational performance through meeting all the services needed by the consumer as well as the private and public sectors, with the highest possible efficiency.
Positioning stc among the best companies in Kuwait and the region within one of the most operationally and financially defensive sectors, affected by the global economic crisis of COVID-19, gives us great impetus to move forward in expanding stc’s business and achieve the best operational and financial results.
Financial Performance of 2020
Despite COVID-19’s repercussions and the strong competition in the Kuwaiti telecommunications market, stc has managed to achieve good financial results that meet the anticipation of our shareholders during unstable and unprecedented circumstances. Whereby, stc’s revenue reached KD 283.2 million by the end of 2020, compared to KD 293.7 million in the previous year. This decline is attributed to the full and partial lockdown that was imposed in Kuwait due to COVID-19 pandemic, which, in turn, resulted in a decline in the consumer sector’s revenue. Furthermore, the significant near-total drop in the company’s revenue from the roaming services, due to the suspension of flights and closure of airports of most countries around the globe, was also translated into the decline in stc’s total revenue. In addition, stc’s social contribution that we are proud of through providing its customers with unlimited free local calls for all mobile networks, in addition to a 5GB internet package per day from 22 March to 20 April 2020, in collaboration with the Communications and Information Technology Regulatory Authority (CITRA) in support of the Kuwaiti community during COVID-19 crisis. On the other hand, sales of the enterprise sector witnessed a growth in its volume as a result of the current need and the growing demand for digital and IT services.
On the other hand, EBITDA reached KD 73.4 million in 2020 with an EBITDA margin of 26% during 2020. Consequently, stc’s net profit recorded KD 32.1 million (earnings per share of 64 fils) with a profit margin of 11%. The company also structured its capital and operational expenditures, particularly after the negative effects of the current economic crisis to ensure liquidity of cash flows under the current conditions. Furthermore, the company achieved these results despite COVID-19’s global economic challenges, during which stc was able to achieve good revenue levels in addition to enhancing its operational efficiency to create an added value for its customers and better returns for its shareholders. stc’s financial results throughout 2020 also reflected its competitiveness and strengthened its position as the second largest telecommunications company in terms of its market share of revenue in the Kuwait telecommunications sector with a market share of approx. 35%. Moreover, stc’s customer base reached 1.9 million customers at the end of 2020.
stc’s Future Plans
Following the negative effects of COVID-19’s economic crisis, all the local and regional enterprises have sought the urgent need for the digital transformation, which has become one of the most important pillars of the strategic plans for many local and international institutions and corporates. Through its AHEAD strategy, stc’s future plans focused on enriching customer experience, gaining market leadership and being a pioneer through improving the company’s capabilities as well as providing an effective model based on its digital platforms. Furthermore, AHEAD strategy also focused on instilling the culture of performance within the company. stc also seeks to enter into strategic partnerships to provide the basic infrastructure necessary to develop stc’s ICT portfolio. Additionally, stc is always keen to provide integrated working teams, innovate in its services and products, and explore more smart investments in order to achieve the best results. In light of market challenges resulting from the highly competitive prices, stc aims to focus on the value and quality of its products and services. Hence, one of stc’s most important future aspirations is to provide its customers, individuals and enterprises, with products and services that are beyond the traditional mobile services. It also strives to attract opportunities related to providing enterprise services and transforming the technical capabilities, in addition to empowering those capabilities renewably, leveraging from stc group’s expertise and capabilities in the digital transformation area. stc also capitalizes on the advanced technical services provided by solutions by stc which operates in Kuwait and is fully owned by stc. Accordingly, stc currently focuses on providing a wide range of services and solutions based on its strong infrastructure and its innovative 5G network to provide an excellent experience to its customers in various areas to facilitate digital transformation in Kuwait. It is worth noting that such services and digital solutions are specifically designed to help stc’s customers to cope with the repercussions of the current crisis that is likely to continue throughout 2021.
The Role of Governmental and Regulatory Entities in Supporting the Telecom Sector
In light of the current circumstances and present developments, the importance of the role that the governmental and regulatory entities can play to make a paradigm shift in the communications and IT sector in Kuwait, with an aim to upgrade the digital services so that they match best services available globally, depending on the telecommunication companies’ private sector’s capabilities. Government’s support for implementing the digital transformation in Kuwait is essential to enable the Kuwaiti telecommunications sector to keep pace with its global counterparts. Whereby, regional governments as well as those of different countries have begun to realize the importance of digital transformation and are working on applying it to execute the business of private companies, governmental entities as well as commercial, health and educational activities. The State of Kuwait also possesses all the geographical credentials that gives the country a distinctive feature to be a corridor and a hub for international cables to connect the countries of the region and the world. This is CITRA’s vision of transforming Kuwait into a regional data storage and processing center, in addition to the privately owned infrastructure of telecommunications companies, aimed at making Kuwait a leader and exporter of information technology in the region. Accordingly, this is likely to reinforce the “Kuwait 2035” vision for transforming Kuwait into a financial and commercial center. I would also like to commend CITRA’s positive and regulatory role, which has been supportive in making the Kuwaiti telecommunications sector take its leading regional and global position.
Human Capital Development
Throughout 2020, stc was keen to invest in its human capital and develop the capabilities of its employees to enable them to adapt to all the circumstances that we have witnessed. In particular, this has helped stc’s employees to better implement the remote working business plan as efficiently as possible and without any impact on the company’s administrative and operational activities, in line with the company’s strategy to meet the future challenges. Therefore, our investment in the workforce is one of the key elements of stc’s action plan, as we are committed to supporting the Kuwaiti employment replacement program “Kuwaitization” as one of the main pillars of our human resources strategy. Whereby, the Kuwaiti employees at stc reached 64% of company’s total employees by the end of 2020. We always strive to enhance and raise the efficiency and capacity of the company’s human resources through providing training courses and disseminating knowledge in the working environment to encourage our employees to achieve their goals and improve their expertise.
Appreciation and Gratitude
In conclusion, I am pleased to express my gratitude and thank our valued customers for their loyalty and confidence in stc, which has enabled us to achieve these results despite the difficult times we faced due to the COVID-19 crisis. Furthermore, I would like to thank the Board of Directors, Executive Management, stc family members and partners for their contributions in achieving this remarkable operational performance through their outstanding teamwork. I would also like to shed the light on their contributions to the company’s success during these difficult and unprecedented times through their cooperation, enthusiasm, dedication and continued support. This, in turn, has paid off with the fact that stc is now at the forefront of the most innovative digital communications services providers. Through your support and our productivity in implementing the company’s new strategy, transformation plan and investment activities, we are confident that stc will be able to move forward in achieving its future goals.
Eng. Maziad Bin Nasser Alharbi
Chief Executive Officer
Mr. Mohammed Bin AbdulMohsen Al Assaf
Chief Financial Officer
Overview
Despite the economic distortions caused by COVID-19’s current global crisis, stc was able to maintain satisfying cash flows driven by the company’s continuous investments in its key areas. stc’s strong financial and solvency positions supported the company to respond quickly and build up countercyclical buffers to support to the emergency contingency plans arising from external shocks. While working remotely under exceptional circumstances, stc defined its core areas and the required future strength capabilities necessary to execute its operations, administrative activities as well as desired financial results.stc ensured providing convergent offerings on a continuous basis in addition to implementing its updated strategy that was designed to cope with the latest developments associated with the COVID-19 crisis. While the current crisis has exposed the weakness of the digital infrastructure of most companies, particularly mediumsized firms, to cope with the related repercussions, stc demonstrated its ability to provide a wide range of digital, cloud and IT services through which it can reach the best secure business process with the highest possible technical and operational efficiency. This has, in turn, enabled stc to maintain its financial and operational flexibility throughout the general abnormal market and economic conditions.stc succeeded in capturing the opportunities created by the current crisis driven by the increasing demand for business solutions and digital services through increasing its investments in data services backed by the 5G network. Consequently, stc viewed this event as a valuable opportunity to increase its cost efficiency while investing in growth opportunities through the implementation of strategic cost management initiatives and expanding its digitization efforts. Despite the stiff competition among digital services and solutions providers, stc was able to capitalize on the new opportunities raised from the growing and wide demand on digital services through utilizing its flexible operating model. Additionally, stc has successfully reaped the benefits of the new digital economy capitalizing on its prior achievements over the past years with regards to adopting the digital transformation strategy and offering integrated technical solutions to its customers, individuals and enterprises, representing new areas of sustainable growth.
Concrete financial performance throughout an unprecedented crisis
The uncertain global financial market environment and the volatility of business operations during the lockdown period have made it challenging for most companies from different sectors to keep their financial wheels turning throughout that period. However, stc was able to maintain both its strong financial position and performance during 2020 which were reflected in achieving good levels in its revenue, EBITDA, EBITDA margin and net profit.
Throughout the current crisis, stc reported consolidated financial results for the year ended 2020 that satisfy the anticipation of its shareholders. Driven by the high demand on data services and digital platforms especially from the enterprise segment, stc’s revenues reached KD 283.2 million at the year ended 31 December 2020. The exceptional efforts of the company’s working teams significantly contributed in driving stc’s business efficiency and its efforts to offset the negative impacts of COVID-19 pandemic is demonstrated by its good EBITDA results reaching KD 73.4 million with an EBITDA margin of 26%. Thus, the net income reached KD 32.1 million (earnings per share 64 fils) with a net profit margin of 11%.
stc has dramatically expanded its offerings related to the 5G network backed products and services, building on its previous as well as ongoing investments in this area. Hence, the company’s total capex spending reached KD 26.2 million over the year, representing 9% of stc’s total revenue in 2020, compared to KD 58.5 million representing 20% of stc’s total revenues in 2019. On the other hand, stc’s total assets reached KD 374.2 million. In addition, the company’s total shareholders’ equity grew by 3.2% reaching KD 222.2 million, with a book value of 445 Kuwaiti fils per share. It is worth highlighting that one of stc’s competitive advantage is having a strong solvency position among its peers in the MENA region, where the debt to equity ratio reached 0.05x by the end of 2020, which is considered low compared to the industry average.
Financial strategy
Throughout this year, stc succeeded by acting proactively in providing a wide range of innovative products and services valued using an adequate pricing mechanism which supports the needs of the local community. This has also helped stc to maintain satisfactory levels of profitability margins enabling the company to gain a competitive advantage and maintain its leadership position in the Kuwaiti telecommunications market. As we carry out this historic astonishing work and exceptional continuous efforts of the company’s working teams throughout the unusual period, stc strives to provide products and services that exceed customers’ expectations during not only critical situations but also all the way through relaxed economic and market conditions.
During the financial year 2020, stc directed its financial resources to achieve the company’s vision, mission and values by investing in its people, technologies, operational processes and internal capabilities. The company also contributed in a number of initiatives in collaboration with the governmental bodies aimed at alleviating the negative consequences of COVID-19 pandemic on the local community. Furthermore, stc remained focused on building its financial strategy based on smart investments and cost optimization frameworks aligned with the company’s corporate strategy of enabling the digital transformation while catering to customers’ needs and developing structured frameworks to streamline its costs. This will, in turn, help the company to achieve its operational and financial objectives.
Remote working didn’t hold stc back from measuring its financial performance against the targeted KPIs, through the post-implementation analysis mechanism that was initiated in 2019. Hence, at stc, we are proud to be one of the few companies that succeeded in controlling the negative impacts of COVID-19 crisis while enhancing its operational efficiency during such an unprecedented event.
