The Saudi Integrated Telecoms Company (SITC) has had its license cancelled and is to be dissolved under a royal decree, according to a statement carried by the country’s stock exchange.
The financially troubled telecoms firm, which launched an initial public offering (IPO) in 2011, has been given six months to liquidate.
The royal decree was received by Saudi Arabia's Capital Market Authority (CMA) from the Ministry of Telecommunications and Information Technology, according to the statement posted on the Tadawul website.
A committee involving members from the local Ministry of Commerce and Industry, CMA, and the Communications and Information Technology Commission (CITC) will oversee the liquidation, according to the statement.
It is understood that priority will be given to repaying SITC shareholders, excluding its founders, in the liquidation of the company.
Prioritizing debt repayments to shareholders over founders is uncommon in Saudi Arabia, experts told Al Arabiya.
“This is definitely an exceptional case. Even the way in which authorities interfered in the matter and forced the [liquidation of the company] makes it an exception to the rule,” lawyer Mohammed al-Dhabaan, a representative of the Business Software Alliances (BSA), said in an interview with Al Arabiya TV.
There are still unanswered questions as to how the company will be wound up, Mr al-Dhabaan said.
“The mechanism by which the committee will dissolve the company and repay involved parties is still unknown,” he told Al Arabiya. “The decree did not discuss what action is to be taken if the founders refuse to accept the decision”.
SITC was backed by Hong Kong’s PCCW, which holds interests in telecoms, media and other businesses. It also had “marketing and administrative” support from the Mawarid Group of Companies, a Saudi Arabian conglomerate, according to previous press reports.
A separate company, Integrated Telecom Company (ITC), is part of the Mawarid Group. A prominent disclaimer was published on ITC’s website on May 5, distancing itself from SITC. “ITC is a separate legal entity which operates completely and independently from SITC with absolutely no impact on ITC's business continuity to provide customer support and services over its national & international telecom infrastructure,” the disclaimer said.
Analysts told Al Arabiya that SITC had faced difficulties in getting its services off the ground. Its business plan included high-speed mobile broadband networks known as long-term evolution (LTE).
“SITC had the backing of a credible international telecoms player, Hong Kong-based PCCW, and some interesting ideas around deploying fibre and LTE networks to address the large and fast-growing market for data services in Saudi Arabia,” said Matthew Reed, the principal analyst for the Middle East and Africa at Informa Telecoms and Media.
“But SITC’s failure to get its plans off the drawing board seems to demonstrate the difficulties of going up [against] the bigger and more established players in Saudi Arabia, STC and Mobily. Zain and Etihad Atheeb have struggled as new entrants in the Saudi mobile and fixed markets respectively, for example.”
Last September, SITC was hit by a CMA fine of 200,000 Saudi riyals, for allegedly violating markets and listing rules.
It undertook a 300 million riyal initial public offering (IPO) in 2011, which was reportedly more than twice oversubscribed. Trading in SITC shares was suspended in February, with the last recorded share price at 24.3 riyals, after Saudi Arabia's CITC requested the termination of SITC’s license.