1. Strictly ConfidentialThe Future of Broadband MENA Region and KSA Paris, France September 2011 This report is confidential and intended solely for the use and information of the audience to whom it is addressed.

2. Broadband as an Economic CatalystDrivers for Broadband GrowthReaping the Broadband BenefitsThe STC Broadband Story 1

3. Globally fixed and mobile broadband uptake has beensignificantly increasing with a shift towards high-speed access Global Fixed Broadband Subscribers Global Mobile Broadband Subscribers (2008 - 2015) (Million) (2008 - 2015) (Million) 715.2 680.4 3,159 +9% 8% +14% 638.0 7% 594.6 7% 2,752 550.9 7% 25% +25% 23% 502.9 7% 20% 17% 2,322 6% +33% 444.8 15% 6% 13% 1,887 384.8 19% 18% 18% +5% 11% 20% 6% 20% 10% 21% 22% 1,433 23% 976 56% 54% 52% 50% +6% 60% 58% 627 60% 61% 430 2008 2009 2010 2011 2012 2013 2014 2015 2008 2009 2010 2011 2012 2013 2014 2015 Other FTTx Cable DSLNote Other includes Fixed Wireless Access and EthernetSource: Ovum 2

4. The Middle East is no exception to the rule with a phenomenaldouble-digit growth in fixed and mobile broadband subscribers Middle East Broadband Subscribers Middle East Mobile Broadband Subscribers (2008 - 2015) (Million) (2008 - 2015) (Million) 16.9 2% +15% 72 15.4 7% +23% 2% 66 7% +16% 13.6 2% 22% +6% +47% 58 7% 12.0 23% 2% 50 10.5 7% 2% 25% 9.2 6% 41 2% 6% 27% 7.6 30% 2% 5% 32% 2% 6.1 26 5% 35% 69% +20% 68% 40% 66% 64% 63% 12 61% 57% 54% 5 2008 2009 2010 2011 2012 2013 2014 2015 2008 2009 2010 2011 2012 2013 2014 2015 Other FTTx Cable DSLNote Other includes Fixed Wireless Access and EthernetSource: Ovum 3

5. In fact, countries with high broadband penetration seem to exhibithigher GDP growth rates Average Yearly Real GDP Growth (20 OECD Countries, 2002-2007) 3.37% Top Quartile Enrich lifestyles of +0.7% GDP Growth (%) Social communities by enabling 3rd Externalities intelligent technologies and 2.68% +1.0% Quartile enhancing social inclusion +1.1% 2.33% 2nd Quartile 2.31% Bottom Boost productivity and Quartile Economic enable new markets in a Externalities 7.8% 11.1% 15.4% 20.5% digital economy Average Broadband Penetration (%) 20 OECD countries were grouped into quartiles based on their broadband penetration between 2002 and 2007 Enable efficient resource Top quartile countries had an average yearly GDP growth that is 1.1% higher than utilization and reduce travel bottom quartile countries Environment requirements, generating World Bank report reveals the impact of broadband on growth in 120 countries from Externalities significant environmental 1980 to 2006. Analysis revealed that each 10 percentage points of broadband benefits penetration results in 1.21% increase in per capita GDP growth in developed countries, and 1.38% increase in developing countries National competitiveness as well seems to correlate with broadband penetration; MENA countries still rank below the intl averageSource: OECD 4

6. Policymakers are therefore increasingly regarding broadband as anessential catalyst to economic growth Policymakers on Broadband - Recent Announcements (2008 - 2010) I believe that America should lead the world in Universal Broadband Access is crucial for Britains broadband penetration economy Barack Obama, USA President Gordon Brown, UK PM Next generation broadband will be a critical enabler to Just announced biggest ever investment in Australian build new capabilities and transform our industries broadband really exciting, infrastructure for the future Lee Hsien Loong, Singapore PM Kevin Rudd, Australia PM Universal Broadband should be a basic right key to the future is next generation broadband Dr. Hessa Al-Jaber, ictQatar SG Mohamed Al-Ghanim, UAE TRA DG Broadband will bring improved innovation, High speed broadbandwill enable us to harness ICT competitiveness, growth and quality of life to Greece to improve productivity and competitiveness Costis Hatsidakis , Greece Transportation and Dato Seri Utama Dr Rais Yatim, Malaysia Minister of Communications Minister Information, Communications and Culture 5