Moving Forward
As our acquisition to solutions by stc has enabled stc to deliver better value to its customers and shareholders despite the stressful economic conditions, we are keen to seek similar strategic potential valuecreating digital opportunities in the near future. With an aim to sustain our leadership position in the Kuwaiti telecom market, stc will hold onto investing in its human capital, internal processes and the latest advanced technologies as a means of uplifting the company’s efficiency and strengthening its core activities.
From a future perspective, stc is keen to ensure putting its disbursements on the right direction by investing more on digital platforms, creating strategic partnerships with digital providers and spending on its R&D function to provide the best-in-class services to its customers, individuals and enterprises.
Mr. Mohammed Bin AbdulMohsen Al Assaf
Chief Financial Officer
Dr. Mahmoud Ahmed Abdulrahman
Chairman
Dear Shareholder,
I am delighted to present Kuwait Telecommunications Company’s ( stc) Annual Report for the year ended 31 December 2020. This report demonstrates stc’s outstanding performance during an unprecedented period due to the COVID-19 crisis and the disruption it has caused to our daily life. Not to mention the considerable damage which inflicted many sectors due to the global fears from the uncertainty and the near-absence of future prospects in this regard. This report also addresses the company’s strategy, which has been highly streamlined and has significantly assisted the local community to adapt to the new digital age. Whereby, stc succeeded in providing its customers with the most innovative business solutions in collaboration with its specialized arm, solutions by stc. Despite the negative impact of the COVID-19 crisis on the global financial markets in various industries, stc was able to achieve financial and operational achievements that meet the aspirations of the company’s shareholders, recording a net profit of KD 32.1 million.As economic uncertainty and financial pressures worsened, stc took it upon itself to launch a wide range of products that meet customers’ demands in that period. As a result, stc has strengthened its position in the market as a leader in the digital and latest technological advances arena driven by the growing demand for the digital services in Kuwait and all over the world. Seizing opportunities, developing plans and innovative solutions in addition to providing innovative services to customers have been amongst the strategic foundations of stc since its inception in 2008. Hence, stc is keen to lead and enable the digitization process in the region leveraging the synergies resulting from the company’s integration with solutions by stc.
The Telecommunications Market and COVID-19
The Kuwaiti telecommunications market has shown flexibility in addressing economic challenges and risks through playing a key role in helping the community and meeting its needs. Throughout the pandemic’s outbreak in 2020 up until today, stc has been using the latest global technologies in addition to doing its utmost to provide innovative digital services aimed at meeting the community’s various needs during closure periods, curfews and beyond. With the advent and increased usage of digital platforms, mobile service providers have rushed to offer 5G backed products and services to mitigate the negative effects of the COVID-19 crisis on the Kuwaiti society. Thus, in response to the challenges and changes in the demand for digital communication services, stc has undertaken several initiatives aimed at facilitating remote working in addition to enabling online education as well as many digital and technical services targeting the B2B and B2C sectors. Through combining the latest technologies that distinguish us and the recent urgent need for digitization, stc has expanded its range of products, services and designs to keep pace with the rapid developments in telecommunications, technology and digitization services on a global level.
Creating Shareholders Value
At stc, we focus on creating shareholders value by establishing long-term growth from sustainable profits in addition to increasing total returns that are in the best interests of the company’s shareholders. With the support of the company’s business continuity plans, stc has been firmly keen to adhere to the corporate goals and values while monitoring developments and finding solutions, as well as enhancing the enthusiasm of the working teams in an effort to make a positive impact not only on employees and customers, but also on the community as a whole. Over the past years, stc’s performance has been evident through its operational efficiency, financial stability and the strength of its products, in addition to its distinctive and well-established brand in the telecommunications sector.
This has, in turn, enabled stc to succeed in expanding its footprint in the telecom industry and attract a large number of investors. Since the onset of the crisis, stc has been at the forefront in providing innovative and integrated digital solutions based on the latest technological developments for its customers, individuals and corporates. We have been able to achieve good results throughout the pandemic through adopting a flexible operating model, in addition to being flexible in implementing the company’s digital transformation strategy. stc also provided advanced technical solutions in line with the government’s expectations and social distancing plan. In order to win the trust of our valued shareholders, we follow a career path that elevates the best global practices to show our ability to deliver good results in both revenues and net profit, also to enhance our operational efficiency. Despite the 2020 crisis, stc managed to achieve a total revenue of KD 283.2 mn, where EBITDA reached KD 73.4 mn with an EBITDA margin of 26%. As a result, stc recorded a net profit of KD 32.1 mn. On the other hand, shareholders’ equity increased by 3.2% at the end of 2020, reaching a book value of 445 fils per share. The Board of Directors has recommended distributing cash dividends of 60 fils per share representing 60% of the share nominal value for the year ended 2020, subject to the approval of the Ordinary General Assembly of the company. This decision was based on stc’s confidence in its sustainability, strong financial position and ongoing cash flow generation during economic downturns.
These results reflect stc’s ability to overcome unprecedented challenges represented by the current global pandemic. Furthermore, the results demonstrated the quality of the company’s strategy and the dedication of each of the Board of Directors, the executive management and its employees. At stc, we are committed to enhancing the quality of our products, services, customer relationships and operational efficiency in order to maintain our market position during difficult times and economic uncertainties in addition to the ongoing societal changes.
Corporate Governance
stc is committed to adhering to the corporate governance rules and regulations issued by the Capital Markets Authority in the State of Kuwait which aims to uphold transparency, protect shareholders value and improve company’s operating environment. In conjunction with all the recent changes imposed by the regulatory bodies with regards to the Annual General Meeting and the disclosures of the financial implications of COVID-19 outbreak, stc ensured applying all laws and regulations that conform to its values and the professional foundations that guide our work to better serve the interests of our shareholders. The corporate governance report in a later chapter of this report outlines our framework in further details.
Corporate Social Responsibility
stc deals highly professionally with its customers, employees, shareholders, and the local community as a whole, who, in turn, contribute to our company’s success. Through contributing to the Kuwaiti society, stc aims to leave a positive footprint to be felt by the future generations.
As a matter of our concern for the social responsibility towards our local community, stc ensured its presence to lend a helping hand and support throughout COVID-19 outbreak in order to alleviate the negative consequences of the current crisis on the Kuwaiti community. In this regard, stc has contributed to many initiatives and activities in support of the preventive measures adopted by the government to mitigate the harsh negative effects of the COVID-19 crisis on the Kuwaiti society. Consequently, the company has collaborated with various entities to support a number of groups and sectors across Kuwait including, health, sports, education and entrepreneurship. In addition, stc has also worked alongside with some governmental agencies and medical companies to prevent the infectious diseases in addition to undertaking several preventive measures in accordance with the health guidelines and instructions issued by the Ministry of Health.
As part of its corporate social responsibility initiatives, stc has also adopted the highest safety standards and instilled the culture of performance among its staff to continue providing high quality services while protecting its customers and employees. During 2020, stc has heavily invested in its human capital through conducting virtual training courses throughout the lockdown period and thereafter. Up until this moment, stc has been keen to ensure employees’ safety, as it was amongst the first companies in Kuwait to adopt the remote working criteria while keeping the working teams engaged through conducting virtual conferences and sending them feedback surveys on a continuous basis.
In compliance with the instructions imposed by the Kuwaiti government with regards to COVID-19 pandemic, it is worth highlighting stc’s internal campaign “Don’t Compromise” that was initiated to raise awareness among the employees following their return to work from the full lockdown, in order to ensure their safety as the company’s first priority. Furthermore, the CSR section of this report is dedicated to include the company’s efforts in these different areas.
Appreciation
On behalf of the Board of Directors, I would like to thank His Highness, the Amir Sheikh Nawaf Al Ahmed Al Jaber Al Sabah, H.H. the Crown Prince Sheikh Meshaal Al Ahmed Al Jaber Al Sabah, H.H. the Prime Minister Sheikh Sabah Al Khalid Al Sabah and his distinguished government for their continued support to the telecommunications sector, which puts our precious country on the map of the advanced and developed countries in the field of telecommunications.
would also like to express my thanks and gratitude to all stc family members for their significant efforts, dedication and great sacrifices during 2020 in light of the challenges we have witnessed. Moreover, I would like to shed light on their continued enthusiasm and dedication in making stc a fascinating and successful company at times when the global economy has been greatly affected. I particularly thank our loyal customers for their continued trust in stc, which motivates us to provide the best services with the highest possible quality. Our sincere appreciation to our valued shareholders for their continued support and for placing their trust in us. We strongly believe that this commitment has been instrumental in enabling stc to continue on its successful journey of growth over the past years.
Dr. Mahmoud Ahmed Abdulrahman
Chairman
Eng. Maziad Bin Nasser Al Harbi
Chief Executive Officer
Dear Shareholders,
2020 was a remarkable year for Kuwait Telecommunications Company (stc) despite the unprecedented crisis witnessed by different sectors in Kuwait and around the globe. The global crisis has led to a radical shift in the quality of services and the strategy of current as well as future businesses due to the rapid spread of COVID-19 and the imposed restrictions on movements which negatively impacted most businesses and economic activities, and has in turn, led to a complete shift from the traditional working systems towards digitization of businesses of all kinds. In addition, the digitalization process assisted businesses to continue operating remotely resulting in more data usages and a significant reliance on the capabilities of telecommunications companies with regards to offering digital services and solutions to the consumer and enterprise customers. It is worth noting that such services would provide flexibility for business continuity, working from home and studying in addition to an access to all medical, financial, entertainment, retail and other basic services.
Recovery Strategy
In response to the unforeseeable events, the company formed a specialized team at the onset of the pandemic to deal with the crisis through developing a business continuity plan and adopting new initiatives to face the challenges and adhere to the national measures imposed to combat the virus’s outbreak. The specialized team has requested detailed business continuity plans to be developed by all the sectors at stc in addition to their request of monitoring the logistical work required to ensure the continuity of the company’s business and services provided to its customers. These plans are likely to reduce the negative economic impact of the crises on stc while ensuring the safety of its employees and customers.
The company also took important steps at the onset of the crises to ensure stc’s continuity of providing full services to all its customers during the full and partial lockdown periods. Furthermore, the steps taken shall also ensure the implementation of working from home and return to work plans, in addition to enhancing the digital transformation strategy and enriching the customer experience.
stc was keen to protect its financial position and its shareholder’s rights by extensively managing its cash flows and monitoring collections, while activating the cost optimization program to support the company’s profit margins for the year 2020.
In 2020, stc relied heavily on its infrastructure, being the most powerful in the region in terms of mobile services, through 5G networks which is the cornerstone of our expansion plan throughout the current crises. stc counts on the 5G network to keep pace with the needed developments of all private sectors and government agencies necessary to invest in the digital transformation process in order to meet the needs of consumers and enterprises capitalizing on the 5G, the latest technologies and digital services. Thus, stc offers a wide range of services including entertainment and the digital services in addition to its concern for meeting the growing demand for fixed and wide mobile broadband services at high speeds and huge capacity. stc also ensures meeting all business requirements related to online institutional and educational interaction with the highest possible quality and efficiency. stc has also proved its ability to overcome the challenges and potential risks in addition to keeping up with business operations and opening its doors to serve its customers in the current circumstances. Moreover, stc was placed in the forefront within the private sectors as a result of the great efforts and dedication of its staff, who have demonstrated their determination to face the health risks associated with COVID-19. As a result, stc was able to continue providing its services with the same quality standards despite the increasing demand and the shift towards digital platforms to communicate and deliver its products to the customers.
