Investors Presentation

Kuwait Telecomunications Company K.S.C.P

Investors Presentation

Kuwait Telecommunications Company K.S.C.P.

9M- 2020

Table of content

stc’s History in Brief 3

Key Milestones 4

Vision, Mission & Values 5

Shareholder’s Structure 6

Population & Penetration 7

Competitive Strengths 8

Our 2020 Strategy 9

Market Share 10

Financial Results 11

Cash Dividends 15

Stock Performance 16

Appendix 18

Appendix 19

Kuwait Telecommunications Company (stc) is a Kuwaiti shareholding organization fused as per Amiri Decree No. 187 on 22 July, 2008, to work and deal with the third GSM versatile system in Kuwait according to Law No. 2 of 2007. Appropriately, stc propelled its tasks in December 2008 and the shares of the company were listed on Boursa Kuwait on 14 December 2014.

It is a world-class computerized pioneer giving imaginative administrations and stages to clients and empowering the advanced change in Kuwait, and is an auxiliary of stc Group.

stc has quickly arrived at a pioneer position in the market through its client and representative driven system. Throughout a decade of excellence in service, transparency and proactivity, and as the fastest- growing and most advanced telecom operator with the largest 5G network in Kuwait.

Since 2008, stc’s accomplishments have transformed the Kuwaiti telecom market, including changing wireless pricing models and fees.

In 2016, stc entered the International Telecommunications Union (ITU).

In 2018, stc became the first network to offer its customers 5G service and to enable enterprises in mobility.

stc has invested in building the most advanced network, and proudly owns the largest number of sites covered by the 5G service in Kuwait.

On 6 May 2019, stc has acquired 100% of the share capital of the leading Internet Service Provider in Kuwait – Solutions by stc, formerly

stc’s History in Brief

Moving the World

for ward

Key Milestones

 Launches commercially

 stcabolishes incoming calls fees and other operators follow

 First Operator in the world to have all IP network

 stcintroduces high speed Mobile Broadband in Kuwait

 stclaunches innovative prepaid offerings and acquires 500K customers in one year

 Expands retail network and launches joint promotions with retailers.

 stcwins Comms MEA Best Telecom Finance Deal

 First to introduce Apple iPhone

 Strategic partnership with Manchester United

 First to introduce newest HSPA+ (42.2 Mbps) Broadband network

 stclaunches Elite Program for loyal, VIP and high value customers

 stcturns into

profitability during the fourth year of operation.

 stcstarts deployment of 4G LTE network

 Partnership with Real Madrid

 Listing on KSE

 Retained earnings turned to be positive

 Ranked 2nd in terms of revenue and subscriber market share

 Completes nationwide 4G LTE Coverage and awarded Best LTE deployment in the Middle East

 Number portability and stcacquires majority of ported numbers between operators

 The first in Kuwait to introduce the all-new (VoLTE) technology

 stcbranches network reached a total of 70 across Kuwait

 First to introduce the LTE Advanced

 Best Telecom Co. by Arabian Business

 Member of (ITU )

 Leading Corporate for IR

 Business Innovation in Risk Management

 Best Network

Development Award at 5G MENA

 stc Reap Three Accolades at ME Call Centre Awards

 Leading for Investor Relations in Kuwait 2018 - third in the MEA

 Wins "Advertising Creativity Award" at Arab Media Forum

 VIP Customer Service Award

 Won the "2017 Speedtest Award“ by Ookla

company

 Excellence in Governance Award

 Won the “Best Operator Network” from telecom world Middle East

 5G Innovator of the Year Awards

 stcwins Sharjah Gulf Top 10

Business Award 2018

 Acquisition of Qualitynet

 Launched 5G services in June 2019

 stcand Huawei sign MOU to develop 5G services

 Launches the new brand stc

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

 stc Group was ranked the 1st in the MENA region, by Forbe’s "Global 2000"

list

 Leading for Investor Relations in Kuwait 2020 – Top 5 in the MENA region

 Rebrands Qualitynet to Solutions by stc

Vision, Mission & Values

Vision

A world-class digital leader providing innovative services and platforms to our customers and enable the digital transformation in Kuwait.

stc is keen to present its customers with numerous telecommunications opportunities with the goal of boosting existing relationships and providing customers with the best experience around the clock which will, in turn, earn us their trust.

Mission

Our Strategy outlines the key pillars to expand stc’s topline, create value with greater efficiencies, while preparing the company for the future:

 End to end digital experience

 Enhance core performance

 Reinvent customer experience at world class standards

 Leveraging on group synergies

Values

Shareholders' Structure

 Public Share holders consists of companies, portfolios, funds and individuals.