7. Broadband as an Economic CatalystDrivers for Broadband GrowthReaping the Broadband BenefitsThe STC Broadband Story 6

8. Moving forward, market trends and technology evolution arereshaping the communication sector Market Trends Overview Convergence Dynamics Key Emerging Digital Practices Telephony, BB E-mail and VAS Search engines Mobile Voice Telecom IT CRM & Data, VAS ERP Bundles: quad-, triple-, e-Commerce and quad-play Media & 1 Communication Entertainment 2 Search & Applications IPTV 3 Infotainment VoD 4 Social Media Games Satellite 5 Shopping Mall The convergence between Telecom, IT and Media & Entertainment sectors has resulted in a complex marketplace consisting mainly of: Highlights Communication providers such as Telco operators, VoIP platforms and Instant Messaging applications Search & Online Application providers such as Google and Yahoo! Infotainment websites and services such as iTunes, CNN and Rotana Social Media websites and applications such as Facebook and YouTube Shopping malls such as Amazon and ebay 7

9. Today, broadband subscribers are not just looking for fastinternet, but the ability to run multimedia applications and VAS Advanced Applications over Broadband Percentage of European Residential Subscribers Purchasing Percentage of European Small Business Subscribers Broadband and VoIP For Advanced Applications Purchasing Broadband For Advanced Applications (%) (2009) (%) (2009) Audio / Media Telecommuting / 45% 61% Conferencing Teleworking Mobility 61% Instant Messaging 37% Audio / Media 45% Conferencing Desktop Video Calls 27% Voice to Remote Facilities 41% Multimedia 20% Instant Messaging 37% Web Conferencing 16% Collaboration Tools 24% Tele-Presence 10% Unified Messaging 22% & CommunicationsSource: IDC 2009 VoIP Survey 8

10. which is increasing the dominance of high-speed broadbandconnections Worldwide Consumer Bandwidth Requirements (2006 - 2011) (in % of Subscribers) 100% 11% 13% Highlights 15% 18% 20% FTTH/B Today, more than 40% of broadband subscribers have 25% 24% a connection of less than 23% 22% 2Mbps 20% Cable This landscape is expected 7% 8% 8% to rapidly shift to the favor of 11% 15% xDSL 10 Mbps + high speeds, with 77% of 16% 16% subs. expected to have a 16% 18% connection exceeding 2Mbps by 2012 21% xDSL 2 - 10 Mbps FTTH/B connections could reach around 20% of total 40% 40% 37% 32% broadband by 2012 23% xDSL 0 - 2 Mbps 2008 2009E 2010E 2011E 2012ESource: OVUM 9

11. Bandwidth hungry applications, such as IPTV and gaming, coulddrive demand for bundles of tens of Mbps INDICATIVE Bandwidth Requirements for Applications and Bundles Bandwidth Requirements by Application Bandwidth Requirements by Service Bundle (Kbps) (Mbps) 60 1 4 Downstream Comments Bandwidth 8 80-128 kbps 1-channel good voice 2 VoIP Channels Quality 6 200 - 2,048 kbps 1 Min download for a 10MB 34 Email email 0 2 4 Browsing & File 1024-4,096 kbps Few seconds wait for an 0 5 30 Transfer average webpage download 19 1 0 448-2,048 kbps E.g.: x-box live 0 2 Online Gaming 3 20 10 128-6,144 kbps Dolby Digital multi-channel 10 Audio Channels 3 3 3072-10,024 kbps 1 channel HD 1088*1080 Basic Bundle Intermediate Bundle Advanced Bundle Multiset IPTV MPEG-4 3072-10,024 kbps HD Video conference VoIP Channels Online Gaming Video Call Video call Email Audio Channels Internet Browsing & File Transfer HD IPTVSource: OVUM 10

