The strength of the strategic and financial planning and the resilience of internal policies are the key to stc’s success at all operational and financial levels and solidify its position as a leader in the telecommunications and information technology market. Eng. Maziad Alharbi

Dear Shareholders,

Kuwait Telecommunications Company (stc) ended the year 2022 with numerous and unprecedented achievements at all operational and financial levels. The expansion of its operating model has had a significant impact on achieving the highest level of the Company’s market share of revenue since its inception. Whereby, all of these achievements are in the interest of our valued shareholders and reflect their confidence in the outlook of the company’s performance. Likewise, stc’s results during the financial year ended in December 2022 demonstrated the successful implementation of its corporate strategy with all the operational and financial KPIs adopted. This was the key factor behind reaching stc’s best results aimed at exceeding the aspiration of our customer’s in addition to placing stc amongst the leading companies in Kuwait for digital transformation and providing integrated technical solutions with a value added to the traditional telecommunications sector.

stc’s strategic expansion in April 2022 through the acquisition of E-Portal Holding Company and its subsidiaries demonstrated the Company’s success in creating strong and solid grounds to achieve the sustainable growth in the future. Therefore, stc has worked hard to establish a holistic operating model, which significantly supports the strategic pillars of its digital transformation process in line with Kuwait’s 2030 vision in addition to maintaining its position as a market leader in the telecom industry that offers a wide range of services to the individual and enterprise sectors. This is by virtue of stc’s most advanced 5G network and well-established infrastructure that the Company had heavily invested in to enable the Company to deliver the best integrated technical and database solutions that target and fulfill the needs of all of our customers.

At stc, we have been keen to keep up with all the changes and challenges brought on by the economic impact, and particularly, by the strong competition within the telecom sector. Therefore, stc ensured refreshing its corporate strategy and structuring the group’s operational model to ensure the best outcomes and capture all the available opportunities. We also strive to design smart plans that consider all the potential risks to always be prepared and face any future crisis through adopting a flexible as well as adaptable operating model that copes with the constantly changing market requirements and economic conditions. In return, this will enable stc to achieve strong performance with longterm sustainable growth.

B2B Sector Expansion

We are relatively certain that stc’s products and innovative solutions shall facilitate the swift transformation that the telecom industry is going through. stc’s focus to reinforce its position as a leader in the Telecom industry and the ICT field was reflected through its acquisition on all the share capital of E-Portal Holding Company in 2022, to act along with our subsidiary solutions by stc, as the Company’s specialized arm for providing business solutions. This acquisition would enable stc to offer the best in-class integrated communications and networking solutions as well as advanced technical solutions, fixed Statement Chief Executive Officer Eng. Maziad Alharbi KD 336.4 Million KD 82.0 Million KD 33.2 Million Revenues EBITDA Net Profit The strength of the strategic and financial planning and the resilience of internal policies are the key to stc’s success at all operational and financial levels and solidify its position as a leader in the telecommunications and information technology market 40 Annual Report 2022 Annual Report 2022 41 services, broadband, integration systems and cloud services to its individuals and enterprise customers. The acquisition of a dominant ICT services provider would also support stc to scale up its activities and shift from just providing traditional telecommunications services to enable more digital capabilities through offering the ICT, IoT as well as cloud services. With an increased focus on the ICT services through utilizing the capabilities of its subsidiaries, stc was able to capture new streams of revenue driven by the increased demand on the digital communications and information technology services, especially post the recent economic crisis. Accordingly, stc succeeded in creating a solid infrastructure that would enable the Company to stand out and confront any difficulties that may face the telecom market in the near future.

Based on our future vision of the digital solutions and the rapid development of the telecom sector that is witnessing an acceleration in the lunch of new global technologies, stc has placed a great emphasis on continuously enhancing its infrastructure. Through which, stc ensures having a qualified infrastructure with the highest specifications and quality to offer all the ICT services, being the recent utmost importance to the enterprise and business sectors. This would also enable stc to sustain its position as a leader in the innovative business solutions through leveraging on its subsidiaries specialized in the ICT and ISP services in addition to creating an unparalleled dazzling opportunities to deliver the most advanced as well as best-in-class services that shall expand the Company’s presence in the enterprise sector, build a strong customer base and increase its market share.