Capturing Business Opportunities
2020 opened the door for stc to undertake several initiatives aimed at developing the scope of work and sharing expertise in order to support the digital transformation process and provide the best services, products as well as solutions that meet the growing demand for the enterprise services. Thus, stc leverages on the parent company’s (stc Group) expertise and capabilities in the area of digitization in addition to the advanced technology services captured from the successful integration project with our subsidiary, solutions by stc. This has enabled stc to switch from providing traditional services to offering digital, cloud, Internet of Things (IoT), data, as well as cyber security and advanced IT solutions and services. It is worth noting that our digital services are designed to target all the private and governmental sectors through designing packages of integrated and services. with the highest possible technical and operational efficiency. Consequently, stc has worked hard to capture business opportunities achieving an outstanding growth in its operations that target enterprises and governmental entities.
The Negative Impacts on the Consumer Sector
On the other hand, COVID-19 crisis has had a negative impact on the telecommunications sector, specifically some activities targeting the consumer services, which were greatly affected by the full lockdown in the country and the interruption of air traffic in most countries around the world. Thus, sales of roaming packages almost entirely dropped due to the suspension of flights and the reluctance to travel during 2020, in addition to the decline in device sales and its accessories resulting from the full closure of shopping malls and retail sales. Furthermore, the decline in the production process of mobile devices and ICT equipment due to COVID-19 effects on the producing and suppling countries have negatively impacted stc’s revenue. Not to mention the suspension of import and export activities which also contributed to the decline in the company’s revenue stream during 2020. However, stc’s strategy has demonstrated its flexibility to adapt with the difficult reality of the company’s operational performance through meeting all the services needed by the consumer as well as the private and public sectors, with the highest possible efficiency.
Positioning stc among the best companies in Kuwait and the region within one of the most operationally and financially defensive sectors, affected by the global economic crisis of COVID-19, gives us great impetus to move forward in expanding stc’s business and achieve the best operational and financial results.
Financial Performance of 2020
Despite COVID-19’s repercussions and the strong competition in the Kuwaiti telecommunications market, stc has managed to achieve good financial results that meet the anticipation of our shareholders during unstable and unprecedented circumstances. Whereby, stc’s revenue reached KD 283.2 million by the end of 2020, compared to KD 293.7 million in the previous year. This decline is attributed to the full and partial lockdown that was imposed in Kuwait due to COVID-19 pandemic, which, in turn, resulted in a decline in the consumer sector’s revenue. Furthermore, the significant near-total drop in the company’s revenue from the roaming services, due to the suspension of flights and closure of airports of most countries around the globe, was also translated into the decline in stc’s total revenue. In addition, stc’s social contribution that we are proud of through providing its customers with unlimited free local calls for all mobile networks, in addition to a 5GB internet package per day from 22 March to 20 April 2020, in collaboration with the Communications and Information Technology Regulatory Authority (CITRA) in support of the Kuwaiti community during COVID-19 crisis. On the other hand, sales of the enterprise sector witnessed a growth in its volume as a result of the current need and the growing demand for digital and IT services.
On the other hand, EBITDA reached KD 73.4 million in 2020 with an EBITDA margin of 26% during 2020. Consequently, stc’s net profit recorded KD 32.1 million (earnings per share of 64 fils) with a profit margin of 11%. The company also structured its capital and operational expenditures, particularly after the negative effects of the current economic crisis to ensure liquidity of cash flows under the current conditions. Furthermore, the company achieved these results despite COVID-19’s global economic challenges, during which stc was able to achieve good revenue levels in addition to enhancing its operational efficiency to create an added value for its customers and better returns for its shareholders. stc’s financial results throughout 2020 also reflected its competitiveness and strengthened its position as the second largest telecommunications company in terms of its market share of revenue in the Kuwait telecommunications sector with a market share of approx. 35%. Moreover, stc’s customer base reached 1.9 million customers at the end of 2020.
stc’s Future Plans
Following the negative effects of COVID-19’s economic crisis, all the local and regional enterprises have sought the urgent need for the digital transformation, which has become one of the most important pillars of the strategic plans for many local and international institutions and corporates. Through its AHEAD strategy, stc’s future plans focused on enriching customer experience, gaining market leadership and being a pioneer through improving the company’s capabilities as well as providing an effective model based on its digital platforms. Furthermore, AHEAD strategy also focused on instilling the culture of performance within the company. stc also seeks to enter into strategic partnerships to provide the basic infrastructure necessary to develop stc’s ICT portfolio. Additionally, stc is always keen to provide integrated working teams, innovate in its services and products, and explore more smart investments in order to achieve the best results. In light of market challenges resulting from the highly competitive prices, stc aims to focus on the value and quality of its products and services. Hence, one of stc’s most important future aspirations is to provide its customers, individuals and enterprises, with products and services that are beyond the traditional mobile services. It also strives to attract opportunities related to providing enterprise services and transforming the technical capabilities, in addition to empowering those capabilities renewably, leveraging from stc group’s expertise and capabilities in the digital transformation area. stc also capitalizes on the advanced technical services provided by solutions by stc which operates in Kuwait and is fully owned by stc. Accordingly, stc currently focuses on providing a wide range of services and solutions based on its strong infrastructure and its innovative 5G network to provide an excellent experience to its customers in various areas to facilitate digital transformation in Kuwait. It is worth noting that such services and digital solutions are specifically designed to help stc’s customers to cope with the repercussions of the current crisis that is likely to continue throughout 2021.
The Role of Governmental and Regulatory Entities in Supporting the Telecom Sector
In light of the current circumstances and present developments, the importance of the role that the governmental and regulatory entities can play to make a paradigm shift in the communications and IT sector in Kuwait, with an aim to upgrade the digital services so that they match best services available globally, depending on the telecommunication companies’ private sector’s capabilities. Government’s support for implementing the digital transformation in Kuwait is essential to enable the Kuwaiti telecommunications sector to keep pace with its global counterparts. Whereby, regional governments as well as those of different countries have begun to realize the importance of digital transformation and are working on applying it to execute the business of private companies, governmental entities as well as commercial, health and educational activities. The State of Kuwait also possesses all the geographical credentials that gives the country a distinctive feature to be a corridor and a hub for international cables to connect the countries of the region and the world. This is CITRA’s vision of transforming Kuwait into a regional data storage and processing center, in addition to the privately owned infrastructure of telecommunications companies, aimed at making Kuwait a leader and exporter of information technology in the region. Accordingly, this is likely to reinforce the “Kuwait 2035” vision for transforming Kuwait into a financial and commercial center. I would also like to commend CITRA’s positive and regulatory role, which has been supportive in making the Kuwaiti telecommunications sector take its leading regional and global position.
Human Capital Development
Throughout 2020, stc was keen to invest in its human capital and develop the capabilities of its employees to enable them to adapt to all the circumstances that we have witnessed. In particular, this has helped stc’s employees to better implement the remote working business plan as efficiently as possible and without any impact on the company’s administrative and operational activities, in line with the company’s strategy to meet the future challenges. Therefore, our investment in the workforce is one of the key elements of stc’s action plan, as we are committed to supporting the Kuwaiti employment replacement program “Kuwaitization” as one of the main pillars of our human resources strategy. Whereby, the Kuwaiti employees at stc reached 64% of company’s total employees by the end of 2020. We always strive to enhance and raise the efficiency and capacity of the company’s human resources through providing training courses and disseminating knowledge in the working environment to encourage our employees to achieve their goals and improve their expertise.
Appreciation and Gratitude
In conclusion, I am pleased to express my gratitude and thank our valued customers for their loyalty and confidence in stc, which has enabled us to achieve these results despite the difficult times we faced due to the COVID-19 crisis. Furthermore, I would like to thank the Board of Directors, Executive Management, stc family members and partners for their contributions in achieving this remarkable operational performance through their outstanding teamwork. I would also like to shed the light on their contributions to the company’s success during these difficult and unprecedented times through their cooperation, enthusiasm, dedication and continued support. This, in turn, has paid off with the fact that stc is now at the forefront of the most innovative digital communications services providers. Through your support and our productivity in implementing the company’s new strategy, transformation plan and investment activities, we are confident that stc will be able to move forward in achieving its future goals.
Eng. Maziad Bin Nasser Alharbi
Chief Executive Officer
Mr. Mohammed Bin AbdulMohsen Al Assaf
Chief Financial Officer
Overview
Despite the economic distortions caused by COVID-19’s current global crisis, stc was able to maintain satisfying cash flows driven by the company’s continuous investments in its key areas. stc’s strong financial and solvency positions supported the company to respond quickly and build up countercyclical buffers to support to the emergency contingency plans arising from external shocks. While working remotely under exceptional circumstances, stc defined its core areas and the required future strength capabilities necessary to execute its operations, administrative activities as well as desired financial results.stc ensured providing convergent offerings on a continuous basis in addition to implementing its updated strategy that was designed to cope with the latest developments associated with the COVID-19 crisis. While the current crisis has exposed the weakness of the digital infrastructure of most companies, particularly mediumsized firms, to cope with the related repercussions, stc demonstrated its ability to provide a wide range of digital, cloud and IT services through which it can reach the best secure business process with the highest possible technical and operational efficiency. This has, in turn, enabled stc to maintain its financial and operational flexibility throughout the general abnormal market and economic conditions.stc succeeded in capturing the opportunities created by the current crisis driven by the increasing demand for business solutions and digital services through increasing its investments in data services backed by the 5G network. Consequently, stc viewed this event as a valuable opportunity to increase its cost efficiency while investing in growth opportunities through the implementation of strategic cost management initiatives and expanding its digitization efforts. Despite the stiff competition among digital services and solutions providers, stc was able to capitalize on the new opportunities raised from the growing and wide demand on digital services through utilizing its flexible operating model. Additionally, stc has successfully reaped the benefits of the new digital economy capitalizing on its prior achievements over the past years with regards to adopting the digital transformation strategy and offering integrated technical solutions to its customers, individuals and enterprises, representing new areas of sustainable growth.
Concrete financial performance throughout an unprecedented crisis
The uncertain global financial market environment and the volatility of business operations during the lockdown period have made it challenging for most companies from different sectors to keep their financial wheels turning throughout that period. However, stc was able to maintain both its strong financial position and performance during 2020 which were reflected in achieving good levels in its revenue, EBITDA, EBITDA margin and net profit.
Throughout the current crisis, stc reported consolidated financial results for the year ended 2020 that satisfy the anticipation of its shareholders. Driven by the high demand on data services and digital platforms especially from the enterprise segment, stc’s revenues reached KD 283.2 million at the year ended 31 December 2020. The exceptional efforts of the company’s working teams significantly contributed in driving stc’s business efficiency and its efforts to offset the negative impacts of COVID-19 pandemic is demonstrated by its good EBITDA results reaching KD 73.4 million with an EBITDA margin of 26%. Thus, the net income reached KD 32.1 million (earnings per share 64 fils) with a net profit margin of 11%.
stc has dramatically expanded its offerings related to the 5G network backed products and services, building on its previous as well as ongoing investments in this area. Hence, the company’s total capex spending reached KD 26.2 million over the year, representing 9% of stc’s total revenue in 2020, compared to KD 58.5 million representing 20% of stc’s total revenues in 2019. On the other hand, stc’s total assets reached KD 374.2 million. In addition, the company’s total shareholders’ equity grew by 3.2% reaching KD 222.2 million, with a book value of 445 Kuwaiti fils per share. It is worth highlighting that one of stc’s competitive advantage is having a strong solvency position among its peers in the MENA region, where the debt to equity ratio reached 0.05x by the end of 2020, which is considered low compared to the industry average.
