PIF inks deal to acquire stake in stc’s TAWAL for SAR 8.7B, creates world's largest tower company

Logo of stc and Public Investment Fund (PIF)

stc Group signed, on April 21, a sale and purchase agreement (SPA) with the Public Investment Fund (PIF) to sell 51% of Telecommunication Towers Company Limited (TAWAL) for cash.

In a statement to Tadawul, the telecom operator said that the agreements were signed to transfer the ownerships of TAWAL, PIF-owned Golden Lattice Investment Co. (GLIC), which owns and operates 8,069 telecommunications towers in the Kingdom, Prince Saud bin Fahad bin Abdulaziz, and Sultan Holding Co. under a new entity.

Accordingly, the shareholding of the new entity will be as follows:

TAWAL and GLIC will be merged to form the region’s largest telecom tower company to best serve consumers.

stc aims to recycle capital while retaining stakes in strategic assets of qualitative value, while the newly merged entity will become one of the largest tower companies in the world.

The new company will own and manage a portfolio of around 30,000 towers across five countries.

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TAWAL’s full enterprise value on a cash- and debt-free basis was estimated at SAR 21.94 billion ($5.85 billion).

GLIC was valued at SAR 3.03 billion ($807 million), representing 100% of enterprise value on a cash- and debt-free basis.

The cash consideration is estimated to be SAR 8.7 billion, stc said, noting that the final cash consideration will be based on the final accounts of debt, cash, and working capital at the completion of the transaction.

The agreements include pre-conditions for closing the deal, including - but not limited to - obtaining the approval of the general assembly of stc, the Communications, Space and Technology Commission and any other regulatory and commercial conditions.

Parties of the transaction include stc, PIF, TAWAL, the new entity, HRH Prince Saud bin Fahad bin Abdulaziz and Sultan Holdings Co.

The purchase of GLIC will be financed through an exchange of shares between the new entity and shareholders of the GLIC. The transfer of TAWAL ownership under the new entity will be through a share swap.

stc will inject approximately SAR 533 million in the new entity’s capital to maintain its 43.06% ownership.

The book value of TAWAL stands at SAR 3.17 billion as per stc’s consolidated financial statements for the year ended Dec. 31, 2023, the statement added.

There is no financial data available on GLIC as it was formed recently.

The transaction enables the creation of a new national champion in the telecommunications sector which will combine the ownership of the assets of TAWAL and GLIC. This is in line with stc’s strategy related to growth and expansion by retaining ownership in strategic value-add assets, such as tower infrastructure companies, with strong growth and expansion potential.

The financial impact is expected to be positive and material with any gains from this transaction will be reflected on stc’s consolidated statement of profit or loss, the telecom operator noted.

The equity method will be used to account for stc’s investment in the new entity.

The company also added that the financial impact will not be reflected, and the accounting method will not be changed for stc’s investment in the new entity, unless the necessary approvals are obtained and all transaction procedures are completed.

The proceeds generated from the sale of 51% of TAWAL will be used to support stc’s growth and expansion strategy along with maximizing its shareholders’ return through increasing and diversifying stc’s investments and seizing the expected growth opportunities in the telecommunication & technology sector in the Kingdom and internationally.

PIF is considered a related party being the largest shareholder in stc with a 64% stake. The following members of the board of directors have an indirect interest being representatives of the PIF: Khaled Biyari, Yazeed AlHumied, Rania Nashar, Arndt Rautenberg and Sanjay Kapoor. Therefore, this transaction shall be subject to stc’s general assembly’s approval, which will be scheduled at a later date in accordance with the relevant laws and regulations.

Any material developments will be announced in due course, stc indicated.

According to data compiled by Argaam, stc received, in October 2022, a non-binding offer from the PIF to acquire 51% of stc's fully-owned subsidiary TAWAL.

In a press release by PIF and stc, Head of MENA Direct Investments at PIF, Raid Ismail, said: “Today's announcement is a significant milestone for the telecommunications industry in Saudi Arabia and the wider region. By bringing together the assets of GLIC and TAWAL, we will establish a consolidated platform on which the telecommunications sector can flourish and give people a better experience to best connect communities and businesses. It is also in line with PIF’s strategy and the Saudi Vision 2030. Fast, reliable and accessible connectivity is a key enabler of growth and a cornerstone for the society, and these agreements mark a major stride towards a more interconnected digital future.”

Meanwhile, Group Chief Investment Officer of stc Group, Motaz Alangari, stated that these agreements are part of stc Group’s continuous endeavor to grow and maximize value in the most sustainable manner, by recycling capital while retaining ownership in strategic value-added assets to benefit from the return on these assets and enable expansion into new domains. Today’s announcement is in line with stc Group’s strategy and the pivotal role that the group is playing in accelerating the digital transformation of society and the economy in Saudi Arabia and the region. Combining TAWAL and GLIC is a stepping-stone to consolidating the Saudi tower market and driving further efficiencies and operational excellence to deliver superior experiences and value for customers, he added.

The new entity is expected to significantly enhance consumer experience and network coverage, as well as improve connectivity and mobile internet speeds by consolidating Saudi Arabia’s tower assets. It will also deliver operational efficiencies, help drive wider innovation in the telecommunication sector across the region and globally, and support development of a more efficient and frictionless business environment, Alangari indicated.

The agreements mark PIF and stc’s ambition to integrate and strengthen the Saudi telecommunication infrastructure sector to unlock its consolidated potential. This follows TAWAL’s acquisition of infrastructure assets in Bulgaria, Croatia and Slovenia, making this Saudi national champion the region’s largest independent tower company. The new merged entity will possess approximately 30,000 mobile tower sites and will become one of the largest tower companies globally with estimated annual revenues of approximately SAR 4.8 billion.

The deal aims to ensure the resilience and international competitiveness of a critical national digital infrastructure asset and aligns with the goals of Vision 2030. It also builds on PIF’s and stc Group’s strategy to enhance Saudi Arabia’s innovation capabilities as a globally competitive hub for the technology, media and telecommunication sector, the press release said.