Digital transformation

With the rapid technological storm, stc is now looking forwards to adopt a sustainable business framework to strengthen its brand name on a global level and positively impact its bottom-line. The increasing global demand on digitization created an imperative need for stc to adopt a digital culture, especially with the advanced technology that would assist the Company to differentiate itself among its competitors in the industry. stc was quick to recognize the necessity of incorporating the sustainability principles into its business plans in order to enhance customer satisfaction through providing cutting-edge digital solutions and telecom services. Not to mention stc’s keenness to save the environment, protect its human capital, and develop all the internal systems to keep up with the finest digital advances and better serve our customers effectively.

Digitalization can also assist in bridging the gap between the immediate requirements to enhance the sustainability principles and protect the environment on the long-term. The full adoption of digital technologies will improve power usage intelligence, speed up electrification, reduce energy consumption and accordingly, cut business costs. In addition to being a sustainable company, executing stc’s operations while maintaining strong ESG initiatives would enhance operational efficiency to sustain the corporates’ value for long-term prosperity. stc will, therefore, be motivated to actively address and exhibit consistent performance in sustainability, which in turn, would affect the Company’s investment decisions and market demand on its services.

Our New Strategy

Upon the successful and outstanding results achieved by implementing our 2020 three year strategy “AHEAD”, a new three year corporate strategy “LEAD” has been established by stc for the year 2023, with the aim of supporting the Company’s journey towards leading the Kuwaiti telecom and ICT market. Company’s “LEAD” strategy is based on the vision of stc’s Board of Directors and Executive Management of enriching shareholders value and maintaining Company’s competitive position by seizing promising investment opportunities. Driven by stc’s strategic pillars, we will strive to achieve the desired objective by capturing growth opportunities across youth, and SMEs segments to boost the performance of the consumer sector. Furthermore, stc will keep capitalizing on the internal capabilities of its ICT subsidiaries to enrich its ICT product portfolio to the enterprise segment, especially after the extensive demand of the digital services and integrated technical and business solutions.

The implementation of a productive and digital operating model is considered our foremost concern with an unwavering commitment to enhance profitability, maximize our employees’ potential, improve their future career skills, and promote corporate sustainability. This is also accompanied by the hard work of our subsidiaries and their capabilities to execute business solutions in the ICT field.

Financial performance of 2022

In line with Company’s aspirations to add value to shareholders and exceed customers’ expectations, stc was able to generate strong financial results in FY2022. Whereby, stc recorded the highest total revenue since inception to reach KD 336.4 million with a growth rate of 13.5% in 2022, compared to KD 296.3 million last year. stc’s robust outcomes are attributed to the smart packages designed to cater the needs of the individual sector, the huge support of the integrated technical solutions provided by its ICT, ISP and business solutions subsidiaries, the recent excessive demand on the integrated business solutions, and the continuous increased demand on the traditional telecommunications services in the Kuwaiti market. Additionally, this growth in revenue was achieved with the significant support from the increase in stc’s customer base which has reached 2.3 million customers by the end of December 2022, representing a rise of 14.4% compared to last year. The growth in revenue was also a result of the positive impact due to the consolidation of E-Portal’s financials, which was fully acquired by stc on the 6th of April 2022. I am also delighted to shed the light on stc’s ability to play a proactive role in offering the best and most sophisticated services to our individual and enterprise customers in the highest possible quality in order to preserve the company’s position amongst the top in the market, in the light of the current difficult economic conditions and inflationary environment. Accordingly, stc’s EBITDA witnessed a growth of 3.1% to reach KD 82.0 million in 2022 compared to KD 79.6 million in 2021. As a result, the company’s net profit during 2022 reached KD 33.2 million (earnings per share 33 fils) compared to 2021.

The continuous update of stc’s long-term financial policy, short and long-term digital transformation strategy along the previous three years was the main attribute that facilitated the ability to keep pace with the most recent developments in the telecom industry. stc succeeded in not only satisfying and exceeding the needs of its customers, but it has also demonstrated its ability to build a wise financial and operational plan based on the Company’s cost optimization program. This, in turn, had a significant role in enhancing stc’s solvency and strong cash position.