Financial strategy
Throughout this year, stc succeeded by acting proactively in providing a wide range of innovative products and services valued using an adequate pricing mechanism which supports the needs of the local community. This has also helped stc to maintain satisfactory levels of profitability margins enabling the company to gain a competitive advantage and maintain its leadership position in the Kuwaiti telecommunications market. As we carry out this historic astonishing work and exceptional continuous efforts of the company’s working teams throughout the unusual period, stc strives to provide products and services that exceed customers’ expectations during not only critical situations but also all the way through relaxed economic and market conditions.
During the financial year 2020, stc directed its financial resources to achieve the company’s vision, mission and values by investing in its people, technologies, operational processes and internal capabilities. The company also contributed in a number of initiatives in collaboration with the governmental bodies aimed at alleviating the negative consequences of COVID-19 pandemic on the local community. Furthermore, stc remained focused on building its financial strategy based on smart investments and cost optimization frameworks aligned with the company’s corporate strategy of enabling the digital transformation while catering to customers’ needs and developing structured frameworks to streamline its costs. This will, in turn, help the company to achieve its operational and financial objectives.
Remote working didn’t hold stc back from measuring its financial performance against the targeted KPIs, through the post-implementation analysis mechanism that was initiated in 2019. Hence, at stc, we are proud to be one of the few companies that succeeded in controlling the negative impacts of COVID-19 crisis while enhancing its operational efficiency during such an unprecedented event.
Moving Forward
As our acquisition to solutions by stc has enabled stc to deliver better value to its customers and shareholders despite the stressful economic conditions, we are keen to seek similar strategic potential valuecreating digital opportunities in the near future. With an aim to sustain our leadership position in the Kuwaiti telecom market, stc will hold onto investing in its human capital, internal processes and the latest advanced technologies as a means of uplifting the company’s efficiency and strengthening its core activities.
From a future perspective, stc is keen to ensure putting its disbursements on the right direction by investing more on digital platforms, creating strategic partnerships with digital providers and spending on its R&D function to provide the best-in-class services to its customers, individuals and enterprises.
Mr. Mohammed Bin AbdulMohsen Al Assaf
Chief Financial Officer
Dr. Mahmoud Ahmed Abdulrahman
Chairman
Dear Shareholder,
I am delighted to present Kuwait Telecommunications Company’s ( stc) Annual Report for the year ended 31 December 2020. This report demonstrates stc’s outstanding performance during an unprecedented period due to the COVID-19 crisis and the disruption it has caused to our daily life. Not to mention the considerable damage which inflicted many sectors due to the global fears from the uncertainty and the near-absence of future prospects in this regard. This report also addresses the company’s strategy, which has been highly streamlined and has significantly assisted the local community to adapt to the new digital age. Whereby, stc succeeded in providing its customers with the most innovative business solutions in collaboration with its specialized arm, solutions by stc. Despite the negative impact of the COVID-19 crisis on the global financial markets in various industries, stc was able to achieve financial and operational achievements that meet the aspirations of the company’s shareholders, recording a net profit of KD 32.1 million.As economic uncertainty and financial pressures worsened, stc took it upon itself to launch a wide range of products that meet customers’ demands in that period. As a result, stc has strengthened its position in the market as a leader in the digital and latest technological advances arena driven by the growing demand for the digital services in Kuwait and all over the world. Seizing opportunities, developing plans and innovative solutions in addition to providing innovative services to customers have been amongst the strategic foundations of stc since its inception in 2008. Hence, stc is keen to lead and enable the digitization process in the region leveraging the synergies resulting from the company’s integration with solutions by stc.
The Telecommunications Market and COVID-19
The Kuwaiti telecommunications market has shown flexibility in addressing economic challenges and risks through playing a key role in helping the community and meeting its needs. Throughout the pandemic’s outbreak in 2020 up until today, stc has been using the latest global technologies in addition to doing its utmost to provide innovative digital services aimed at meeting the community’s various needs during closure periods, curfews and beyond. With the advent and increased usage of digital platforms, mobile service providers have rushed to offer 5G backed products and services to mitigate the negative effects of the COVID-19 crisis on the Kuwaiti society. Thus, in response to the challenges and changes in the demand for digital communication services, stc has undertaken several initiatives aimed at facilitating remote working in addition to enabling online education as well as many digital and technical services targeting the B2B and B2C sectors. Through combining the latest technologies that distinguish us and the recent urgent need for digitization, stc has expanded its range of products, services and designs to keep pace with the rapid developments in telecommunications, technology and digitization services on a global level.
Creating Shareholders Value
At stc, we focus on creating shareholders value by establishing long-term growth from sustainable profits in addition to increasing total returns that are in the best interests of the company’s shareholders. With the support of the company’s business continuity plans, stc has been firmly keen to adhere to the corporate goals and values while monitoring developments and finding solutions, as well as enhancing the enthusiasm of the working teams in an effort to make a positive impact not only on employees and customers, but also on the community as a whole. Over the past years, stc’s performance has been evident through its operational efficiency, financial stability and the strength of its products, in addition to its distinctive and well-established brand in the telecommunications sector.
This has, in turn, enabled stc to succeed in expanding its footprint in the telecom industry and attract a large number of investors. Since the onset of the crisis, stc has been at the forefront in providing innovative and integrated digital solutions based on the latest technological developments for its customers, individuals and corporates. We have been able to achieve good results throughout the pandemic through adopting a flexible operating model, in addition to being flexible in implementing the company’s digital transformation strategy. stc also provided advanced technical solutions in line with the government’s expectations and social distancing plan. In order to win the trust of our valued shareholders, we follow a career path that elevates the best global practices to show our ability to deliver good results in both revenues and net profit, also to enhance our operational efficiency. Despite the 2020 crisis, stc managed to achieve a total revenue of KD 283.2 mn, where EBITDA reached KD 73.4 mn with an EBITDA margin of 26%. As a result, stc recorded a net profit of KD 32.1 mn. On the other hand, shareholders’ equity increased by 3.2% at the end of 2020, reaching a book value of 445 fils per share. The Board of Directors has recommended distributing cash dividends of 60 fils per share representing 60% of the share nominal value for the year ended 2020, subject to the approval of the Ordinary General Assembly of the company. This decision was based on stc’s confidence in its sustainability, strong financial position and ongoing cash flow generation during economic downturns.
These results reflect stc’s ability to overcome unprecedented challenges represented by the current global pandemic. Furthermore, the results demonstrated the quality of the company’s strategy and the dedication of each of the Board of Directors, the executive management and its employees. At stc, we are committed to enhancing the quality of our products, services, customer relationships and operational efficiency in order to maintain our market position during difficult times and economic uncertainties in addition to the ongoing societal changes.
Corporate Governance
stc is committed to adhering to the corporate governance rules and regulations issued by the Capital Markets Authority in the State of Kuwait which aims to uphold transparency, protect shareholders value and improve company’s operating environment. In conjunction with all the recent changes imposed by the regulatory bodies with regards to the Annual General Meeting and the disclosures of the financial implications of COVID-19 outbreak, stc ensured applying all laws and regulations that conform to its values and the professional foundations that guide our work to better serve the interests of our shareholders. The corporate governance report in a later chapter of this report outlines our framework in further details.
Corporate Social Responsibility
stc deals highly professionally with its customers, employees, shareholders, and the local community as a whole, who, in turn, contribute to our company’s success. Through contributing to the Kuwaiti society, stc aims to leave a positive footprint to be felt by the future generations.
As a matter of our concern for the social responsibility towards our local community, stc ensured its presence to lend a helping hand and support throughout COVID-19 outbreak in order to alleviate the negative consequences of the current crisis on the Kuwaiti community. In this regard, stc has contributed to many initiatives and activities in support of the preventive measures adopted by the government to mitigate the harsh negative effects of the COVID-19 crisis on the Kuwaiti society. Consequently, the company has collaborated with various entities to support a number of groups and sectors across Kuwait including, health, sports, education and entrepreneurship. In addition, stc has also worked alongside with some governmental agencies and medical companies to prevent the infectious diseases in addition to undertaking several preventive measures in accordance with the health guidelines and instructions issued by the Ministry of Health.
As part of its corporate social responsibility initiatives, stc has also adopted the highest safety standards and instilled the culture of performance among its staff to continue providing high quality services while protecting its customers and employees. During 2020, stc has heavily invested in its human capital through conducting virtual training courses throughout the lockdown period and thereafter. Up until this moment, stc has been keen to ensure employees’ safety, as it was amongst the first companies in Kuwait to adopt the remote working criteria while keeping the working teams engaged through conducting virtual conferences and sending them feedback surveys on a continuous basis.
In compliance with the instructions imposed by the Kuwaiti government with regards to COVID-19 pandemic, it is worth highlighting stc’s internal campaign “Don’t Compromise” that was initiated to raise awareness among the employees following their return to work from the full lockdown, in order to ensure their safety as the company’s first priority. Furthermore, the CSR section of this report is dedicated to include the company’s efforts in these different areas.
Appreciation
On behalf of the Board of Directors, I would like to thank His Highness, the Amir Sheikh Nawaf Al Ahmed Al Jaber Al Sabah, H.H. the Crown Prince Sheikh Meshaal Al Ahmed Al Jaber Al Sabah, H.H. the Prime Minister Sheikh Sabah Al Khalid Al Sabah and his distinguished government for their continued support to the telecommunications sector, which puts our precious country on the map of the advanced and developed countries in the field of telecommunications.
would also like to express my thanks and gratitude to all stc family members for their significant efforts, dedication and great sacrifices during 2020 in light of the challenges we have witnessed. Moreover, I would like to shed light on their continued enthusiasm and dedication in making stc a fascinating and successful company at times when the global economy has been greatly affected. I particularly thank our loyal customers for their continued trust in stc, which motivates us to provide the best services with the highest possible quality. Our sincere appreciation to our valued shareholders for their continued support and for placing their trust in us. We strongly believe that this commitment has been instrumental in enabling stc to continue on its successful journey of growth over the past years.
Dr. Mahmoud Ahmed Abdulrahman
Chairman
Eng. Maziad Bin Nasser Al Harbi
Chief Executive Officer
Dear Shareholders,
2020 was a remarkable year for Kuwait Telecommunications Company (stc) despite the unprecedented crisis witnessed by different sectors in Kuwait and around the globe. The global crisis has led to a radical shift in the quality of services and the strategy of current as well as future businesses due to the rapid spread of COVID-19 and the imposed restrictions on movements which negatively impacted most businesses and economic activities, and has in turn, led to a complete shift from the traditional working systems towards digitization of businesses of all kinds. In addition, the digitalization process assisted businesses to continue operating remotely resulting in more data usages and a significant reliance on the capabilities of telecommunications companies with regards to offering digital services and solutions to the consumer and enterprise customers. It is worth noting that such services would provide flexibility for business continuity, working from home and studying in addition to an access to all medical, financial, entertainment, retail and other basic services.
