1. FLASH
STC Acquires Bravo: Is It a Good Fit for STC's Enterprise
Business?
Krishna Chinta
IN THIS FLASH
This IDC Flash analyzes the possible outcome of Saudi Arabia's incumbent operator, Saudi Telecom
Company (STC), acquiring full ownership of the country's only push-to-talk (PTT) mobile service
operator, Bravo (the brand under which the Public Telecommunication Company operates). This
document analyzes the significance of the transaction for STC's Enterprise Business unit, as well as
STC's go-to-market strategy for the coming years.
SITUATION OVERVIEW
STC was an obvious choice for Bravo, as it is already under a build-operate-transfer (BOT) agreement
with STC to provide instant and group wireless communication services over Integrated Digital
Enhanced Network (iDEN) technology in the Specialized Mobile Radio (SMR) 800MHz frequency
owned by STC. Bravo was established in 2005 to cater to the PTT needs of both government
organizations and enterprises with tailor-made service offerings. To this end, Bravo entered into a 15year BOT agreement with STC in 2005.
Bravo has slowly evolved its services from basic PTT to automatic vehicle location services,
applications for field task assignment and for measuring KPIs, a bar code-enabled inventory
management tool, Bravo Alert (an SMS alert system suitable for the healthcare sector), and control
room services. The company targets companies from the construction, real estate, oil and gas, and
utility sectors, and its clients include Aramex, Danone, Yamamah, and AlSafi. Bravo expanded its
sales points in select cities within the kingdom, including Riyadh, Jeddah, and Dammam, and invested
in developing its own professional and after-sales support capabilities.
Although this resulted in consistent growth until 2010, demand for Bravo's services has been declining
since due to a lack of a clear value proposition. At the end of 2012, the company had less than
200,000 subscribers and a revenue base of $64.9 million, which represents a 6% decline from the
previous year. A constant drop in the top-line and unsustainable profitability has compelled Bravo's
parent company, Wataniya Telecom, to sell its 100% holdings in the company to STC. Although this is
a logical step forward for Wataniya Telecom, from STC's perspective, it remains to be seen whether
Bravo will be a strategic fit for the telco's enterprise business.
FUTURE OUTLOOK
IDC believes that the consolidation of Bravo's and STC's business operations will have a positive
impact on the mobile market structure in Saudi Arabia. It could further contribute to the development of
the mobile market ─ something that the regulator, the Communication and Information Technology
Commission (CITC), intends to achieve.
November 2013, IDC #CEMA20321

2. STC's monopoly in the mobile market was broken with the launch of Mobily in 2004, and its market
position was further undermined with the entrance of Zain Saudi Arabia in 2008. The proposed launch
of three mobile virtual network operators (MVNOs) — for details, see What Could Be Expected of the
Three Players Shortlisted for MVNO Licenses in Saudi Arabia?, IDC #CEMA19887 — will further
intensify the competitive dynamics of the mobile market. These developments highlight the need for
micro-segmentation and highly targeted service launches, and this merger will prove to be a good
starting point for STC in that direction, especially from the enterprise business perspective.
This acquisition will provide STC with the flexibility to take PTT to new sectors, such as transportation
and logistics, retail/wholesale, healthcare, and education, as part of its vertical services strategy.
Additionally, the professional and technical service capabilities of Bravo will bolster STC's own delivery
capabilities. Overall, this acquisition will accrue the following benefits for STC:

Synergies: In the case of Bravo's merger with STC, synergies do naturally exist. For example,
Bravo's Al Masar AVL service could further strengthen STC's AVL offering. Bravo's PTT
offering could distinguish STC among business mobile service providers in terms of tailormade services. Additionally, Bravo's datacenters, control room services, business mobile
services, and professional services will compliment STC's delivery capabilities in the
enterprise segment.

Go to Market: In view of STC's strong brand image in the market, the company might simply
decide to consolidate all of Bravo's capabilities and completely dilute the brand. However,
STC could also decide to operate Bravo as a sister concern by putting all vertical services
offerings under that brand. In either case, STC should launch a marketing campaign to create
awareness of the potential benefits of PTT offerings and its newly enhanced ability to offer
vertical market solutions.
Overall, this merger will have a positive impact on the vertical services market. The intensifying
competition in the mobile segment will eventually pave the way for services innovation, especially
around mobile data, machine-to-machine (M2M), and vertical-market solutions. This will eventually
increase the significance of service bundles and vertical-specific offerings in the Saudi market.
©2013 IDC
#CEMA20321
2

3. About IDC
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