Human Capital development

It is of our utmost duty to declare the importance of stc’s human capital in the exceptional performance that the Company has achieved in FY2022. The astonishing results validate stc’s determination to invest in its employees, of its operational excellence and financial performance. As part of stc’s commitment to recruit and retain the top talent, it makes every effort to empower its employees by strengthening their capabilities and encouraging them to perform at their highest levels in various working conditions and situations that might occur. In addition to leveraging the arising potential growth opportunities in the enterprise sector, stc’s recent acquisition of E-Portal Holding Company is aimed at exchanging and sharing expertise between the working teams of 42 Annual Report 2022 Annual Report 2022 43 both Companies. Whereby, this acquisition acts as an inflection point of stc’s success in enhancing its internal capabilities.

stc’s initiatives, investment decisions and daily activities cover the Company’s ambition to contribute to the digital transformation process and lead the sustainable economic growth in Kuwait. As part of the Company’s commitment to support the Kuwaiti employment program “Kuwaitization”, which is focused on increasing the indigenous participation rate in the private sector, stc has articulated the Kuwaiti employment replacement program as one of the main pillars of the human resources strategy. Whereby, the Kuwaiti employees at stc has reached 65% of company’s total employees by the end of 2022.

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 have enabled us to achieve these outstanding results. Furthermore, I would like to thank the Board of Directors, Executive Management, stc family members and partners for their support in achieving this remarkable operational performance through their outstanding teamwork. I would also like to shed the light on their contributions to 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 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.

2022 a year full of exceptional achievements and strategic expansions in the Company’s operations driven by stc’s commitment to strengthen its leading position in the telecom sector and achieve the digital aspirations of the State of Kuwait. Dr. Mahmoud Ahmed Abdulrahman

Dear Shareholders,

I am pleased to present the Company’s Annual Report for the year ended 31 December 2022, whereby stc was able to realize a number of achievements in expanding the Company’s operations with the aim to fulfil its corporate strategy and add value to its shareholders. These achievements coincided with many of the challenges faced by the rapid development of the telecommunications sector, to show stc’s flexibility in driving further progress and accelerate the digital transformation process. This would, in turn, enable the Company to capture all the available business opportunities to achieve the growth in its operating and financial results. With our optimistic outlook, dedicated team, solid business continuity plans and robust corporate strategy, stc is keen to meet the needs of customers and the expectations of its valued shareholders in all its current and future plans, as it strives to leverage the Company’s strong infrastructure to maintain its leadership in shaping and guiding digitization in the region.

Throughout the past three years, stc’s AHEAD strategy played a vital role in positioning the Company amongst the front runners of the telecom industry through supporting the public and private sectors in Kuwait. In conjunction with our corporate strategy which focuses on expanding stc’s services in the B2B sector, our outlook with regards to the increased demand on the ICT integrated technologies and digital solutions is considered one of the key factors for stc’s acquisition on E-Portal Holding Company and its subsidiaries in April 2022. This acquisition demonstrates stc’s commitment to grow its position in the ICT field by providing the best in class integrated technical solutions to its individuals and enterprise customers. Consequently, stc is always seeking to leverage on the advanced infrastructure of its specialized ICT and ISP arms to provide the most innovative high quality products, services and solutions aimed at adding value to our customers and achieving good returns.

As part of our strategic and operational planning and driven by stc’s devotion to deliver Kuwait’s digital ambition and maintain its competitive position in a stiff market, we are looking forwards to implement our future strategy “LEAD” that shall elevate stc’s operations in the following three years. This will fulfill stc’s desire to strengthen its efforts to meet the shareholders expectation, increasing customer base, and continue in achieving robust financial results like what has been achieved during 2022; whereby, stc recorded a net profit of KD 33.2 million.

