Riyadh – Mubasher: Moody's Investors Service has upgraded the Saudi Telecom Company's (STC) long-term Issuer Rating to ‘A1’ from ‘A2’, with a ‘Stable’ outlook.

This upgrade of STC's issuer rating follows a reassessment of the Saudi telecom company under the rating agency's Government-Related Issuers (GRIs) Rating Methodology.

“Moody's downgraded the government of Saudi Arabia's long-term issuer ratings to A1 from Aa3 and assigned a stable outlook in May 2016. STC's issuer rating benefits from a one-notch uplift for government support from its baseline credit assessment of a2,” the US-based rating agency said in a report on Thursday.

Moody's expects STC to maintain its strong standalone creditworthiness as expressed by its baseline credit assessment (BCA) of a2.

“Moody's also assumes high default dependence between the government and STC, as demonstrated by: the government's reliance on STC for royalties as well as STC being a large private sector employee of Saudi Arabian nationals; STC strategic role in supporting government economic initiatives; and STC's provision of communications services for Saudi Arabia's defense and government sectors,” the credit ratings agency concluded.

Furthermore, the STC's strong liquidity profile is endorsed by a healthy cash balance of SAR 8.15 billion ($2.17 billion).

Moody’s expects a strong generation of funds from operations of SAR 29.56 billion ($7.88 billion) over the coming 18 months.

“These cash sources will be more than adequate to cover our forecast of the company's capital spending requirement of SAR 19.24 billion ($5.13 billion), dividend payments of SAR 16.0 billion ($4.27 billion), and debt repayments of SAR 220.15 million ($58.70 million) over the next 18 months,” according to the report.