 The public shareholders are mix between local, regional and international investors.

 Independent Board member elected during the AGM on 16th of May 2016.

 stc KSA, the leading regional telecom operator, won the bid for third mobile license in November 2007, and paid USD 980 million for the license.

 stchas a management agreement with stc Group.

 stc increased its ownership percentage from 26% to 51.8%

through a VTO at the beginning of 2016.

 Currently, 4 out of 7 board members are representative of stc group.

 The Kuwaiti government holds 24% of stc’ capital through different governmental entities.

 Currently 2 out of 7 board members are representing the Kuwaiti government bodies.

52% 24% 24%

Saudi Telecom Kuwaiti Governmental

Entities Public Shareholders

Kuwait Population

& Penetration Rate

Population & Penetration

Source: Population as per PACI Kuwait, Penetration Rate as per ITU till 2018, while 2019 till September 2020 are calculated by stc IR

Current Population

4.8 Million Current Penetration

158%

3.4 3.5 3.6 3.7 3.8 3.9 4.1 4.2 4.4 4.5 4.6 4.8 4.8

57% 93%

133%

155% 152%

182%

205% 200% 194%

176% 172% 171%

158%

0%

50%

100%

150%

200%

250%

0.0 1.0 2.0 3.0 4.0 5.0 6.0

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Sep-20

Competitive Strengths

Relation-ship with stc group

stc(the largest telecom company in the region) will continue to be a major shareholder and will continue to benefit from being a member of stc group. Through this relationship, stc has access to technical support, industry best practice for provision of telecom services, as well as stronger purchasing power benefiting from joint procurement and coordination of regional initiatives.

Extensive distribution

channels

stchas an extensive, well-developed and increasingly sophisticated direct and indirect distribution network covering all parts of Kuwait. stc Inaugurates New Branches to its network amounting to a total of 93 branches across Kuwait

Modern &

Scalable Network

stcbenefits from having a modern and efficient network that is adaptable to emerging technologies. stc has the widest 5G service coverage in Kuwait reaching 100% of populated areas as it was also the first company in the Middle East to launch the testing process of 5G service.

Strong Branding

Since its launch in 2008, stc has built a valuable brand associated with excellence. By the end of 2019, stc has rebranded with the intention to unify its brand with stc Group’s companies to reflect its plan in creating new opportunities in addition to enabling the digital transformation through implementing stc Group’s 2020 new digital transformation strategy. Changing the brand name to “stc” positions the company among the most valuable brands in the Middle East.

Strong Growth &

Results

stc’s revenue market share reached 35%.

Customer- Centric Strategy

stcfollows a customer-centric strategy, which entails focusing on the communication needs of customers and providing differentiated service. This strategy positions stc as the only telecom provider in Kuwait that targets enhancing customer experience.

Our 2020 Strategy “AHEAD”

…..aims to position stc at the center of Kuwait’s digital ambitions and is built upon 5 strategic pillars

Anticipate Consumer

Needs

Harness Enterprise Opportunities

Excel Digital Experience

Accelerate Enabling Capabilities

Devote performance

Culture

I II III IV V

 Value growth strategy in the core

 Innovative service offering venturing in new services beyond the core

 End to end digital experience

 Technology as the enabler of digital transformation

 Corporate functions to enable the development of a sustainable business model

 Leveraging stc Group capabilities

Market Share

Total Subscriber Base in Kuwait (Mn) Telecom Sector Revenues in Kuwait (KWD Mn)

27%

Subscriber Market Share September - 2020

35%

Revenue Market Share 9M - 2020

32%

EBITDA Market Share 9M - 2020

34%

Net Profit Market Share 9M - 2020

4.5 5.2 5.9 6.41

7.6 7.7 7.7

7.2 7.1 7.4 6.9

0.8 1.1 1.6 2.2 2.4 2.5 2.4 2.3 2.2 2.0 1.8

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Sep-2020

Total Subscribers in kuwait (Mn) stc Subcribers (Mn)

627 684 690 717 753 788 799 841 860 859 600

61 94 137 182 239 277 279 288 288 294 209

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Q3-2020

Total Telecom Revenue in Kuwait (KWD Mn) stc's Revenue (KWD Mn)

Nine Months Period Ended 30 September 2020

 stc’s revenue declined by 3.1% during the 9M-20 to reach KD 209.0 mn compared to KD 215.6 mn recorded during the same period in 2019.

 EBITDA declined by 3.7% to reach KD 57.9 mn during the 9M-20 compared to KD 60.1 mn during same period last year.

 EBITDA Margin reached 27.7% during the 9M-20 compared to 27.9% during the same period last year.

