Riyadh – Mubasher: Al Rajhi Capital on Tuesday said that the Saudi telecommunications sector is likely to witness a drop in earnings for the third quarter of 2017.

Factors that lead to this decline include; longer than usual school holidays, higher expenditure on marketing, newer offers on roaming, continuing impact of the biometric requirements, the levy of expat fee, and some expat labour force moving out, the report predicted.

 “Though we are negative on the sector, STC continues to be one of our defensive picks in the Saudi equity portfolio.”, The report added, noting that sale of the tower portfolio remains the primary catalyst for the telecom sector stocks in the medium term, but any deal is unlikely to be finalized soon.

“While Zain and Mobily continue to work on controlling costs, we believe the weakness is likely to persist as new challenges emerge for the sector in the form of falling total subscribers and introduction of voice over data applications, in addition to the high level of competition which was already impacting the sector.”, Al Rajhi continued.

The report also said that limiting the daily data usage to 3GB and 6GB for internet and fixed wireless services, respectively, is considered a positive thing, but it will not offset the overall weakness in the sector.