The Telecommunications Market & the Global Macroeconomic Challenges

The ever-growing reliance on digitization and reliable connectivity was the gate through which telecom operators were able to overcome the global economic challenges. Likewise, the telecommunications market in Kuwait has seen potential growth opportunities throughout the past few years in creating partnerships and executing mergers and acquisitions deals with ICT service providers. It is worth mentioning that the Kuwaiti Telecom market has also shown a sturdy demand in the 5G network services, particularly in the enterprise sector.

In line with the rapid developments in the telecom sector, stc has updated its’s corporate strategy during 2022, and was keen on developing its new strategy “LEAD” that focuses on leading the telecom and ICT market as well as overcoming all potential risks in order to enable the Company in providing the best as well as cutting-edge technologies. Accordingly, stc translated its outlook to support its internal capabilities and enhance its market share through enriching customer experience and leveraging on its solid infrastructure to expand its consumer and enterprise sectors.

Creating shareholders Value

stc’s commitment to create shareholders value was clearly demonstrated by the constructive decisions that were taken by the executive management to excel with the Company’s operations and deliver strong financial results. In 2022, stc’s prudent corporate strategy was reflected in the tangible outcomes that the Company has achieved from its acquisition on E-Portal Holding Company. The acquisition of E-Portal is considered one of stc’s major achievements during the year which enabled the Company to expand its business model and become one of the top companies in terms of the revenue market share of the Telecom sector. Not to mention that stc is utilizing the capabilities of its subsidiaries specialized in introducing innovative concepts and providing suitable solutions to the B2B sector in Kuwait in order to seize the potential growth in the enterprise sector, invest in its capabilities, reach the utmost efficiency in its business environment and drive its long-term value propositions. Similarly, stc is keen to foster the digitization agenda in its daily operations to facilitate the way towards reaching operational efficiency and effectiveness in each and every aspect of the product development and service offerings processes. Accordingly, stc ensures to enhance employees’ productivity and increase their motivation towards driving the lead to a smooth digital transition.

Proudly speaking, stc’s outstanding financial results throughout the year and distinct brand emphasize Company’s strong financial solvency position and the implementation of its flexible operating model. Whereby, stc managed to achieve a total revenue of KD 336.4 million for the year ended 31 December 2022, where EBITDA reached KD 82 million with an EBITDA margin of 24%. As a result, stc recorded a net profit of KD 33.2 million. On the other hand, shareholders’ equity increased by 2% at the end of 2022, reaching KD 241.4 million, with a book value of 242 fils per share.

The Board of Directors has recommended distributing cash dividends of 30 fils per share representing 30% of the share nominal value for the year ended 2022, subject to the approval of the Ordinary General Assembly of the company. This decision was based on stc’s belief in its long-term viability, strong financial position, and the ability to generate cash flow in the upcoming periods.

Nevertheless, in the first half of 2022, stc has successfully increased its share capital to reach KD 99.9 million through distributing 100% bonus shares to its shareholders. This decision came from stc’s positive outlook on creating an added value to its shareholders and place their interest on its top priorities. In this regard, stc’s management ensures developing long term financial policy to balance between its operational and financial performance that would positively reflect on its solvency and enhance its market position as a leader in the telecom industry and a pioneer in the digital transformation.

Corporate Governance

stc is committed to adhere 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, 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

With an aim to better serve its customers, employees, suppliers, local community and all the relevant stakeholders, since inception, stc set clear goals centered on strengthening its corporate social responsibility program (CSR) by launching and contributing to various initiatives.

In this regard, and following stc’s corporate values and keenness to deliver on its commitment to maintain its pioneering position as part of the social fabric in Kuwait, this year the Company launched a series of campaigns and initiatives in collaboration with various charitable organizations, as well as institutions in the government and private sectors respectively. The objective of these various initiatives was to make effective and positive contributions in the society that spread awareness on important causes that impact the community. This has provided the Company with an opportunity to enhance its outreach to the local community and tackle key issues with a primary focus on health, the environment, entrepreneurship, sports, and education.

This year, stc’s CSR program was also narrowly focused on the Company’s environmental, social and governance consideration that was expanded further during 2022. Hand in hand, stc’s working teams assure compliance with the latest trends towards adhering and evaluating the implementation of the ESG factors to protect Company’s stakeholders, manage its social capital, preserve the natural resources and encourage waste reduction.