12. Broadband as an Economic CatalystDrivers for Broadband GrowthReaping the Broadband BenefitsThe STC Broadband Story 11

13. Pressured by the commoditization of the connectivity due todecreasing prices Minimum Subscription Prices Comments (2008 - 2009) (In US$) 55 The increase in broadband bandwidth speeds is expected to increase the 48 48 demand for multimedia applications, such 43 41 as high-definition IPTV, video conferencing, interactive gaming etc 35 32 30 30 28 Parallel to the increase in demand, bandwidth prices are decreasing 19 To date, the average monthly tariff per 1 Mbps in most developed countries has already dropped to less than US$5 6 As a result, telecom operators connectivity revenue share is expected to Austria France Portugal Turkey Spain Italy decrease 2008 2009 Telecom operators globally are therefore recognizing the importance of content and applications as a source of future revenue growthSource: Broadband forecast pack 2009-14, Ovum 2009, Global Entertainment and Media Outlook 2009 12

14. Telcos will have to develop additional revenue streams beyondaccess Next Generation Broadband Applications Trends The need for high bandwidth increases as the amount of Faster user generated content increases Information Enterprises participating in the digital economy need User generated Exchange high speed bandwidth to exchange digital goods such as Content e-books High Definition and 3D TV Targetted & Interactive Video-On- Advertising Consumers increasingly demand the ability to engage in demand Real Time a virtual real-time experience, e.g. telepresenceCollaboration Enterprises can extend the reach and scope of their Online Gaming digital offering using real time collaboration, e.g. e-health Tele-medicine Intelligent Transport Solutions Next generation computing will be enabled by newVirtualization technologies which virtualize products and sell them as of Services services (e.g. cloud computing) Personal Storage Blue Cloud Cloud Computing 13

15. On the consumer front, IPTV and VoD1) in the MENA are expectedto represent the lions share of applications revenues MENA Broadband VAS Revenues VAS Drivers (2010 - 2014) (In US$ Million) 1,182 33 70 The telecom market in the MENA region is expected to follow the same trend as 111 more developed markets 891 24 Growth in IPTV is expected due to the 49 popularity of VOD, premium content and 92 467 interactivity 625 In fact, by 2014, roughly 10% of 32 16 76 325 broadband connections will be bundled with IPTV 401 19 9 213 Music The MENA regions large young 63 257 VOD population (72% of population under 35) 12 5 118 501 Gaming is a major driver for the growth in the 52 401 60 288 IPTV gaming and music markets 192 128 Online Advertising 2010 2011 2012 2013 2014 Share of Total Broadband Revenues (%) 2.6% 3.5% 4.6% 5.4% 5.8%1) Video on DemandSource: Digital Music Forecast 2009-14, Telco TV Forecast 2009-14, Global Entertainment and Media Outlook 2009, Parc 2009 14

16. IPTV applications and offerings span several content andmultimedia services IPTV Content Ecosystem IPTV Players Portfolio Benchmarks Premium content services Video Interactive entertainment and PPV VoD Pay TV educational games right on the TV set Shop for DVDs, books, cinema tickets, Games / lifestyle items and food News and information tickers on IPTV User Generated Content Entertainment One-time Online Purchase Games Gambling video channels and EPG Games Directory services offering local restaurants, hotels and hotlines search Music / Audio Streaming Music Music on Demand News Rich library of over 14,000 on-demand movies and TV shows Walled Garden Ability to purchase latest music and Advertising and movies from Verizons online store Commerce TV Shopping Video Yellow Interactive Ads Play interactive games such as fantasy Pages football and sudoku On screen horoscopes, weather, news, Text incoming phone calls and browsing Directory services TV to SMS On-screen News Tracker 15