 Net profit reached KD 27.5 mn (earning per share 55 fils) during the 9M-20 compared to KD 31.6 mn (earning per share 63 fils) during the same period last year.

 Shareholders' equity reached KD 217.8 mn at the end of Sep 2020 with a growth rate of 7%

compared to KD 203.6 mn at the end of Sep 2019.

Third Quarter Ended 30 September 2020

 stc achieved 13% growth in company’s revenue during Q3-2020 compared to Q2-2020

 stc achieved 16.3% growth in EBITDA during Q3- 2020 compared to Q2-2020

 stc achieved 23.7% growth in net profit during Q3-2020 compared to Q2-2020

 stc’s customer base has grown by 7.1% to reach 1.84 mn by the end of Q3-20 compared to Q2-20 .

Financial Results

Key Figures & Ratios 9M-2019 9M-2020 Change

Subscribers (Mn) 2.01

-8.6%

Revenue (KD Mn) 215.6

-3.1%

EBITDA 60.1

-3.7%

EBITDA Margin (%) 27.9%

-0.2pt.

Net Profit (KD Mn) 31.6

-13.2%

Net Profit Margin (%) 14.7%

-1.5pt.

EPS (Fils) 63

-13.2%

Equity (KD Mn) 203.6

7%

BVPS (Fils) 408

7%

2.01 1.84

Subscribers (Mn)

215.6 209.0

31.6

27.5

Financial Results - Highlights

*FY 2017 and 2018 numbers are based on the IFRS 15 ‘Revenue from Contracts with Customers “and IFRS 9 “Financial Instruments” which are effective from 1st

Annual and YTD-20

Revenue (KD Million)

Net Profit (KD Million)

CAPEX (KD Million)

EBITDA

277 279 288 288 294

216 209

2015 2016 2017 2018 2019 9M-19 9M-20

131 131.9

71.1 77.8 83.8

60.1 57.9

47% 47%

25% 27% 29% 28% 28%

0%

10%

20%

30%

40%

50%

2015 2016 2017 2018 2019 9M-19 9M-20 0 20 40 60 80 100 120 140 EBITDA (KD Million) EBITDA Margin (%)

39 38 33 31

59

37

21

14% 14%

12% 11%

20%

17%

10%

0%

5%

10%

15%

20%

25%

2015 2016 2017 2018 2019 9M-19 9M-20 0 10 20 30 40 50 60 70 Capex (KD Million) Capex to Sales Ratio

43.0 39.8 42.8

50.4

43.6

31.6 27.5

2015 2016 2017 2018 2019 9M-19 9M-20

Financial Results - Highlights ^Quarterly

Revenue (KD Million)

Net Profit (KD Million)

EBITDA

72.2

64.2

72.6

Q1-19 Q2-19 Q3-19 Q4-19 Q1-20 Q2-20 Q3-20

18.8 19.8 21.5 23.7

17.0 18.9 22.0

28% 27% 28% 30%

24%

29% 30%

0%

5%

10%

15%

20%

25%

30%

35%

Q1-19 Q2-19 Q3-19 Q4-19 Q1-20 Q2-20 Q3-20 0 5 10 15 20 25 EBITDA (KD Million) EBITDA Margin (%)

9.6 10.3

11.7 12

6.5

9.3

11.6

Q1-19 Q2-19 Q3-19 Q4-19 Q1-20 Q2-20 Q3-20

Financial Results - Highlights

Total Assets

Total Debt / Equity

Book Value Per Share

Shareholders Equity

*FY 2017 and 2018 numbers are based on the IFRS 15 ‘Revenue from Contracts with Customers “and IFRS 9 “Financial Instruments” which are effective from 1st

263 267 273 305

391 412

2015 2016 2017 2018 2019 Sep-20

0.186

0.266

0.314

0.384

0.431 0.436

2015 2016 2017 2018 2019 Sep-20

72

47

9 0 20 11

0.8

0.4

0.1 0.0 0.1 0.1

-0.5 -0.3 -0.1 0.1 0.3 0.5 0.7 0.9

2015 2016 2017 2018 2019 Sept-20

0 10 20 30 40 50 60 70 80 Total Debt (KD Million) Debt to Equity Ratio (x)

93

133

157

192

215 218

2015 2016 2017 2018 2019 Sep-20

Cash Dividends

10

30

40

50

2016 2017 2018 2019

Cash Dividends Per Share (Fils) Dividends Payout Ratio ^(%)

13%

35% 40%

57%

2016 2017 2018 2019

0.799 0.800 0.788

0.853

1% 4% 5% 6%

0.5 0.55 0.6 0.65 0.7 0.75 0.8 0.85 0.9

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

8.00%

9.00%

10.00%

Stock Price (KD) Div. Yield (%)

 stc has been distributing a growing dividends since 2016 reaching 50 fils in 2019.

 stc’s dividend payout ratio increased from 40% in 2018 to reach 57% in 2019.

