GLOBAL TELECOM, INC.

A Feasibility Study for the third Saudi Arabia

Telecommunication provider in the Kingdom of

Submitted by Dr. Gene Benter PhD – Business Management

Excutive Summary Telecommunication is an important part of many modern societies. In 2006, the telecommunication industry is estimated to have $1.2 trillion revenues or just fewer than 3% of the gross world product. Good telecommunication infrastructure is widely acknowledged as important for economic success in the modern world on both the micro and the macro economic scale. On the microeconomic scale, most companies have used their telecommunication to help build global empires, this is self evident in the business of online retailer like the Amazon.com but even the conventional retailer Wal-Mart has benefited from possessing superior telecommunication infrastructure compared to its competitors. In modern Western society, homeowners often used their telephones to organize many home services ranging from pizza deliveries to electrician. Even relatively poor countries have been noted to use telecommunication to their advantage. In Bangladesh’s Narshingdi district, isolated villagers use cell phones to speak directly to wholesalers and arrange a better price for their good. In Cote d’lvoire coffee growers share mobile phones to follow hourly variations in coffee prices and sell at the best price. A 2003 survey by the International telecommunication Union (ITU) revealed that roughly one-third of countries have less than 1 mobile subscription for every 20 people. In terms of internet access, roughly half of the countries have less than 1 to 20 people with internet access. From this information, as well as educational data, the ITU was able to compile a Digital access Index that measures the over all ability of citizens to access and use information and communication technologies. In the Kingdom of Saudi Arabia, majority of the Saudi have PDA ranging from the old to the latest Nokia or Motorola models. The presence of three telecommunication provider in the Kingdom can hardly keep the heavy traffic of calls and messages especially during the peak hours of the day especially during the Holy months in the Kingdom. The situation is brought to the attention of interested parties to put up the third telecommunication provider in the Kingdom. Bayanat also known as Bayanat Al Oula for Network Services is a Saudi company established in 2005 through a consortium of local investors, Bayanat was licensed by the Communication & Information Technology Commission to provide local, national, and international data communications services. Bayanat Al Oula for Network Services is a privately funded and owned by three of the leading

communication firms in Saudi Arabia: Nour Communications, Baud Telecom Company and Al-Harbi Telecom. Bayanat is still on its preparatory stages. 1. Current Situation A. Economy Saudi Arabia's economy is petroleum-based; roughly 75% of budget revenues and 90% of export earnings come from the oil industry. The oil industry comprises about 45% of Saudi Arabia's gross domestic product, compared with 40% from the private sector. The combination of relatively high oil prices and exports led to a revenues windfall for Saudi Arabia during 2004 and early 2005. For 2004 as a whole, Saudi Arabia earned about $116 billion in net oil export revenues, up 35 percent from 2003 revenue levels. Saudi net oil export revenues are forecast to increase in 2005 and 2006, to $150 billion and $154 billion, respectively, mainly due to higher oil prices. Increased oil prices and consequent revenues since the price collapse of 1998 have significantly improved Saudi Arabia's economic situation, with real GDP growth of 5.2 percent in 2004, and forecasts of 5.7% and 4.8% growth for 2005 and 2006, respectively. B. Legal Saudi Arabia does not have much of a formal criminal code, and thus much of its law is derived from an ultra-conservative form of Sunni Islam commonly known as, Washbasin. To that end judges are free to impose capital punishment or corporal punishment, including amputations of hands and feet for certain crimes such as murder, robbery, rape, drug smuggling and for various forms of sexual behavior such as homosexuality and adultery. The courts may impose less severe punishments, such as floggings, for less serious crimes against public morality such as drunkenness. The punishments, especially the executions, are carried out in public in order to add humiliation to the convicted person and also to act as deterrence. Judges are generally given a tremendous amount of discretion in deciding how to punish a particular individual, and will make such decisions based on the particular school of Islam that they follow. For example; Theft is punishable by the amputation-only if the thief is not poor and the stolen money is not from public sources or a company (must be a private secure money that was stolen by well-off adult)- of the right hand. If the right hand has already been amputated, the left hand is chosen instead. Drinking, selling, or buying alcohol and sniffing drugs or injecting drugs is punished by a sentence of eighty lashes. Smuggling heroin or cocaine into the country is punished by beheading with a sword. Fornication is proven by four righteous witnesses - is normally punished with forty lashes, as is adultery. During flogging, the face, head and vital organs of the person are protected. Murder, accidental death and bodily harm are open to punishment from the victim's family. Retribution may be sought in kind or through blood money. The blood money payable for a woman's accidental death is half as much as that for a man. C. Government The central institution of the Saudi Arabian government is the Saudi monarchy. The Basic Law of Government adopted in 1992 declared that Saudi Arabia is a monarchy ruled by the sons and grandsons of the first king, Abd Al Aziz Al Saud, it also claims that the Qur’an is the constitution of the country, which is governed on the basis of Islamic law (Shari’a) There are no recognized political parties or national elections, except the local elections which were held in the year 2005. The king's powers are theoretically limited within the bounds of Shari'a and other Saudi traditions. He also must retain a consensus of the Saudi royal family, religious leaders, and other important elements in Saudi society. The Saudi government spreads Islam by funding construction of mosques and Qur’an around the world. The leading members of the royal family choose the king from among themselves with the subsequent approval of the ulema. The government is attempting to promote growth in the private sector by