Recovery Strategy
In response to the unforeseeable events, the company formed a specialized team at the onset of the pandemic to deal with the crisis through developing a business continuity plan and adopting new initiatives to face the challenges and adhere to the national measures imposed to combat the virus’s outbreak. The specialized team has requested detailed business continuity plans to be developed by all the sectors at stc in addition to their request of monitoring the logistical work required to ensure the continuity of the company’s business and services provided to its customers. These plans are likely to reduce the negative economic impact of the crises on stc while ensuring the safety of its employees and customers.
The company also took important steps at the onset of the crises to ensure stc’s continuity of providing full services to all its customers during the full and partial lockdown periods. Furthermore, the steps taken shall also ensure the implementation of working from home and return to work plans, in addition to enhancing the digital transformation strategy and enriching the customer experience.
stc was keen to protect its financial position and its shareholder’s rights by extensively managing its cash flows and monitoring collections, while activating the cost optimization program to support the company’s profit margins for the year 2020.
In 2020, stc relied heavily on its infrastructure, being the most powerful in the region in terms of mobile services, through 5G networks which is the cornerstone of our expansion plan throughout the current crises. stc counts on the 5G network to keep pace with the needed developments of all private sectors and government agencies necessary to invest in the digital transformation process in order to meet the needs of consumers and enterprises capitalizing on the 5G, the latest technologies and digital services. Thus, stc offers a wide range of services including entertainment and the digital services in addition to its concern for meeting the growing demand for fixed and wide mobile broadband services at high speeds and huge capacity. stc also ensures meeting all business requirements related to online institutional and educational interaction with the highest possible quality and efficiency. stc has also proved its ability to overcome the challenges and potential risks in addition to keeping up with business operations and opening its doors to serve its customers in the current circumstances. Moreover, stc was placed in the forefront within the private sectors as a result of the great efforts and dedication of its staff, who have demonstrated their determination to face the health risks associated with COVID-19. As a result, stc was able to continue providing its services with the same quality standards despite the increasing demand and the shift towards digital platforms to communicate and deliver its products to the customers.
Capturing Business Opportunities
2020 opened the door for stc to undertake several initiatives aimed at developing the scope of work and sharing expertise in order to support the digital transformation process and provide the best services, products as well as solutions that meet the growing demand for the enterprise services. Thus, stc leverages on the parent company’s (stc Group) expertise and capabilities in the area of digitization in addition to the advanced technology services captured from the successful integration project with our subsidiary, solutions by stc. This has enabled stc to switch from providing traditional services to offering digital, cloud, Internet of Things (IoT), data, as well as cyber security and advanced IT solutions and services. It is worth noting that our digital services are designed to target all the private and governmental sectors through designing packages of integrated and services. with the highest possible technical and operational efficiency. Consequently, stc has worked hard to capture business opportunities achieving an outstanding growth in its operations that target enterprises and governmental entities.
The Negative Impacts on the Consumer Sector
On the other hand, COVID-19 crisis has had a negative impact on the telecommunications sector, specifically some activities targeting the consumer services, which were greatly affected by the full lockdown in the country and the interruption of air traffic in most countries around the world. Thus, sales of roaming packages almost entirely dropped due to the suspension of flights and the reluctance to travel during 2020, in addition to the decline in device sales and its accessories resulting from the full closure of shopping malls and retail sales. Furthermore, the decline in the production process of mobile devices and ICT equipment due to COVID-19 effects on the producing and suppling countries have negatively impacted stc’s revenue. Not to mention the suspension of import and export activities which also contributed to the decline in the company’s revenue stream during 2020. However, stc’s strategy has demonstrated its flexibility to adapt with the difficult reality of the company’s operational performance through meeting all the services needed by the consumer as well as the private and public sectors, with the highest possible efficiency.
Positioning stc among the best companies in Kuwait and the region within one of the most operationally and financially defensive sectors, affected by the global economic crisis of COVID-19, gives us great impetus to move forward in expanding stc’s business and achieve the best operational and financial results.
Financial Performance of 2020
Despite COVID-19’s repercussions and the strong competition in the Kuwaiti telecommunications market, stc has managed to achieve good financial results that meet the anticipation of our shareholders during unstable and unprecedented circumstances. Whereby, stc’s revenue reached KD 283.2 million by the end of 2020, compared to KD 293.7 million in the previous year. This decline is attributed to the full and partial lockdown that was imposed in Kuwait due to COVID-19 pandemic, which, in turn, resulted in a decline in the consumer sector’s revenue. Furthermore, the significant near-total drop in the company’s revenue from the roaming services, due to the suspension of flights and closure of airports of most countries around the globe, was also translated into the decline in stc’s total revenue. In addition, stc’s social contribution that we are proud of through providing its customers with unlimited free local calls for all mobile networks, in addition to a 5GB internet package per day from 22 March to 20 April 2020, in collaboration with the Communications and Information Technology Regulatory Authority (CITRA) in support of the Kuwaiti community during COVID-19 crisis. On the other hand, sales of the enterprise sector witnessed a growth in its volume as a result of the current need and the growing demand for digital and IT services.
On the other hand, EBITDA reached KD 73.4 million in 2020 with an EBITDA margin of 26% during 2020. Consequently, stc’s net profit recorded KD 32.1 million (earnings per share of 64 fils) with a profit margin of 11%. The company also structured its capital and operational expenditures, particularly after the negative effects of the current economic crisis to ensure liquidity of cash flows under the current conditions. Furthermore, the company achieved these results despite COVID-19’s global economic challenges, during which stc was able to achieve good revenue levels in addition to enhancing its operational efficiency to create an added value for its customers and better returns for its shareholders. stc’s financial results throughout 2020 also reflected its competitiveness and strengthened its position as the second largest telecommunications company in terms of its market share of revenue in the Kuwait telecommunications sector with a market share of approx. 35%. Moreover, stc’s customer base reached 1.9 million customers at the end of 2020.
stc’s Future Plans
Following the negative effects of COVID-19’s economic crisis, all the local and regional enterprises have sought the urgent need for the digital transformation, which has become one of the most important pillars of the strategic plans for many local and international institutions and corporates. Through its AHEAD strategy, stc’s future plans focused on enriching customer experience, gaining market leadership and being a pioneer through improving the company’s capabilities as well as providing an effective model based on its digital platforms. Furthermore, AHEAD strategy also focused on instilling the culture of performance within the company. stc also seeks to enter into strategic partnerships to provide the basic infrastructure necessary to develop stc’s ICT portfolio. Additionally, stc is always keen to provide integrated working teams, innovate in its services and products, and explore more smart investments in order to achieve the best results. In light of market challenges resulting from the highly competitive prices, stc aims to focus on the value and quality of its products and services. Hence, one of stc’s most important future aspirations is to provide its customers, individuals and enterprises, with products and services that are beyond the traditional mobile services. It also strives to attract opportunities related to providing enterprise services and transforming the technical capabilities, in addition to empowering those capabilities renewably, leveraging from stc group’s expertise and capabilities in the digital transformation area. stc also capitalizes on the advanced technical services provided by solutions by stc which operates in Kuwait and is fully owned by stc. Accordingly, stc currently focuses on providing a wide range of services and solutions based on its strong infrastructure and its innovative 5G network to provide an excellent experience to its customers in various areas to facilitate digital transformation in Kuwait. It is worth noting that such services and digital solutions are specifically designed to help stc’s customers to cope with the repercussions of the current crisis that is likely to continue throughout 2021.
The Role of Governmental and Regulatory Entities in Supporting the Telecom Sector
In light of the current circumstances and present developments, the importance of the role that the governmental and regulatory entities can play to make a paradigm shift in the communications and IT sector in Kuwait, with an aim to upgrade the digital services so that they match best services available globally, depending on the telecommunication companies’ private sector’s capabilities. Government’s support for implementing the digital transformation in Kuwait is essential to enable the Kuwaiti telecommunications sector to keep pace with its global counterparts. Whereby, regional governments as well as those of different countries have begun to realize the importance of digital transformation and are working on applying it to execute the business of private companies, governmental entities as well as commercial, health and educational activities. The State of Kuwait also possesses all the geographical credentials that gives the country a distinctive feature to be a corridor and a hub for international cables to connect the countries of the region and the world. This is CITRA’s vision of transforming Kuwait into a regional data storage and processing center, in addition to the privately owned infrastructure of telecommunications companies, aimed at making Kuwait a leader and exporter of information technology in the region. Accordingly, this is likely to reinforce the “Kuwait 2035” vision for transforming Kuwait into a financial and commercial center. I would also like to commend CITRA’s positive and regulatory role, which has been supportive in making the Kuwaiti telecommunications sector take its leading regional and global position.
Human Capital Development
Throughout 2020, stc was keen to invest in its human capital and develop the capabilities of its employees to enable them to adapt to all the circumstances that we have witnessed. In particular, this has helped stc’s employees to better implement the remote working business plan as efficiently as possible and without any impact on the company’s administrative and operational activities, in line with the company’s strategy to meet the future challenges. Therefore, our investment in the workforce is one of the key elements of stc’s action plan, as we are committed to supporting the Kuwaiti employment replacement program “Kuwaitization” as one of the main pillars of our human resources strategy. Whereby, the Kuwaiti employees at stc reached 64% of company’s total employees by the end of 2020. We always strive to enhance and raise the efficiency and capacity of the company’s human resources through providing training courses and disseminating knowledge in the working environment to encourage our employees to achieve their goals and improve their expertise.
Appreciation and Gratitude
In conclusion, I am pleased to express my gratitude and thank our valued customers for their loyalty and confidence in stc, which has enabled us to achieve these results despite the difficult times we faced due to the COVID-19 crisis. Furthermore, I would like to thank the Board of Directors, Executive Management, stc family members and partners for their contributions in achieving this remarkable operational performance through their outstanding teamwork. I would also like to shed the light on their contributions to the company’s success during these difficult and unprecedented times through their cooperation, enthusiasm, dedication and continued support. This, in turn, has paid off with the fact that stc is now at the forefront of the most innovative digital communications services providers. Through your support and our productivity in implementing the company’s new strategy, transformation plan and investment activities, we are confident that stc will be able to move forward in achieving its future goals.
Eng. Maziad Bin Nasser Alharbi
Chief Executive Officer
Mr. Mohammed Bin AbdulMohsen Al Assaf
Chief Financial Officer
Overview
Despite the economic distortions caused by COVID-19’s current global crisis, stc was able to maintain satisfying cash flows driven by the company’s continuous investments in its key areas. stc’s strong financial and solvency positions supported the company to respond quickly and build up countercyclical buffers to support to the emergency contingency plans arising from external shocks. While working remotely under exceptional circumstances, stc defined its core areas and the required future strength capabilities necessary to execute its operations, administrative activities as well as desired financial results.stc ensured providing convergent offerings on a continuous basis in addition to implementing its updated strategy that was designed to cope with the latest developments associated with the COVID-19 crisis. While the current crisis has exposed the weakness of the digital infrastructure of most companies, particularly mediumsized firms, to cope with the related repercussions, stc demonstrated its ability to provide a wide range of digital, cloud and IT services through which it can reach the best secure business process with the highest possible technical and operational efficiency. This has, in turn, enabled stc to maintain its financial and operational flexibility throughout the general abnormal market and economic conditions.stc succeeded in capturing the opportunities created by the current crisis driven by the increasing demand for business solutions and digital services through increasing its investments in data services backed by the 5G network. Consequently, stc viewed this event as a valuable opportunity to increase its cost efficiency while investing in growth opportunities through the implementation of strategic cost management initiatives and expanding its digitization efforts. Despite the stiff competition among digital services and solutions providers, stc was able to capitalize on the new opportunities raised from the growing and wide demand on digital services through utilizing its flexible operating model. Additionally, stc has successfully reaped the benefits of the new digital economy capitalizing on its prior achievements over the past years with regards to adopting the digital transformation strategy and offering integrated technical solutions to its customers, individuals and enterprises, representing new areas of sustainable growth.