 Based on the latest cash dividend payout and the stock price at the end of September 2020, the stock will be yielding

Stock Price vs. Dividends Yield

Rebased Index Since stc’s Listing Date 14 Dec 2014 – Stock Performance vs. KSE and Telecom weighted Indices

Stock Performance

PE (X) 15.27

PB (X) 1.93

Dividend Yield (%) 6.0%

Closing Price (KD) 0.840

Paid up Capital (KD Million) 49.9 Market Cap (KD Million) 419.5

60 80 100 120 140 160 180

STC's Stock Price (KWD) KSE Weighted Index Telecom Weighted Index

Reb as e d 100 In d e x

 Balance Sheet (2017 – September 2020)

 Income Statement (2017 – 9M 2020)

Appendix

Balance Sheet (2017– September 2020)

Balance Sheet 2017 2018 2019 September 2020

KD Mn KD Mn KD Mn KD Mn

ASSETS

Property and equipment 145.0 150.5 193.5 192.0 Goodwill and Intangible assets - - 26.2 25.3 Total non-current assets 145.0 150.5 219.7 217.3 Inventories 12.9 6.9 9.1 9.1 Prepayments and other current assets 4.7 4.0 5.4 3.4 Trade and other receivables 31.2 35.8 35.8 39.6

Contracts Assets 47.2 42.5 44.4 37.8

Cash and cash equivalents 32.2 65.7 76.7 104.7 Total Current assets 128.2 154.8 171.4 194.6

Total assets 273.2 305.4 391.1 411.9

Equity And Liabilities

Share capital 49.9 49.9 49.9 49.9

Statutory reserve 12.9 18.2 22.8 22.8 Voluntary reserve 12.9 18.2 22.8 22.8 Other reserves - (0.3) (0.6) (0.6)

Retained earnings 81.0 105.9 120.3 122.8

Total equity 156.9 192.0 215.4 217.8

Employees' end of service benefits 3.6 5.3 8.3 9.3 Islamic Financing Facilities - - 11.3 8.1 Trade and other payables - - 5.4 4.7 Total non-current liabilities 3.6 5.3 25.0 22.0 Islamic Financing Facilities 9.0 - 8.8 3.2 Trade and other payables 103.7 108.1 142.0 168.9 Total current liabilities 112.7 108.1 150.7 172.1 Total liabilities 116.3 113.4 175.7 194.1 Total equity and liabilities 273.2 305.4 391.1 411.9

Income Statement (2017– 9M 2020)

*FY 2017 and 2018 numbers are based on the IFRS 15 ‘Revenue from Contracts with Customers “and IFRS 9 “Financial Instruments” which are effective from 1st January 2018 and opted for full retrospective approach.

Income Statement 2017 2018 2019 9M-2019 9M-2020

KD Mn KD Mn KD Mn KD Mn KD Mn

Revenue 287.7 287.9 293.7 215.6 209.0

Operating expenses (145.5) (139.3) (148.5) (110.2) (107.2)

Staff costs (20.4) (21.7) (24.6) (17.7) (17.6)

Expected credit losses on trade & other receivables

and contract assets (14.2) (18.2) (12.7) (9.4) (10.3)

Depreciation and amortization (25.9) (25.6) (37.7) (27.3) (28.9) General and administrative expenses (38.7) (34.8) (25.3) (18.7) (16.0)

Finance costs (0.7) (0.1) (1.0) (0.5) (0.5)

Other income 2.7 4.9 2.2 1.6 0.7

Profit before BoD Remuneration, Contribution to KFAS and Zakat 45.0 53.0 46.0 33.3 29.0

KFAS (0.4) (0.5) (0.4) (0.3) (0.3)

NLST (1.2) (1.4) (1.3) (0.9) (0.8)

Zakat (0.5) (0.6) (0.5) (0.4) (0.3)

BOD remuneration (0.2) (0.2) (0.2) (0.1) (0.1)

Net Profit and other Comprehensive Income For The Preiod 42.8 50.4 43.6 31.6 27.5 Basic and Diluted Earnings per share (Fils) 86 101 87 63 55

Thank you

Investor Relations Department:

: [email protected] : +965 5000 1911

: www.stc.com.kw

stc Kuwait

Kuwait Telecommunication Company (stc

)