privatizing industries such as power and telecom. Saudi Arabia announced plans to begin privatizing the electricity companies in 1999, which followed the ongoing privatization of the telecommunications company. D. Technology Saudi Arabia main lines telephone in use as of 2002 has a total of 3,317,500 receivers. Saudis who use mobile cellular telephones is 5.008 million. In 2004 the Saudi Telecom Company monopolization was broken by authorizing Etihad Etisalat / Mobily to operate competing with the STC. The Kingdom telephone system is modernized and upgraded to world class advanced technology. Domestic inter changes microwave radio relay and coaxial and fiber-optic cable system international: microwave radio relay to Bahrain, Jordan, Kuwait, Qatar, UAE, Yemen, and Sudan; coaxial cable to Kuwait and Jordan; submarine cable to Djibouti, Egypt and Bahrain; satellite earth stations - 5 ntelsat, 3 Atlantic Ocean and 2 Indian Ocean, 1 Arabsat, and 1 Inmarsat in the Indian Ocean region. The radio broadcast stations are found at AM 43, FM 31 and SW. There are 6.25 million radio listeners in the entire kingdom. For television the broadcast station is at channel 117 and there are about 5.1 million daily viewers. In 2005, there are 22 Internet service providers found in the Kingdom. E. Ecological Shortages of water and rapid population growth may constrain government efforts to increase self-sufficiency in agricultural products. Center Pivot Irrigation in Saudi Arabia is typical of many isolated irrigation projects scattered throughout the arid and hyper-arid regions of the Earth Fossil water is mined from depths as great as 1 km (3,000 ft), pumped to the surface, and distributed via large center pivot irrigation feeds. The circles of green irrigated vegetation may comprise a variety of agricultural commodities from alfalta to wheat. Diameters of the normally circular fields range from a few hundred meters to as much as 3 km (2 miles). The Kingdom has implemented a multifaceted program to provide the vast supplies of water necessary to achieve the spectacular growth of the agricultural sector. A network of dams has been built to trap and utilize precious seasonal floods. Vast underground water reservoirs have been tapped through deep wells. Desalination plants have been built to produce fresh water from the sea for urban and industrial use, thereby freeing other sources for agriculture. Facilities have also been put into place to treat urban and industrial run-off for agricultural irrigation. These efforts collectively have helped transform vast tracts of the desert into fertile farmland. Land under cultivation has grown from under 400,000 acres (1600 km²) in 1976 to more than 8 million acres (32,000 km²) in 1993. F. Socio-cultural Saudi Arabian culture revolves almost entirely around the religion of Islam. Islam's two holiest sites, Mecca and Medina, are located in the country. Every day, five times a day, Muslims are called to prayer from the minarets of mosques which dot the country. The weekend consists of Thursday and Friday. The public practice of any religion other than Islam, including Christianity and Judaism, the presence of churches, and open possession of Christian religious materials are only allowed in places of non-Muslim concentration e.g. foreign army base camps. Public theatres and cinemas are prohibited, as Wahabi tradition deems those institutions to be incompatible with Islam. However, in private compounds such as Dahran and Ras Tanura public theaters can be found, but often are more popular for local music, arts, and theatre productions rather than the exhibition of motion pictures. Recently, plans for some cinemas that will be allowed to feature Arabic cartoons for women and children were announced. The cultural heritage is celebrated at the annual Jenadriyah Cultural festival. During this event, the Saudi national cake, carrot cake, is handed out to visitors. G. Supply chain Within the kingdom, the supply chain is segmented due to importation of goods and materials from another country and regions. Saudi Arabia has less rw material resources and still lacks the competencies to produce its own materials. That is