17. OTT1) is also emerging as a major IPTV contender given its contentvariety, convenience, personalization, and low cost advantages Customer Needs Ample selection of content covering a Abundance of free content (Most OTT variety of genres (e.g. Movies, Sports, offerings do not require a subscription News ) as well as types (e.g. Movies, fee) Documentaries, Series ) Set Top Box not necessary Unlike in walled garden environments compulsory as content can be (traditional pay tv), OTT has no Content transported via devices existing at home boundaries except for rights Variety Lower Cost (Laptop, PC, Game Console, Mobile) User-Generated Content (UGC) delivered to Home media OTT Video Value Proposition Access of videos anywhere, anytime, Content aggregated from multiple from various devices as content sources including main studios and becomes fully portable broadcasters Increasing attractiveness of home media Ability to build a la carte sharing (personal content on TV, mobile, Convenience personalized content portals etc.) Personalization Lean forward attitude to media Seamless session handover between consumption in general devices Increasing popularity of on-demand, Attractiveness of bringing online services need to take control, and value of (eg UGC) on TV directly from internet interactivity Power of branded cross-platform & cross- Ability to offer widgets and apps over device ecosystems (eg iTunes, Tivo) open device standards1) Over The Top 16

18. Ubiquitous broadband access and convergence will also begaining momentum covering voice, broadband and applications Fixed-Mobile Convergence Overview Application / Personalized, ubiquitous, location- Voice Broadband Content dependent services and applications through a single device Customers One bill for all telecommunication needsFixed Perspective Seamless and uniform communication experienceMobile Integrated customer-facing organization serving fixed and mobile services Fully integrated suite of business and Operators operational support systems Highlights Perspective Common core all-IP network for fixed and mobile services An FMC offering should have one fixed component (voice, Uniform service provisioning across all broadband, applications/content) and one mobile component access channels (voice, broadband, applications/content). Another example is femtocell: mobile voice + mobile broadband + application/content + fixed broadband 17

19. The multi-screen concept is also becoming a necessity enablinginteraction between various delivery systems: TV, phone and PC Multiscreen Overview Drivers Users Pause my show, pick New internet capabilities increased consumers expectations to Video conference be able to watch what they want at nearly any given moment up watching it on the with my family from mobile while leaving Operators my work PC home in the car They can leverage growing demand for the multi-screen experience to extend fixed or mobile triple play offerings Respondents to one recent study commissioned indicated that Multiscreen a multi-screen service offer would increase the subscribers likelihood to remain with their service provider by up to 40% Both my purchased and created content is available to me on all my screens Benefits With Multi-screen, content can be delivered across a range of devices, in a seamless transparent way Post a small family Professionally generated content (movies, television video to my TV VOD programs and news clips) channel to show User-generated content (home movies or video captured friends on a cell phone)1) By Alcatel-Lucent 18

20. On the enterprise front, broadband enabled applications spanseveral sectors and creating new revenue opportunities NON-EXHAUSTIVE Industry Specific Applications Sector Applications Sector Applications Telemedicine RFID and NFC apps Health services research Broadcasting Online monitoring Logistics IT applications Healthcare Logistics e-Public services e-Learning National backbone ICT infrastructure Virtual university Content management Government Education Ticketing systems Simulation systems Routing systems Remote intel gathering Aerospace research GPS Defense Aviation Telcos Enabling Value Proposition Enhance effectiveness by providing location information Provide alternate payment methods Provide marginal cost mechanism to transfer digital information Facilitate rich value-added information exchange Facilitate better risk management and decision making Introduce efficiency improvements by enhanced interactivity 19

21. Broadband as an Economic CatalystDrivers for Broadband GrowthReaping the Broadband BenefitsThe STC Broadband Story 20

22. STC is one of the largest telecom operators in the MENA region STC Competitive Positioning (2010) Consolidated Revenues Total Subscribers (In SR Billion) (2010) (In Millions) (2010) STC 52 STC 139 Etisalat 32 Etisalat 123 Q-Tel 28 Q-Tel 82 Zain 18 Zain 37 Batelco 3 Batelco 9Source: World Cellular Information Service (WCIS) Informa, Bloomberg, Zawya 21

23. STCs expansion in 10 countries has opened up markets with over1.6 billion people significant room for future growth Turkey STC International Footprint WWW Kuwait Bahrain Lebanon WWW Jordan Malaysia WWW WWW Saudi Arabia WWW India WWW South Africa Indonesia 22