Concrete financial performance throughout an unprecedented crisis
The uncertain global financial market environment and the volatility of business operations during the lockdown period have made it challenging for most companies from different sectors to keep their financial wheels turning throughout that period. However, stc was able to maintain both its strong financial position and performance during 2020 which were reflected in achieving good levels in its revenue, EBITDA, EBITDA margin and net profit.
Throughout the current crisis, stc reported consolidated financial results for the year ended 2020 that satisfy the anticipation of its shareholders. Driven by the high demand on data services and digital platforms especially from the enterprise segment, stc’s revenues reached KD 283.2 million at the year ended 31 December 2020. The exceptional efforts of the company’s working teams significantly contributed in driving stc’s business efficiency and its efforts to offset the negative impacts of COVID-19 pandemic is demonstrated by its good EBITDA results reaching KD 73.4 million with an EBITDA margin of 26%. Thus, the net income reached KD 32.1 million (earnings per share 64 fils) with a net profit margin of 11%.
stc has dramatically expanded its offerings related to the 5G network backed products and services, building on its previous as well as ongoing investments in this area. Hence, the company’s total capex spending reached KD 26.2 million over the year, representing 9% of stc’s total revenue in 2020, compared to KD 58.5 million representing 20% of stc’s total revenues in 2019. On the other hand, stc’s total assets reached KD 374.2 million. In addition, the company’s total shareholders’ equity grew by 3.2% reaching KD 222.2 million, with a book value of 445 Kuwaiti fils per share. It is worth highlighting that one of stc’s competitive advantage is having a strong solvency position among its peers in the MENA region, where the debt to equity ratio reached 0.05x by the end of 2020, which is considered low compared to the industry average.
Financial strategy
Throughout this year, stc succeeded by acting proactively in providing a wide range of innovative products and services valued using an adequate pricing mechanism which supports the needs of the local community. This has also helped stc to maintain satisfactory levels of profitability margins enabling the company to gain a competitive advantage and maintain its leadership position in the Kuwaiti telecommunications market. As we carry out this historic astonishing work and exceptional continuous efforts of the company’s working teams throughout the unusual period, stc strives to provide products and services that exceed customers’ expectations during not only critical situations but also all the way through relaxed economic and market conditions.
During the financial year 2020, stc directed its financial resources to achieve the company’s vision, mission and values by investing in its people, technologies, operational processes and internal capabilities. The company also contributed in a number of initiatives in collaboration with the governmental bodies aimed at alleviating the negative consequences of COVID-19 pandemic on the local community. Furthermore, stc remained focused on building its financial strategy based on smart investments and cost optimization frameworks aligned with the company’s corporate strategy of enabling the digital transformation while catering to customers’ needs and developing structured frameworks to streamline its costs. This will, in turn, help the company to achieve its operational and financial objectives.
Remote working didn’t hold stc back from measuring its financial performance against the targeted KPIs, through the post-implementation analysis mechanism that was initiated in 2019. Hence, at stc, we are proud to be one of the few companies that succeeded in controlling the negative impacts of COVID-19 crisis while enhancing its operational efficiency during such an unprecedented event.
Moving Forward
As our acquisition to solutions by stc has enabled stc to deliver better value to its customers and shareholders despite the stressful economic conditions, we are keen to seek similar strategic potential valuecreating digital opportunities in the near future. With an aim to sustain our leadership position in the Kuwaiti telecom market, stc will hold onto investing in its human capital, internal processes and the latest advanced technologies as a means of uplifting the company’s efficiency and strengthening its core activities.
From a future perspective, stc is keen to ensure putting its disbursements on the right direction by investing more on digital platforms, creating strategic partnerships with digital providers and spending on its R&D function to provide the best-in-class services to its customers, individuals and enterprises.
Mr. Mohammed Bin AbdulMohsen Al Assaf
Chief Financial Officer
Dr. Mahmoud Ahmed Abdulrahman
Chairman
Dear Shareholder,
I am delighted to present Kuwait Telecommunications Company’s ( stc) Annual Report for the year ended 31 December 2020. This report demonstrates stc’s outstanding performance during an unprecedented period due to the COVID-19 crisis and the disruption it has caused to our daily life. Not to mention the considerable damage which inflicted many sectors due to the global fears from the uncertainty and the near-absence of future prospects in this regard. This report also addresses the company’s strategy, which has been highly streamlined and has significantly assisted the local community to adapt to the new digital age. Whereby, stc succeeded in providing its customers with the most innovative business solutions in collaboration with its specialized arm, solutions by stc. Despite the negative impact of the COVID-19 crisis on the global financial markets in various industries, stc was able to achieve financial and operational achievements that meet the aspirations of the company’s shareholders, recording a net profit of KD 32.1 million.As economic uncertainty and financial pressures worsened, stc took it upon itself to launch a wide range of products that meet customers’ demands in that period. As a result, stc has strengthened its position in the market as a leader in the digital and latest technological advances arena driven by the growing demand for the digital services in Kuwait and all over the world. Seizing opportunities, developing plans and innovative solutions in addition to providing innovative services to customers have been amongst the strategic foundations of stc since its inception in 2008. Hence, stc is keen to lead and enable the digitization process in the region leveraging the synergies resulting from the company’s integration with solutions by stc.
The Telecommunications Market and COVID-19
The Kuwaiti telecommunications market has shown flexibility in addressing economic challenges and risks through playing a key role in helping the community and meeting its needs. Throughout the pandemic’s outbreak in 2020 up until today, stc has been using the latest global technologies in addition to doing its utmost to provide innovative digital services aimed at meeting the community’s various needs during closure periods, curfews and beyond. With the advent and increased usage of digital platforms, mobile service providers have rushed to offer 5G backed products and services to mitigate the negative effects of the COVID-19 crisis on the Kuwaiti society. Thus, in response to the challenges and changes in the demand for digital communication services, stc has undertaken several initiatives aimed at facilitating remote working in addition to enabling online education as well as many digital and technical services targeting the B2B and B2C sectors. Through combining the latest technologies that distinguish us and the recent urgent need for digitization, stc has expanded its range of products, services and designs to keep pace with the rapid developments in telecommunications, technology and digitization services on a global level.
Creating Shareholders Value
At stc, we focus on creating shareholders value by establishing long-term growth from sustainable profits in addition to increasing total returns that are in the best interests of the company’s shareholders. With the support of the company’s business continuity plans, stc has been firmly keen to adhere to the corporate goals and values while monitoring developments and finding solutions, as well as enhancing the enthusiasm of the working teams in an effort to make a positive impact not only on employees and customers, but also on the community as a whole. Over the past years, stc’s performance has been evident through its operational efficiency, financial stability and the strength of its products, in addition to its distinctive and well-established brand in the telecommunications sector.
This has, in turn, enabled stc to succeed in expanding its footprint in the telecom industry and attract a large number of investors. Since the onset of the crisis, stc has been at the forefront in providing innovative and integrated digital solutions based on the latest technological developments for its customers, individuals and corporates. We have been able to achieve good results throughout the pandemic through adopting a flexible operating model, in addition to being flexible in implementing the company’s digital transformation strategy. stc also provided advanced technical solutions in line with the government’s expectations and social distancing plan. In order to win the trust of our valued shareholders, we follow a career path that elevates the best global practices to show our ability to deliver good results in both revenues and net profit, also to enhance our operational efficiency. Despite the 2020 crisis, stc managed to achieve a total revenue of KD 283.2 mn, where EBITDA reached KD 73.4 mn with an EBITDA margin of 26%. As a result, stc recorded a net profit of KD 32.1 mn. On the other hand, shareholders’ equity increased by 3.2% at the end of 2020, reaching a book value of 445 fils per share. The Board of Directors has recommended distributing cash dividends of 60 fils per share representing 60% of the share nominal value for the year ended 2020, subject to the approval of the Ordinary General Assembly of the company. This decision was based on stc’s confidence in its sustainability, strong financial position and ongoing cash flow generation during economic downturns.
These results reflect stc’s ability to overcome unprecedented challenges represented by the current global pandemic. Furthermore, the results demonstrated the quality of the company’s strategy and the dedication of each of the Board of Directors, the executive management and its employees. At stc, we are committed to enhancing the quality of our products, services, customer relationships and operational efficiency in order to maintain our market position during difficult times and economic uncertainties in addition to the ongoing societal changes.
Corporate Governance
stc is committed to adhering to the corporate governance rules and regulations issued by the Capital Markets Authority in the State of Kuwait which aims to uphold transparency, protect shareholders value and improve company’s operating environment. In conjunction with all the recent changes imposed by the regulatory bodies with regards to the Annual General Meeting and the disclosures of the financial implications of COVID-19 outbreak, stc ensured applying all laws and regulations that conform to its values and the professional foundations that guide our work to better serve the interests of our shareholders. The corporate governance report in a later chapter of this report outlines our framework in further details.
Corporate Social Responsibility
stc deals highly professionally with its customers, employees, shareholders, and the local community as a whole, who, in turn, contribute to our company’s success. Through contributing to the Kuwaiti society, stc aims to leave a positive footprint to be felt by the future generations.
As a matter of our concern for the social responsibility towards our local community, stc ensured its presence to lend a helping hand and support throughout COVID-19 outbreak in order to alleviate the negative consequences of the current crisis on the Kuwaiti community. In this regard, stc has contributed to many initiatives and activities in support of the preventive measures adopted by the government to mitigate the harsh negative effects of the COVID-19 crisis on the Kuwaiti society. Consequently, the company has collaborated with various entities to support a number of groups and sectors across Kuwait including, health, sports, education and entrepreneurship. In addition, stc has also worked alongside with some governmental agencies and medical companies to prevent the infectious diseases in addition to undertaking several preventive measures in accordance with the health guidelines and instructions issued by the Ministry of Health.
As part of its corporate social responsibility initiatives, stc has also adopted the highest safety standards and instilled the culture of performance among its staff to continue providing high quality services while protecting its customers and employees. During 2020, stc has heavily invested in its human capital through conducting virtual training courses throughout the lockdown period and thereafter. Up until this moment, stc has been keen to ensure employees’ safety, as it was amongst the first companies in Kuwait to adopt the remote working criteria while keeping the working teams engaged through conducting virtual conferences and sending them feedback surveys on a continuous basis.
In compliance with the instructions imposed by the Kuwaiti government with regards to COVID-19 pandemic, it is worth highlighting stc’s internal campaign “Don’t Compromise” that was initiated to raise awareness among the employees following their return to work from the full lockdown, in order to ensure their safety as the company’s first priority. Furthermore, the CSR section of this report is dedicated to include the company’s efforts in these different areas.