why, to solve this dilemma and to address the same concern in other countries within the peninsula, a council was formed to put effect supply chain cooperation. The Cooperation Council for the Arab States of the Gulf formerly named and still commonly called Gulf Cooperation Council (GCC) is a regional organization involving the six Arab Gulf states with many economic and social objectives in mind, among the stated objectives are: • formulating similar regulations in various fields such as economy, finance, trade, customs, tourism, legislation, and administration; • fostering scientific and technical progress in industry, mining, agriculture, water and animal resources; • establishing scientific research centers; • setting up joint ventures; • encouraging cooperation of the private sector; • strengthening ties between their peoples; and • establishing a common currency by 2010, the Khaleen 2. Current Situation o market definition – the entire Kingdom of Saudi Arabia, the Middle East countries, the whole of Asia and the entire world. o market size – figuratively, close to around 22 million people is the total number of target subscriber once fully operational five years after its inauguration. o market segmentation – students, professionals, businessmen, workforce City name Population Comments Riyadh + 4,700,000 Capital city / highest population Jeddah + 3,600,000 2nd largest city / main seaport on Red Sea Mecca + 1,700,000 Medina + 1,300,000 Dammam + 1,300,000 Holiest city of Islam religion 2nd Holiest city of Islam religion main seaport on Persian gulf

Locations of other cities in Saudi Arabia where the transmitter are to be installed: Buraydah 600,000 people, Dahaban +96,000, Al Hufuf +334,000, Hafr Al-Batin, Al Jafer +12,000, Khamis Mushayt 630,000, Al-Mubarraz 550,000, Al Omran +49,000, Al Oyon +33,000 o competition and market share Two existing companies are fully operational, Al Jawal keeps 24% of the market share, Mobily has 15% share of the market. The third company is yet to insert itself in the market and still lacking in many facilities. It was supposed to operate on 2005 unfortunately its market share is narrowing and many stockholders are withdrawing their shares. Al Jawal and Mobily are competing on very small percentage of the market. Many subscribers have complains ranging from poor network connection to expensive rate of the service. The market is reluctant to remain in one company and if they will have another option, they might leave their current telecommunication company. o market trends The demands in telecommunications are definitely increasing and will continue to increase in the coming years as more and more Saudis are becoming familiar to its advantages and benefit. The business industry finds the use of PDA

and telephones beneficial in marketing and selling. Hence, telecommunications in the Kingdom are becoming a necessity as the country moves towards industrialization. This is the best opportunity so far for those aspiring to join the telecommunication industry. 3. Current Situation - Consumer Analysis o nature of the buying decision Saudis and all other customers of telecommunication opt to subscribe to services with lower cost, more efficient and contain several features that are accessible at their finger tips. o Participants Telecommunications may range from students, college students, professionals, business men, company, organizations and associations. There may be other investors who would take the opportunity to put in investment in the company. Stakeholders will be given company options for their loyal and continues support to the company o Demographics Expect that majority of the subscribers would be males but the company is considering giving special discounts for female subscriber in the Kingdom. Population over 1 million Riyadh capital Jeddah second largest city; pilgrimage gateway to Mecca; main Red Sea port Dammam Eastern Province capital; third largest metropolitan area Makkah Mecca, the holiest city in Islam Madinah second holiest city in Islam (traditionally spelled Medina in English) Other major cities Ta’if mountain resort above Mecca Tabuk northwestern border city near Jordan Buraidah city in north central Arabia Hofuf major urban center of the Al Hasa oasis Qatif large coastal oasis city and oilfield Khamis Mushayt western Arabian mountain city and military base o Psychographics Most customers would be emotionally, psychology and mentally capable of making decisions for themselves. They could patronize the company once they are fully satisfied with the service and the cost that we will provide over and above other companies. o buyer motivation and expectations a. motivated by family connectivity b. peer groups and acquaintances communications c. sense of pride and integrity d. latest source of fun and excitement o loyalty segments a. professionals and businessmen who need highly advanced communication gadgets b. public servants and those in medical professions c. college and graduate school students d. Secondary school level students 4. Current Situation - Internal Investment Investment Capital of Global telecommunication is 100,000.000.00 SAR. Registered Stock at NASDAQ IPO 1.50 USD per share people The Board is a composition of different investors from Saudi, Bahrain, USA, Japan, China, Singapore, North Korea, The Philippines and India. Mohammad Faisal Deleigan, as CEO/Chairman (Saudi), Thomas Wells (American), Hirohito Masawa (Japan), Ahmad Nabtiti (Jordan), Sahle Al-Harbi (Saudi), Leonardo Mendoza (Philippines), Ahmad Tajar (Bahrain), Naeem Badr (India), Mohammad Kaicer (Singapore), Ming Li Tao (China) and Lew Kuan Ho (N. Korea