24. This resulted in healthy growth across revenues, profitability,subscribers and footprint STC Actual Results (2006 -2010) Revenues EBITDA Subscribers Footprint (In SR Billion) (In SR Billion) (In Million) (Number of Countries) +60% +22% +685% 52 20 139 10 16 32 18 1 2006 2010 2006 2010 2006 2010 2006 2010Note: 2006 revenues are revised. Subscribers include fixed and mobile subscribersSource: World Cellular Information Service (WCIS) Informa, Bloomberg, Zawya 23

25. STC is constantly innovating with unique services whiledeploying the most advanced network in the region Noteworthy Achievements Coverage of 99% of 960 million the geographically 1st operator to launch SMS were sent during populated areas 4G LTE-based the Hajj period last year technology in the region 1,200 international roaming agreements, the 1st telecom operator most diverse roaming 1st operator to launch to launch IPTV services portfolio in the Middle a home internet package in the Kingdom East of 100 megabits/sec 1st operator in region 90% increase in 85,000 kilometers to launch fully dedicated worth of fibre optic customer data exchange, network, the largest in the healthcare solution Easy exceeding 1,150 region Clinic terabytes per day 24 24

26. STC has an aggressive strategy to drive broadband penetration and services to maximize customer lifetime value STC Growth Path Further Insights To re-invent home communication High Increasing broadband penetration Operators start providing content- and add value to its customers, based services and focus on customer Fair Markets Home is expanding its service satisfaction portfolio to tap into content-rich Operators invest in applications and servicesValue to the Home customer service delivery platforms 1 Drive Penetration and Optimize Service Delivery Low broadband subscriber - Focus on re-aligning service base portfolio, tap into low-end 2 Maximize Customer segment opportunity, fix delivery Basic services: voice, and Lifetime Value capabilities and enhance overall basic broadband packages QoS Focus on driving penetration before heavily investing in value Mild 2 Maximize Customer Lifetime Value Competition - Offer basic bundles (including fixed-mobile), content and Competition at its peak broadband portal services Pre- Drive Penetration and Operators start bundling fixed - Offer differentiated multi-play 1 Optimize Service voice, broadband, TV/Video and services and leverage content Liberalization Delivery mobile voice into one product acquisition/development Quadruple is the combination of Low communication convergence with media/content convergence Single Play Quad Play Products and Services Portfolio 25

27. STC made significant progress in transforming itself from pureconnectivity to a multimedia provider STC: On The Way Beyond Connectivity IPTV Multi-Play Fixed-Mobile Convergence A multimedia provider Online Gaming, D etc Content and Apps. Breadth of Portfolio Broad Basic Smart Homes application portfolio C Heavy Next Bundles Web filtering Generation Apps B Broadband and voice End-to-end devices bundles Online Voicemail Broadband with Launched double- laptops and 3G File Storage A play modems dongles Pure connectivity Streamlining CPE My Calendar, etc Broadband, voice and Defined broadband outsourcing model Today mobile bundles Single-Play My Calendar service portfolio and consolidated technology choices An end-to-end WebTV Improved operational broadband and VAS capabilities provider A pure connectivity provider Early Advanced Transformation Stages 26

28. Moreover, STC is enabling next generation Saudi homes with advanced applications over broadband Next Generation Saudi HouseholdsNOT EXHAUSTIVE Applications with a Broadband Connection (including VoIP) Home Communication Home Entertainment Digital Home Server Applications 1. VoIP 1. TV 2. Broadband Internet 2. Music Radio 1. Main storage for media/data 3. Video Telephony 3. Voice chat / Talk show 2. Content format conversion 4. Teleworking, Telelearning, etc. 4. VoD 3. Streaming video/audio 5. SMS/MMS 5. Online-gaming, Personal Media 4. Content editing/authoring 6. Surveillance (Door-Videophone) Management, etc 5. Archive of content into DVDs Broadband Access Home Gateway (DSL, Fiber, WiFi etc) 1. Firewall and routing 2. Home network interfaces 3. Gateway to outside world 27

29. Thank YouSaad Dhafer Al-QahtaniGroup Chief Strategy Officersdhafer@stc.com.sawww.stc.com.sa 28