| Element List | Explanation |
|---|---|
| Announcement Detail | Under the generous patronage of Ministry of Finance, Ministry of Communications and Information Technology, and Communications and Information Technology Commission, with a view to support the telecommunications sector and to stimulate the investment in developing the infrastructure in the Kingdom and in consistent with the National Transition Program 2020 and contribution to achieving the objectives of the Kingdom vision 2030. |
Saudi Telecom Company (the Company), has signed an agreement on 15/12/2018 with government agencies (Ministry of Finance, Ministry of Communications and Information Technology and Communications and Information Technology Commission) for a comprehensive and final settlement of the outstanding dispute related to commercial services provisioning fees provided by the Company and the licenses fees granted to the Company for the period from 1/1/2008 till 31/12/2017. In return, the Company shall develop the infrastructure of its network according to the terms and conditions specified in the agreement through the injection of capital investments during a period of three years starting from the current year. The agreement contains detailed mechanism specifying targeted performance indicators. The agreement will contribute towards the development of infrastructure in line with Company's strategy to reach the best performance of its network coverage and speed.
Concerning the determination of the financial impact resulted from signing the agreement and settling the existing dispute; which is expected to be positive; the company will use provisions already allocated in its financial statements over the past few years to meet large part of the capital investments planned under the agreement, however, the current positive financial impact cannot be measured reliably because it depends on the implementation of the agreement over the three years period and the expected revenues from such investments.
The agreement also included an amendment of the mechanism for calculating the commercial services provisioning fees starting from 1/1/2018. The fees will be 10% of net revenues from the telecommunications services provide by the Company instead of the current calculation mechanism (i.e. 15% of net revenues from mobile services and 10% of net revenues from fixed line services and 8% of net revenues from data services).
Concerning the determination of the financial impact on amending the mechanism for calculating the provisioning fees during the current year 2018, and taking into account the provisions allocated to it during the year, it is expected to have a positive impact on the financial results of the Company during the fourth quarter of 2018. Part of those provisions will be used to cover the differences resulted from the modified mechanism and the remaining part, which is about 500 million Riyals, will be reversed, as it is not needed.
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