Skills Holding top management positions in the corporation are licensed electronic engineers, electrical engineers, computer engineers, Master degree holders in Industrial Marketing, Industrial Management, Services Marketing, Human Resources. Added to the list is the group of administrative staff, personnel, security, maintenance and 1000 to 1,500 skilled field workers and sales representatives. o Objectives Vision Statement : A global telecommunication company providing humanity with excellent services, bridging distances and making families always connected anytime, everywhere” Mission Statement : “Handler of advanced telecommunication services to the GCC and the entire world capitalizing on superior and excellent customer care and services” Corporate objectives: To be one of the worlds firm and stable telecommunication organization based in the Kingdom of Saudi Arabia. Financial objective: To maintain financial stability and profitability amidst global economic recession. Marketing objectives: To create loyal customers who shares the vision and mission of the corporation hence maintaining balance between associates and customers. Long term objectives: To establish own satellite network of subscribers all over the world o Corporate culture Focus on excellent customer care and services The Global Telecommunication is in business because of our customers. Our customers deserve to enjoy the benefits that our company has to offer, fully satisfied with our services and keeping them fully informed of the corporation’s innovations and new products. The best way to keep the customers loyal to the corporation is to make participate in the business operation not only as buyers but also as marketers. On this regard, they also have the chance to earn. 5. Summary of Situation Analysis o external threats Decline in oil production due to narrowing quantity of mineral resources. o external opportunities Opening of Saudi Arabia for Foreign Direct Investors and other foreign investors to put up businesses in the \Kingdom. o internal strengths Highly qualified management team, skilled technicians and experienced administrative staff and personnel with 300 strong willed and dedicated field workers o internal weaknesses Inability of the corporation to fully monitor for 24 hours a day the different towers all over the \Kingdom o key success factors in the industry Competent background and training in customer service, electronics and telecommunications Fully equipped facilities and state of the art transmission equipments. Partnership with the largest satellite network in the Middle East, Japan, China and India First to introduced cable free fixed telephone for home and offices Partnership with internet service providers in the kingdom and other countries. Capital investment as horizon foreign direct investment to other countries Probability of greater market share in the whole middle East and Asia due to presence of million expatriates in the Kingdom

o

Other sustainable competitive advantage Strategic marketing plan, superior customer care, highly advanced technological know how and telecommunication competency

6. Financial Summary * The following balance sheet structure is just an example. It does not show all possible kinds of assets, equity and liabilities, but it shows the most usual ones. Because it shows goodwill it could be a consolidated balance sheet. Monetary values are not shown and the summary rows are missing as well. A. Balance Sheet of Global Telecommunication, Incorporated as of February 28, 2007. ASSETS Current Assets Cash and cash equivalents Account receivable Inventories Prepaid Expenses Investments held for trading Other current assets Fixed Assets (Non-Current Assets) Property, plant and equipment Less: Accumulated Depreciation Goodwill Other intangible fixed assets Investment in associates Deferred tax assets assets LIABILITIES and EQUITY Current liabilities Account Payable Current income tax liabilities Current portion of bank loans payable Short-term provisions Other current liabilities Long term Liabilities (Fixed Liabilities) Bank Loans Issued debt securities Deferred tax liability Provisions Equity Share capital Capital reserves Revaluation reserve Translation reserve Retained earnings Equity valuation The real value to a purchaser of the business or a shareholder may be different from the net assets shown by the balance sheet. This is because factors that affect the value of a business may not be recorded yet. For example, a purchaser will be interested in the future earnings of the business, whether assets such as

property have been revalued recently, and whether there are potential liabilities in the future such as lawsuits. The value of the assets in the balance has also been based on the assumption that the business is a going concern; otherwise the break-up value of the assets may be far less than the value in the balance sheet. B. Income Statement of Global Telecommunication Incorporated from the Stock Market dated February 28, 2007. Net sales ____________________$3,400,000 Rent revenue _________________ 40,000 Interest revenue _______________ 12,000 Total revenue ____________ __ 3,452,000 Expenses (usually sorted by amount) Cost of goods sold ____________ 2,000,000 Selling expenses ______________ 450,000 Administrative expenses ________ 350,000 Interest expense _______________ 45,000 Total expense ______________ 2,845,000 Income before taxes ____________ 607,000 Income taxes __________________ 182,100 Net income ____________________ 424,900 Earnings per share _______________ C. Period Ending 28- February- 2007 Operating activities, Cash flows provided by or used in Net Income 17,853 Adjustment to net income 13,263 Depreciation 2,121 Changes in account receivables 14,188 Changes in Liabilities 31,571 Changes in operating activities (93,848) Total Cash flow from operating activities Investing Activities Capital expenditures (2,354) Dividends Paid (5,773) Treasury stocks acquired paid (2,416) Issuance of long term debt 67,054 Payments and redemption of long-term debt 67,054 Change in deposits 42,136 Contract holder fund deposits 8,346 Contact holder fund withdrawal (5,976) Cash flows from financing activities 64,405 Effect of exchange rate 579 Change in cash and due from banks 3,823 *Amount figures are purely fictional $4.20

(14,854)

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