Saudi Telecom Co. (STC) has joined the growing group of Middle East carriers that are acquiring international operations, by investing $3.05 billion in a Malaysian holding company that controls service providers in India and Indonesia as well as Malaysia.

STC, which is coming under increasing competitive pressure in its home market, had stated earlier in the year it was prepared to raise billions to make investments in Africa and Asia/Pacific, something many of its fellow Middle Eastern carriers have already done. (See Mideast Carriers Line Up Credit.)

Now it has pulled the investment trigger with plans to pump $3.05 billion into Binariang GSM Sdn. Bhd., which has just taken control of Malaysia's national operator Maxis Communications Bhd.

STC's investment in Binariang gives it a 25 percent stake in fixed and mobile operator Maxis, and a direct 51 percent stake in PT Natrindo Telepon Seluler (NTS), the mobile operator in Indonesia owned by Maxis. The move also gives STC a stake in the rapidly expanding Indian mobile market because Maxis holds a 74 percent stake in Aircel Ltd. (See NSN Wins Aircel Contract, Maxis Snaps Up Aircel, and Indian Mobile Set to Spread.)

In a prepared statement, STC chairman Dr. Muhammad Bin Suliman Al-Jasser said: "This transaction is consistent with our strategy and objective to expand into high growth emerging markets not only to diversify our revenue to countries outside of Saudi Arabia but also to generate sustainable long-term growth for the future."

STC believes this investment will help it achieve its aim of generating 10 percent of its revenues from overseas markets by 2010, and help Maxis negotiate better terms with its vendors and wholesale service providers. In 2006, STC generated $9 billion in revenues and $4.4 billion in EBITDA (earnings before interest, tax, depreciation, and amortization).

Investing in emerging markets is all the rage currently as carriers struggle to find growth opportunities in saturated, developed markets and come under increasing competitive pressure. (See Vodafone Tops 200M, Talks M&A, Vodafone Wins Battle to Buy Essar, Mobile Subs Soar at Orascom, Top 10 Emerging Mobile Markets , and Emerging Markets See More Mobile M&A.)

STC has certainly been feeling the pinch since it lost its monopoly position in Saudi Arabia in May 2005, when Etisalat subsidiary Etihad Etisalat Co. (Mobily) launched its GSM service. Mobily has since launched 3G services, and, with around 5 million customers, now commands between 25 percent and 30 percent of the Saudi mobile market. (See Mobily Uses HSDPA.)

STC now faces the prospect of further mobile market share erosion once Mobile Telecommunications Co. (MTC) fires up the country's third GSM network. MTC expects to launch its mobile services early in 2008. Fixed-line competition is also being planned by the Saudi authorities. (See MTC Bids $6.1B for Saudi Mobile License and Groups Bid for Saudi License.)

— Ray Le Maistre, International News Editor, Light Reading