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KSA telecom sector sees ‘intense competition’ in Q1-17 – Riyad Capital

KSA telecom sector sees ‘intense competition’ in Q1-17 – Riyad Capital
(Photo Credit: Arabianeye-Reuters)
STC
7010
-4.35% 39.60 -1.80
ETIHAD ETISALAT
7020
10.16% 52.60 4.85
ZAIN KSA
7030
-8.68% 12.62 -1.20

Riyadh – Mubasher: The first quarter of the year saw an intense competition among the three Saudi telecom operators to regain market share, ever since the disconnection of SIMs on the back of biometric verification, according to Riyad Capital.

The report showed that there are a number of risks surrounding the profitability of the sector such as lower market subscribers, which resulted from the application of the biometric verification, weaker purchasing power, and higher weight for lower margin services in revenue mix.

According to the latest data released by the Communications and Information Technology Commission (CITC) for 2016, the subscriber base decreased by 4.9 million year-on-year in 2016 to reach 47.9 million subscribers.

On the contrary, post-paid subscribers have increased by 900,000 to reach 8.8 million subscribers in 2016, compared to 7.9 million in 2015, the report added.

The market shares swang between the telecom operators after the biometric verification, but Saudi Telecom Company (STC) remained firmly in control, Riyad Capital mentioned, adding that STC is known for brand loyalty leading to it maintaining the highest market share in the post-paid segment.

The research company expected revenues of STC to decrease 4% year-on-year and to increase 2% quarter-on-quarter to reach SAR 12.2 billion. Bottom line is forecast to improve 6% on a quarterly base.

Riyad Capital maintained its "neutral" recommendation on STC at a target price of SAR 73 per share, as most positives are priced in.

As for Mobily, the investment firm expected its revenues to fall 1% quarter-on-quarter and 16% year-on-year, reaching SAR 2.9 billion. Net loss is forecast to improve from SAR 71 million last quarter to SAR 48 million for Q1-17.

The "neutral" stance on Mobily was maintained, “given no real triggers apparent to support top line or bottom line in the short term,” Riyad Capital said, keeping on its target price at SAR 26.

Revenues of Zain KSA are likely to grow 2% quarter-on-quarter and 4% year-on-year to stand at SAR 1.8 billion. The company’s loss is expected to improve to SAR 72 million.

Riyad Capital maintained a "buy" stance on Zain, with a target of SAR 13 per share, expecting an enhancement in its financial position and operating income.