Appreciation
On behalf of the Board of Directors, I would like to thank His Highness, the Amir Sheikh Nawaf Al Ahmed Al Jaber Al Sabah, H.H. the Crown Prince Sheikh Meshaal Al Ahmed Al Jaber Al Sabah, H.H. the Prime Minister Sheikh Sabah Al Khalid Al Sabah and his distinguished government for their continued support to the telecommunications sector, which puts our precious country on the map of the advanced and developed countries in the field of telecommunications.
would also like to express my thanks and gratitude to all stc family members for their significant efforts, dedication and great sacrifices during 2020 in light of the challenges we have witnessed. Moreover, I would like to shed light on their continued enthusiasm and dedication in making stc a fascinating and successful company at times when the global economy has been greatly affected. I particularly thank our loyal customers for their continued trust in stc, which motivates us to provide the best services with the highest possible quality. Our sincere appreciation to our valued shareholders for their continued support and for placing their trust in us. We strongly believe that this commitment has been instrumental in enabling stc to continue on its successful journey of growth over the past years.
Dr. Mahmoud Ahmed Abdulrahman
Chairman
Eng. Maziad Bin Nasser Al Harbi
Chief Executive Officer
Dear Shareholders,
2020 was a remarkable year for Kuwait Telecommunications Company (stc) despite the unprecedented crisis witnessed by different sectors in Kuwait and around the globe. The global crisis has led to a radical shift in the quality of services and the strategy of current as well as future businesses due to the rapid spread of COVID-19 and the imposed restrictions on movements which negatively impacted most businesses and economic activities, and has in turn, led to a complete shift from the traditional working systems towards digitization of businesses of all kinds. In addition, the digitalization process assisted businesses to continue operating remotely resulting in more data usages and a significant reliance on the capabilities of telecommunications companies with regards to offering digital services and solutions to the consumer and enterprise customers. It is worth noting that such services would provide flexibility for business continuity, working from home and studying in addition to an access to all medical, financial, entertainment, retail and other basic services.
Recovery Strategy
In response to the unforeseeable events, the company formed a specialized team at the onset of the pandemic to deal with the crisis through developing a business continuity plan and adopting new initiatives to face the challenges and adhere to the national measures imposed to combat the virus’s outbreak. The specialized team has requested detailed business continuity plans to be developed by all the sectors at stc in addition to their request of monitoring the logistical work required to ensure the continuity of the company’s business and services provided to its customers. These plans are likely to reduce the negative economic impact of the crises on stc while ensuring the safety of its employees and customers.
The company also took important steps at the onset of the crises to ensure stc’s continuity of providing full services to all its customers during the full and partial lockdown periods. Furthermore, the steps taken shall also ensure the implementation of working from home and return to work plans, in addition to enhancing the digital transformation strategy and enriching the customer experience.
stc was keen to protect its financial position and its shareholder’s rights by extensively managing its cash flows and monitoring collections, while activating the cost optimization program to support the company’s profit margins for the year 2020.
In 2020, stc relied heavily on its infrastructure, being the most powerful in the region in terms of mobile services, through 5G networks which is the cornerstone of our expansion plan throughout the current crises. stc counts on the 5G network to keep pace with the needed developments of all private sectors and government agencies necessary to invest in the digital transformation process in order to meet the needs of consumers and enterprises capitalizing on the 5G, the latest technologies and digital services. Thus, stc offers a wide range of services including entertainment and the digital services in addition to its concern for meeting the growing demand for fixed and wide mobile broadband services at high speeds and huge capacity. stc also ensures meeting all business requirements related to online institutional and educational interaction with the highest possible quality and efficiency. stc has also proved its ability to overcome the challenges and potential risks in addition to keeping up with business operations and opening its doors to serve its customers in the current circumstances. Moreover, stc was placed in the forefront within the private sectors as a result of the great efforts and dedication of its staff, who have demonstrated their determination to face the health risks associated with COVID-19. As a result, stc was able to continue providing its services with the same quality standards despite the increasing demand and the shift towards digital platforms to communicate and deliver its products to the customers.
Capturing Business Opportunities
2020 opened the door for stc to undertake several initiatives aimed at developing the scope of work and sharing expertise in order to support the digital transformation process and provide the best services, products as well as solutions that meet the growing demand for the enterprise services. Thus, stc leverages on the parent company’s (stc Group) expertise and capabilities in the area of digitization in addition to the advanced technology services captured from the successful integration project with our subsidiary, solutions by stc. This has enabled stc to switch from providing traditional services to offering digital, cloud, Internet of Things (IoT), data, as well as cyber security and advanced IT solutions and services. It is worth noting that our digital services are designed to target all the private and governmental sectors through designing packages of integrated and services. with the highest possible technical and operational efficiency. Consequently, stc has worked hard to capture business opportunities achieving an outstanding growth in its operations that target enterprises and governmental entities.
The Negative Impacts on the Consumer Sector
On the other hand, COVID-19 crisis has had a negative impact on the telecommunications sector, specifically some activities targeting the consumer services, which were greatly affected by the full lockdown in the country and the interruption of air traffic in most countries around the world. Thus, sales of roaming packages almost entirely dropped due to the suspension of flights and the reluctance to travel during 2020, in addition to the decline in device sales and its accessories resulting from the full closure of shopping malls and retail sales. Furthermore, the decline in the production process of mobile devices and ICT equipment due to COVID-19 effects on the producing and suppling countries have negatively impacted stc’s revenue. Not to mention the suspension of import and export activities which also contributed to the decline in the company’s revenue stream during 2020. However, stc’s strategy has demonstrated its flexibility to adapt with the difficult reality of the company’s operational performance through meeting all the services needed by the consumer as well as the private and public sectors, with the highest possible efficiency.
Positioning stc among the best companies in Kuwait and the region within one of the most operationally and financially defensive sectors, affected by the global economic crisis of COVID-19, gives us great impetus to move forward in expanding stc’s business and achieve the best operational and financial results.
Financial Performance of 2020
Despite COVID-19’s repercussions and the strong competition in the Kuwaiti telecommunications market, stc has managed to achieve good financial results that meet the anticipation of our shareholders during unstable and unprecedented circumstances. Whereby, stc’s revenue reached KD 283.2 million by the end of 2020, compared to KD 293.7 million in the previous year. This decline is attributed to the full and partial lockdown that was imposed in Kuwait due to COVID-19 pandemic, which, in turn, resulted in a decline in the consumer sector’s revenue. Furthermore, the significant near-total drop in the company’s revenue from the roaming services, due to the suspension of flights and closure of airports of most countries around the globe, was also translated into the decline in stc’s total revenue. In addition, stc’s social contribution that we are proud of through providing its customers with unlimited free local calls for all mobile networks, in addition to a 5GB internet package per day from 22 March to 20 April 2020, in collaboration with the Communications and Information Technology Regulatory Authority (CITRA) in support of the Kuwaiti community during COVID-19 crisis. On the other hand, sales of the enterprise sector witnessed a growth in its volume as a result of the current need and the growing demand for digital and IT services.
On the other hand, EBITDA reached KD 73.4 million in 2020 with an EBITDA margin of 26% during 2020. Consequently, stc’s net profit recorded KD 32.1 million (earnings per share of 64 fils) with a profit margin of 11%. The company also structured its capital and operational expenditures, particularly after the negative effects of the current economic crisis to ensure liquidity of cash flows under the current conditions. Furthermore, the company achieved these results despite COVID-19’s global economic challenges, during which stc was able to achieve good revenue levels in addition to enhancing its operational efficiency to create an added value for its customers and better returns for its shareholders. stc’s financial results throughout 2020 also reflected its competitiveness and strengthened its position as the second largest telecommunications company in terms of its market share of revenue in the Kuwait telecommunications sector with a market share of approx. 35%. Moreover, stc’s customer base reached 1.9 million customers at the end of 2020.
stc’s Future Plans
Following the negative effects of COVID-19’s economic crisis, all the local and regional enterprises have sought the urgent need for the digital transformation, which has become one of the most important pillars of the strategic plans for many local and international institutions and corporates. Through its AHEAD strategy, stc’s future plans focused on enriching customer experience, gaining market leadership and being a pioneer through improving the company’s capabilities as well as providing an effective model based on its digital platforms. Furthermore, AHEAD strategy also focused on instilling the culture of performance within the company. stc also seeks to enter into strategic partnerships to provide the basic infrastructure necessary to develop stc’s ICT portfolio. Additionally, stc is always keen to provide integrated working teams, innovate in its services and products, and explore more smart investments in order to achieve the best results. In light of market challenges resulting from the highly competitive prices, stc aims to focus on the value and quality of its products and services. Hence, one of stc’s most important future aspirations is to provide its customers, individuals and enterprises, with products and services that are beyond the traditional mobile services. It also strives to attract opportunities related to providing enterprise services and transforming the technical capabilities, in addition to empowering those capabilities renewably, leveraging from stc group’s expertise and capabilities in the digital transformation area. stc also capitalizes on the advanced technical services provided by solutions by stc which operates in Kuwait and is fully owned by stc. Accordingly, stc currently focuses on providing a wide range of services and solutions based on its strong infrastructure and its innovative 5G network to provide an excellent experience to its customers in various areas to facilitate digital transformation in Kuwait. It is worth noting that such services and digital solutions are specifically designed to help stc’s customers to cope with the repercussions of the current crisis that is likely to continue throughout 2021.
The Role of Governmental and Regulatory Entities in Supporting the Telecom Sector
In light of the current circumstances and present developments, the importance of the role that the governmental and regulatory entities can play to make a paradigm shift in the communications and IT sector in Kuwait, with an aim to upgrade the digital services so that they match best services available globally, depending on the telecommunication companies’ private sector’s capabilities. Government’s support for implementing the digital transformation in Kuwait is essential to enable the Kuwaiti telecommunications sector to keep pace with its global counterparts. Whereby, regional governments as well as those of different countries have begun to realize the importance of digital transformation and are working on applying it to execute the business of private companies, governmental entities as well as commercial, health and educational activities. The State of Kuwait also possesses all the geographical credentials that gives the country a distinctive feature to be a corridor and a hub for international cables to connect the countries of the region and the world. This is CITRA’s vision of transforming Kuwait into a regional data storage and processing center, in addition to the privately owned infrastructure of telecommunications companies, aimed at making Kuwait a leader and exporter of information technology in the region. Accordingly, this is likely to reinforce the “Kuwait 2035” vision for transforming Kuwait into a financial and commercial center. I would also like to commend CITRA’s positive and regulatory role, which has been supportive in making the Kuwaiti telecommunications sector take its leading regional and global position.
Human Capital Development
Throughout 2020, stc was keen to invest in its human capital and develop the capabilities of its employees to enable them to adapt to all the circumstances that we have witnessed. In particular, this has helped stc’s employees to better implement the remote working business plan as efficiently as possible and without any impact on the company’s administrative and operational activities, in line with the company’s strategy to meet the future challenges. Therefore, our investment in the workforce is one of the key elements of stc’s action plan, as we are committed to supporting the Kuwaiti employment replacement program “Kuwaitization” as one of the main pillars of our human resources strategy. Whereby, the Kuwaiti employees at stc reached 64% of company’s total employees by the end of 2020. We always strive to enhance and raise the efficiency and capacity of the company’s human resources through providing training courses and disseminating knowledge in the working environment to encourage our employees to achieve their goals and improve their expertise.