Hence, as a pioneer in Kuwait’s telecom and digital solutions sector, stc will continue to contribute through its rich, diverse, and widespread program with the sole objective of creating a positive and sustainable impact in the local community. This approach falls in line with stc’s vision to back and support the community by implementing initiatives and events that align with its robust social responsibility framework.

Appreciation

On behalf of the Board of Directors, I would like to thank His Highness, the Amir Sheikh Nawaf Al-Ahmad Al-Jaber Al-Sabah, H.H. the Crown Prince Sheikh Meshaal Al-Ahmad Al-Jaber Al- Sabah, H.H. the Prime Minister Sheikh Ahmad Nawaf Al-Ahmad Al-Sabah 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.

I would also like to express my appreciation and gratitude to all stc family members for their significant efforts, dedication, and great sacrifices during 2022. Furthermore, I would like to highlight their ongoing enthusiasm and dedication to making stc a fascinating successful company during a time when the global economy has been greatly impacted. I would like to thank our loyal customers in particular for their continued trust in stc, which motivates us to provide the best services of the highest quality possible. Our heartfelt gratitude to our valued shareholders for their ongoing support and confidence in us.

The outstanding financial performance with new revenue streams and sustainable growth enabled stc to achieve its strategic objectives and maintain its strong financial solvency in the telecom market. Mr. Mohammed Mubarak Al Faran

Overview,

The strong financial results of Kuwait Telecommunications Company (stc) for the FY2022 demonstrated Company’s resiliency and efficiency in achieving its corporate strategic objectives in addition to the strong financial plans designed to support its operations. This has been also achieved along with the robust financial results in terms of revenue, profits, and solid cash flows. Therefore, stc was keen to implement its corporate strategy focusing on the digital transformation, capturing business opportunities and expanding Company’s activities in the enterprise sector. Accordingly, in April 2022, stc completed its acquisition on the entire share capital of E-Portal Holding Company and its subsidiaries - a leader in the ICT field with a value added customer base from both the private and government sectors. This acquisition was mainly driven by stc’s objective to expand its operating model, offer comprehensive services and provide integrated solutions in the field of information technology as well as advanced technical and digital solutions for the enterprise sector. In addition to strengthening stc’s internal ICT capabilities in line with the recent rapid global developments, we believe that this acquisition is also considered an integral opportunity to expand stc’s business scope of work in Kuwait, and share the expertise and experiences between the working teams of our subsidiaries.

stc’s internal policies and financial plans that have been implemented in 2022 are based on several programs, such as cost optimization, reaching operational efficiency at the lowest costs to achieve higher profitability whilst ensuring the same quality of services. This was also accompanied with the continuous investment in its infrastructure to upgrade its digital services as a key factor in guiding stc towards sustaining its leading position in the telecom and ICT field. Driven by stc’s commitment to create value to shareholders, exceed customers’ expectations, and meet the investment community’s outlook, we always strive to build the Company’s financial strategy in a way that serves the best interest of stc’s strategic expansions. The harmony in implementing the Company’s operational policies, corporate strategy and financial strategy allowed stc to stand out among its rivals in the telecom market in terms of its operational performance, and maintaining a strong level of cash flow. The latter has, in turn, preserved stc’s strong solvency position and provided the opportunity to achieve new streams of revenue through targeting new opportunities in the enterprise sector.

In 2022 stc was keen to implement the industry’s international best practices and adhere to the highest level of transparency with the current and potential investors. stc also ensures the application of corporate governance laws in all of the Company’s activities driven by the full transparency principle and preserving the equality between Company’s shareholders and the investment community. Accordingly, for the third consecutive year in a row, stc was ranked the 1st as Kuwait’s Leading Corporate for Investor Relations and amongst the top 5 companies in the Middle East, demonstrating its great efforts in fulfilling the needs of the investment community in an efficient, transparent and timely manner to meet the global best practices in this field.

