STC looks to exit loss-making Axis Telekom

Saudi Telecom Company (STC) has confirmed that it has entered into negotiations to sell its subsidiary in Indonesia Axis Telekom after failing to generate the returns it had expected from the company.

STC owns 80.1 per cent shareholding directly and 3.725 per cent indirectly in Axis.

STC first invested in Axis in 2007 and again in 2011, with these investments STC envisaged that an exposure to fast growing emerging markets and under penetrated markets would provide a platform for future growth.

Since the acquisition of Axis, STC says that it provided significant operational and financial support to the operator and was actively involved in developing the business by supporting the Axis management with initiatives, which leveraged STC Group’s presence in multiple markets and implemented both revenue enhancing and cost reduction programmes.

STC said however, that the financial performance of the company has been poor and it has not been able to deliver growth as expected due to intense competition in Indonesia, a market with more than 10 mobile operators (five GSM, five CDMA and one WiMAX).

Last month, STC recognised a realized loss of SAR 705 million (US$188 million) on the investment.