Appreciation and Gratitude
In conclusion, I am pleased to express my gratitude and thank our valued customers for their loyalty and confidence in stc, which has enabled us to achieve these results despite the difficult times we faced due to the COVID-19 crisis. Furthermore, I would like to thank the Board of Directors, Executive Management, stc family members and partners for their contributions in achieving this remarkable operational performance through their outstanding teamwork. I would also like to shed the light on their contributions to the company’s success during these difficult and unprecedented times through their cooperation, enthusiasm, dedication and continued support. This, in turn, has paid off with the fact that stc is now at the forefront of the most innovative digital communications services providers. Through your support and our productivity in implementing the company’s new strategy, transformation plan and investment activities, we are confident that stc will be able to move forward in achieving its future goals.
Eng. Maziad Bin Nasser Alharbi
Chief Executive Officer
Mr. Mohammed Bin AbdulMohsen Al Assaf
Chief Financial Officer
Overview
Despite the economic distortions caused by COVID-19’s current global crisis, stc was able to maintain satisfying cash flows driven by the company’s continuous investments in its key areas. stc’s strong financial and solvency positions supported the company to respond quickly and build up countercyclical buffers to support to the emergency contingency plans arising from external shocks. While working remotely under exceptional circumstances, stc defined its core areas and the required future strength capabilities necessary to execute its operations, administrative activities as well as desired financial results.stc ensured providing convergent offerings on a continuous basis in addition to implementing its updated strategy that was designed to cope with the latest developments associated with the COVID-19 crisis. While the current crisis has exposed the weakness of the digital infrastructure of most companies, particularly mediumsized firms, to cope with the related repercussions, stc demonstrated its ability to provide a wide range of digital, cloud and IT services through which it can reach the best secure business process with the highest possible technical and operational efficiency. This has, in turn, enabled stc to maintain its financial and operational flexibility throughout the general abnormal market and economic conditions.stc succeeded in capturing the opportunities created by the current crisis driven by the increasing demand for business solutions and digital services through increasing its investments in data services backed by the 5G network. Consequently, stc viewed this event as a valuable opportunity to increase its cost efficiency while investing in growth opportunities through the implementation of strategic cost management initiatives and expanding its digitization efforts. Despite the stiff competition among digital services and solutions providers, stc was able to capitalize on the new opportunities raised from the growing and wide demand on digital services through utilizing its flexible operating model. Additionally, stc has successfully reaped the benefits of the new digital economy capitalizing on its prior achievements over the past years with regards to adopting the digital transformation strategy and offering integrated technical solutions to its customers, individuals and enterprises, representing new areas of sustainable growth.
Concrete financial performance throughout an unprecedented crisis
The uncertain global financial market environment and the volatility of business operations during the lockdown period have made it challenging for most companies from different sectors to keep their financial wheels turning throughout that period. However, stc was able to maintain both its strong financial position and performance during 2020 which were reflected in achieving good levels in its revenue, EBITDA, EBITDA margin and net profit.
Throughout the current crisis, stc reported consolidated financial results for the year ended 2020 that satisfy the anticipation of its shareholders. Driven by the high demand on data services and digital platforms especially from the enterprise segment, stc’s revenues reached KD 283.2 million at the year ended 31 December 2020. The exceptional efforts of the company’s working teams significantly contributed in driving stc’s business efficiency and its efforts to offset the negative impacts of COVID-19 pandemic is demonstrated by its good EBITDA results reaching KD 73.4 million with an EBITDA margin of 26%. Thus, the net income reached KD 32.1 million (earnings per share 64 fils) with a net profit margin of 11%.
stc has dramatically expanded its offerings related to the 5G network backed products and services, building on its previous as well as ongoing investments in this area. Hence, the company’s total capex spending reached KD 26.2 million over the year, representing 9% of stc’s total revenue in 2020, compared to KD 58.5 million representing 20% of stc’s total revenues in 2019. On the other hand, stc’s total assets reached KD 374.2 million. In addition, the company’s total shareholders’ equity grew by 3.2% reaching KD 222.2 million, with a book value of 445 Kuwaiti fils per share. It is worth highlighting that one of stc’s competitive advantage is having a strong solvency position among its peers in the MENA region, where the debt to equity ratio reached 0.05x by the end of 2020, which is considered low compared to the industry average.
Financial strategy
Throughout this year, stc succeeded by acting proactively in providing a wide range of innovative products and services valued using an adequate pricing mechanism which supports the needs of the local community. This has also helped stc to maintain satisfactory levels of profitability margins enabling the company to gain a competitive advantage and maintain its leadership position in the Kuwaiti telecommunications market. As we carry out this historic astonishing work and exceptional continuous efforts of the company’s working teams throughout the unusual period, stc strives to provide products and services that exceed customers’ expectations during not only critical situations but also all the way through relaxed economic and market conditions.
During the financial year 2020, stc directed its financial resources to achieve the company’s vision, mission and values by investing in its people, technologies, operational processes and internal capabilities. The company also contributed in a number of initiatives in collaboration with the governmental bodies aimed at alleviating the negative consequences of COVID-19 pandemic on the local community. Furthermore, stc remained focused on building its financial strategy based on smart investments and cost optimization frameworks aligned with the company’s corporate strategy of enabling the digital transformation while catering to customers’ needs and developing structured frameworks to streamline its costs. This will, in turn, help the company to achieve its operational and financial objectives.
Remote working didn’t hold stc back from measuring its financial performance against the targeted KPIs, through the post-implementation analysis mechanism that was initiated in 2019. Hence, at stc, we are proud to be one of the few companies that succeeded in controlling the negative impacts of COVID-19 crisis while enhancing its operational efficiency during such an unprecedented event.
Moving Forward
As our acquisition to solutions by stc has enabled stc to deliver better value to its customers and shareholders despite the stressful economic conditions, we are keen to seek similar strategic potential valuecreating digital opportunities in the near future. With an aim to sustain our leadership position in the Kuwaiti telecom market, stc will hold onto investing in its human capital, internal processes and the latest advanced technologies as a means of uplifting the company’s efficiency and strengthening its core activities.
From a future perspective, stc is keen to ensure putting its disbursements on the right direction by investing more on digital platforms, creating strategic partnerships with digital providers and spending on its R&D function to provide the best-in-class services to its customers, individuals and enterprises.
Mr. Mohammed Bin AbdulMohsen Al Assaf
Chief Financial Officer
stc’s COVID-19 safety measures and procedures
stc maintained the continuity of its services during the unprecedented period of COVID-19’s implications
At the onset of the COVID-19 pandemic,stc established a Committee to deal with the crisis through activating the Business Continuity Plan and adopting new initiatives as imposed by the pandemic crisis and the taken national measures to combat the virus outbreak. Whereby, with the development of crisis management and infection control procedures to avoid the contamination of the work environment, stc was able to minimize the economic impact of the COVID-19 crisis on stc’s business while ensuring the safety of its employees and customers.
Within the company premises, stc developed clear and strict precautionary guidelines to protect its employees and stakeholders during the pandemic in addition to installing sanitizing stations in the company’s departments and elevators. stc has also capitalized on the digital revolution to protect its employees by installing thermal cameras in the entrance of the company in order to detect infections.Furthermore, stc was amongst the first corporations in Kuwait to transition more than 75% of its employees to work remotely before the Kuwaiti government had imposed the lockdown across the country. With their dedication, determination and continuous efforts, stc employees embraced every opportunity that was available to overcome the challenges and be able to continue providing the company’s services with the same quality standards.Throughout the global challenges of COVID-19 crisis, stc ensured keeping its employees up-todate with the latest corporate developments in order to keep the working teams closer despite the social distancing. As a result, stc’s executive management conducted virtual meetings to keep their working teams engaged during times of fear and uncertainty. The company also ensured that effective communication was taking place with all of its employees by engaging them via all the communication and social networking channels.The company strictly adhered to the government’s plan of the gradual return to the company premises while trying to minimize the number of employees as much as possible. Besides following flexible working hours with the aim to reduce the interactions between the working teams, stc ensured sanitizing all the facilities on a daily basis before and after the employees’ working hours.
As for the branches, stc developed interim guidance to prevent the negative consequences of the social interactions between its employees and customers, where it enforced various preventive measures during working hours throughout the full and partial lockdown periods in accordance with the government’s plan to gradually return to the normal life in Kuwait.Hence, the company adopted the highest safety standards and instilled it into the culture of performance among stc’s staff to continue offering high quality services while protecting its customers and employees.Installing thermal cameras, putting preventive intervals, distributing the preventive items at all stc branches in addition to adhering to the social distancing protocols and health regulations were the key measures taken by the company to combat the pandemic. To ensure consistent safety measures, contracts were signed with specialized companies for the continuous sterilization of all branches, machines, and workplaces, coupled with awareness posters and ongoing training for employees to maintain effective preventive measures.
At stc, the followed risk assessment process plays a key role in maintaining company’s viability throughout identifiable and unidentifiable risks. Hence, each business unit within stc is responsible for developing the relevant function’s risk profile in order to help the executive management in monitoring the company’s risks especially in times of uncertainties and catastrophic events.Therefore, stc’s executive management ensured monitoring the company’s various functions to mitigate the risks arising from the COVID-19 pandemic that might disrupt the company’s services and related activities. During this period, related risks have been captured by each function within stc together with the required mitigation plan to ensure business continuity.The following is a summary of the most important steps taken by stc to minimize the negative impacts of the pandemic on the company’s services and operational activities:• Ensure the continuity of providing all the services to the company’s customers during the partial and full lockdown • Implement the work-from-home plan • Implement the safe return-to-office plan • Strengthen the digital transformation strategy • Manage cash flows and monitor the collection extensively • Activate the optimization plan
Our Strategy
In a year full of challenges due to COVID-19 pandemic, stc has moved forward to implement its new corporate strategy “AHEAD” with the ambition of propelling the company on its path to market leadership
AHEAD strategy
AHEAD aims to position stc as a digital pioneer by enhancing and building on our current initiatives to enable the digital transformation in Kuwait. The foundations of AHEAD are customer centricity, technology leadership, capture growth opportunities and leverage on the stc group capabilities. Throughout the past couple of years, stc has successfully optimized its operations, invested in developing the largest 5G network in Kuwait and enhanced its digital channels to provide its customers with an unrivalled experience. Our opportunity now is to accelerate our momentum and build on our strengths by looking and moving AHEAD.
AHEAD leverages on 5 strategic pillars:
Anticipate Consumer
Needs
Knowing what our customers need before they ask and serving them greatly: stc applied this pillar since the beginning of the pandemic by innovating on its product portfolio to meet new customer needs.
Harness Enterprise
Opportunities
Capturing the potential of the enterprise market across sectors by offering integrated communications and IT solutions. The pandemic has propelled the development of new vertical solutions that have been developed in the areas of safety, education and health.
Excel Digital Experience
Accelerating the digital life of our customers and the digital transformation in Kuwait by leveraging leading-edge technology: stc has revamped its digital platforms to offer new services and experiences overcoming the pandemic lockdown challenges.
Accelerate Enabling
Capabilities
Moving forward with a nimble and digital operating model with a relentless focus on profitability.
Devote Performance
Culture
Developing stc employee’s potential and nurturing skills for the future in order to continue leading Kuwait telecom market.
Corporate Social Responsibility
Bridging the gap for a better tomorrow