I hold STC for the dividend. Last week I looked much harder at what else I own.

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I have held STC since Q1 2026.

I bought it for a fairly simple reason: the dividend.

STC has committed to paying SAR0.55 per share, per quarter through Q3 2027. For me, that made it one of the more predictable income streams in the portfolio.

Last week I looked much harder at what else I actually own when I hold STC.

The answer was more interesting than I expected. And more complicated.

Most investors think of STC as Saudi Arabia's dominant telecom company. That's certainly the business at its core. But look underneath it and there are effectively several businesses operating at the same time.

Connectivity and 5G. Saudi Arabia's dominant network operator, with continued investment in 5G and national connectivity infrastructure.

TAWAL. STC retains a significant stake in the combined tower company, which operates approximately 30,000 mobile tower sites across multiple markets.

solutions by stc. The enterprise IT business, building and managing technology infrastructure for corporate and government clients.

Center3. The data centre and connectivity infrastructure business, with plans to build toward 1GW of capacity by 2030.

Cloud and cybersecurity. Growing businesses serving many of the same enterprise and government customers.

STC Bank. More than 8 million customers in its first full year of commercial operations.

I bought a dividend telecom.

What I increasingly own looks more like a portfolio of Saudi digital infrastructure assets sitting under one Tadawul ticker.

And that's where things get interesting.

In January 2025, STC announced a SAR32.64 billion contract with a government entity.

The structure is unusual in its duration: 18 months of preparation and execution followed by 15 years of operations.

STC expects revenue recognition to begin in Q4 2026 and continue through the operating period.

I'm deliberately not dividing SAR32.64 billion by 15 and calling that annual revenue because STC hasn't said recognition will be perfectly straight-line.

What matters to me is the visibility.

If the contract moves into revenue recognition on schedule, STC begins monetising one of the largest contracts in its history, backed by a very long operating period.

Q4 2026 is therefore an important test.

This one needs a little more nuance because the deal isn't finished yet.

In December 2025, STC signed an MoU with HUMAIN, PIF's AI company, to establish a data centre joint venture. The proposed ownership is 51% HUMAIN and 49% STC through Center3. Initial capacity would be up to 250MW, with the potential to scale to 1GW subject to customer commitments.

The definitive JV has not been signed.

The MoU was extended in June 2026 for another six months while the parties continue negotiating the final agreement and commercial framework.

If it gets completed, though, the significance is fairly clear. STC would have direct exposure to the physical infrastructure underneath Saudi Arabia's AI buildout.

That connects directly to something I am currently writing wrote about: everyone is talking about Saudi AI, but I'm increasingly interested in who builds, powers, cools and finances the infrastructure underneath it.

Center3 puts STC directly into that conversation.

This is where I think the straightforward bullish reading gets more complicated.

STC has a lot of things competing for capital at the same time.

There is the SAR0.55 quarterly dividend commitment through Q3 2027.

There is the government infrastructure project.

There is Center3's data centre expansion toward 1GW.

There is STC Bank as it scales beyond 8 million customers.

There is ongoing investment in 5G and the core network.

And there are STC's wider international ambitions.

None of these is necessarily a bad investment.

The question is what happens when you try to fund all of them at once.

Center3 alone announced in August 2025 that it planned another $10 billion of investment after approximately $3 billion already deployed as it works toward its 1GW ambition.

That's a lot of capital.

And STC is simultaneously returning a meaningful amount of cash to shareholders..This is the part of the investment case I hadn't paid enough attention to when I originally bought the shares.

The old STC was relatively straightforward:

Telecom cash flows → dividends.

The STC emerging today looks more like:

Telecom → data centres → AI infrastructure → enterprise IT → cloud → cybersecurity → banking.

There is considerably more growth optionality.

There is also considerably more capital required to capture it.

CoreWeave reported Q2 results this week.

Revenue reached $2.58 billion, up 112% year on year.

Its revenue backlog reached roughly $104 billion.

Those are extraordinary demand numbers.

Now look at the other side.

Net loss: $626 million.

Quarterly interest expense: $640 million.

2026 capex guidance: $35 billion to $39 billion.

More than $32 billion of secured debt.

CoreWeave and STC are obviously very different businesses, so I'm not suggesting a direct comparison.

What CoreWeave demonstrates is something more useful:

AI infrastructure consumes an extraordinary amount of capital even when demand is booming.

That's the part I'm applying to STC.

The question isn't whether Saudi Arabia will need more data centres. Everything I'm seeing suggests it will.

The question is what returns Center3 ultimately earns on the billions being deployed to build them.

How quickly does utilisation ramp?

What pricing can Center3 achieve?

How much capital does STC ultimately have to contribute?

And what happens to the rest of STC's capital allocation if data centre investment keeps rising?

Those answers matter more to me than another announcement about gigawatts.

Four things.

1. The government contract

Does revenue recognition begin as expected in Q4 2026?

This is the nearest identifiable catalyst and an important test of execution.

2. The Center3-HUMAIN agreement

The MoU has been extended. I want to see the definitive agreement.

More importantly, I want to see the economics: capital commitments, funding structure, customer commitments and how the returns are shared.

The headline 1GW number is exciting.

The terms will tell us whether it is attractive for STC shareholders.

3. Dividend coverage

STC has committed to SAR 0.55 per share, per quarter through Q3 2027.

As infrastructure spending ramps, I want to see how comfortably cash generation continues to cover that distribution alongside everything else STC is funding.

4. What happens after Q3 2027

This may eventually be the most revealing signal.

Does STC renew the dividend commitment?

Increase it?

Reduce it?

The answer will tell us quite a bit about how management sees the balance between shareholder distributions and the capital required for STC's next phase.

I still hold STC.

The SAR 0.55 quarterly dividend remains one of the reasons I own it.

But after looking much harder at the business, I no longer think about STC as simply a dividend telecom.

The government contract is real.

The data centre opportunity is real.

Saudi Arabia's AI infrastructure buildout is real.

But so is the capital required to participate in all of it.

And that brings me back to something I keep returning to as an investor:

A strategically important company is not automatically an attractively priced stock.

At SAR 43.70, I'm not selling.

But I'm not adding either.

Before I put more money into STC, I want to see two things.

First, evidence that the government contract is moving into revenue recognition as expected.

Second, the final economics of the Center3-HUMAIN joint venture.

I bought STC as a dividend telecom.

I'm increasingly holding a digital infrastructure company.

Whether that transformation creates enough additional shareholder value to justify the capital it requires is the question I'm watching now.

In the coming issues: We look at Saudi Arabia’s willingness to deepen capital markets and attract more foreign investors. But what happens when IPO investors repeatedly lose money?

I'm looking at the CMA's investigation into recent Saudi listings and asking a fairly simple question:

Who was the Saudi IPO market being priced for: issuers or investors?

TQC holds STC (7010). This is my personal investment analysis, not financial advice.

Most people will chase the next AI IPO on hype alone and get burned. If you'd rather understand the timeline, the retail access window, and the risk buried in the filings before you commit a dollar, the free briefing is built for you.

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