Solid Financial Performance

I am pleased to announce that stc succeeded in reaching the desired results and strengthening its financial position during 2022, which was reflected in achieving good levels of revenue, EBITDA, EBITDA margin, and net profit throughout the challenging market conditions and strong competition. Whereby, stc’s perseverance to expand its services and strengthen its position in the ICT field in addition to leveraging on its specialized arms to provide the best integrated communications information solutions and cutting-edge technical solutions have also significantly contributed to its solid financial results for the FY2022. Additionally, stc’s determination to implement its digital transformation strategy, leverage on its 5G network capabilities and offer a wide range of the smart packages, designed to serve the consumer sector, was critical in rising the demand for its traditional communications and digital services. As a result, stc was able to achieve a notable growth in revenue during 2022.

For the fiscal year ended in 2022, stc generated good consolidated financial achievements driven by the intense demand for the digital platforms and data services, particularly from the enterprise segment and the integrated business solutions. Whereby, stc reported the highest total revenue since inception which grew by 13.5% reaching KD 336.4 million at the year ended 31 December 2022. stc also achieved good levels of EBITDA reaching KWD 82.0 million in 2022, despite the high marketing and sales charges brought on by the market. Accordingly, stc’s EBITDA margin reached 24% in 2022, with a net profit of KD 33.2 million (earnings per share 33 fils) in 2022 compared to KD 44.9 million (earnings per share 45 fils) in 2021, in which the decline in net profit is due to the nonrecurring and extraordinary gains from legal claims in 2021.

stc’s robust financial strategy is reflected by the Company’s clear and accurate investment capital decisions that have been taken since launching the 5G network in 2019. Whereby, stc’s total capex spending reached KD 18.5 million, representing 5.5% of stc’s total revenues in 2022, compared to KD 27.4 million representing 9% of stc’s total revenues in 2021. On the other hand, stc’s total assets reached KD 424.4 million in 2022. In addition, Company’s total shareholders’ equity grew by 2% to reach KD 241.4 million, with a book value of 242 Kuwaiti fils per share. Furthermore, stc’s low debt to equity ratio of 0.10 as of 31 December 2022 compared to its peers in the telecom industry demonstrates the Company’s strong solvency position within the telecom industry in MENA region.

Financial Strategy

Driven by the global and regional economic conditions, market competition and industrial outlook, stc ensures the continuous review and update of its financial strategy to help the Company cater customers’ needs and create value to its shareholders. Over the past few years, the consistency of stc’s strategic and financial decisions were reflected in the Company’s diligence to invest in its human capital, strategic business units and internal capabilities to offer a huge basket of products and services to the consumer and enterprise sectors.

In this regard, stc completed several strategic projects that are backed up by the digital solutions in line with the Company’s strategic and financial objectives to enhance its efficiency and control over its operations in addition to reaching excellence in the treasury management processes. stc has also successfully integrated the financial systems with its subsidiary Solutions by stc , which has contributed to reducing operational costs, and providing more opportunities to enhance its financial efficiency. Moreover, the flexible operating model of the group (stc and its subsidiaries) also contributed to boost profitability and improve the Company’s internal capabilities in the most effective way in terms of cost restructuring and optimization. Furthermore, the ERP integration of solutions by stc, the establishment of the automated dashboard designed to monitor the operational performance of each unit at stc and its subsidiaries, the implementation of the automated CPM tool and the strategic business analysis of the payment mechanism are considered the key achievements of stc that significantly contributed to enhancing its profitability. Not to mention the restructuring of its internal procedures and adopting the best digitization processes to control stc’s expenses and detailed financial performance prior to the preparation of Company’s consolidated results.

Moving forward

After the significant achievements resulted from the implementation of stc’s 2020 “AHEAD” strategy over the three past years, which focused on expanding Company’s product offerings and services, stc is eager to launch its 2023 “LEAD” strategy for the next three years focusing on market leadership through expanding its digital services and utilizing its efficient and digital operating model. stc ensured that its “LEAD” strategy and business plans are developed based on the Company’s healthy cash position reaching KD 63 million at the end of 2022. Subsequently, stc will keep on screening and hunting developed strategic potential value-creating digital prospects aimed at elevating Company’s market position in the telecom and ICT market, contribute to the Kuwaiti outlook of building up a new digital economy and aid the Company in implementing the digital agenda within its daily operations.