Saudi Arabia’s STC board recommends 150% capital increase through bonus shares

The move is expected to help the telecom operator expand its operations in the region

STC, listed on the Tadawul, is majority owned by the Saudi sovereign wealth fund Public Investment Fund. Reuters

The board of directors of Saudi Telecom Company (STC), the kingdom’s biggest mobile operator, recommended increasing the company’s capital by 150 per cent to 50 billion Saudi riyals ($13.33bn) through the offering of bonus shares to support its expansion in the region.

Shareholders will be granted 1.5 bonus shares for every share owned on the eligibility date as part of the transaction, the company said in a statement on Sunday to the Tadawul stock exchange, where its shares are traded.

The increase will be done by capitalising 30bn riyals from the company's retained earnings and will support STC's “growth and expansion strategy along with maximising its shareholders’ return”, it said.

The deal is also expected to help the company to diversify its investments and seize growth opportunities in the telecommunication and technology sector in the kingdom and across the region.

“In case of bonus shares fractions occurrence, STC will collect all fractions in a single portfolio to be sold at market price [and] the value will be distributed to eligible shareholders each by their ownership percentage during 30 days from the allocation of new shares to each shareholder,” it said.

The capital increase and the bonus share distribution are subject to the approval of authorities as well as the company's extraordinary general meeting, the date for which will be announced later.

STC is majority owned by the Saudi sovereign wealth fund Public Investment Fund with a 64 per cent stake. The PIF raised $3.2bn from the sale of a 6 per cent stake in STC last year.

“The capital increase represents an important milestone for STC being one of the biggest listed companies in the Saudi market, as this capital increase is the largest in the history of the Saudi market,” chairman of the board, Prince Mohammad Al Faisal, said in a statement posted on STC's website.

“This increase will undoubtedly lead to enhancing the liquidity in the company’s shares and make them more accessible to a wider group of investors.”

The company's current “dare” strategy is based on four main pillars: expanding in scale and scope, enriching the customer experience, enabling digital transformation, and accelerating its assets monetisation, he added.

Separately, STC's board also recommended amending the company’s dividends policy amid the capital increase plan.

Under the proposal, the three-year dividend policy, in place since the fourth quarter of 2021, would be cut from a 1 riyal payment a share per quarter to 0.40 riyals.

“STC will consider paying additional dividends, subject to STC’s board of directors’ recommendation to the general assembly after evaluating STC's financial position, future expectation and capital requirement,” it said.

The latest announcement comes as the company continues to expand its operations in the Arab world’s largest economy.

Last month, STC said it is teaming up with China's Alibaba Group to establish a cloud computing venture in Saudi Arabia at an investment of 894 million riyals.

Other firms including eWTP Arabia for Technical Innovation, Saudi Company for Artificial Intelligence and Saudi Information Technology Company are part of the joint venture.

Saudi Arabia is implementing its Vision 2030 strategy, which aims to steer its economy away from oil dependence. One crucial pillar is technology, with the kingdom projected to spend about $33bn on ICT development in 2022, the International Data Corporation said in an April report. The sector grew 8 per cent between 2019 and 2021.

The PIF is also partnering with STC to establish an Internet of Things company.