Beltone starts coverage on Saudi telcos; recommends 'neutral' on Zain Saudi, Mobily

Beltone Financial initiated coverage on the Saudi telecom sector, recommending "neutral" on Mobile Telecommunications Co. Saudi Arabia (Zain Saudi) and Etihad Etisalat Co. (Mobily) setting the stocks target prices at SAR 11.50 and SAR 22.50, respectively.

A lower-than-expected increase in annual cost of government fees serves as a catalyst for Mobily, Beltone said in a recent report.

Meanwhile, the sale of Zain Saudi's telecommunication towers or the regulatory approval of the telecom operator's capital restructuring to offset accumulated losses and repay debts are they key stock drivers.

Mobily is expected to post a net profit of SAR 163 million and SAR 107 million in 2019 and 2020, respectively.

Zain Saudi's net earnings are expected to hit SAR 450 million this year, ahead of rising to SAR 560 million in 2020.

In addition, the current market indicators, regulatory environment, and macroeconomic forecasts will maintain the current market stability, with a limited change in the current market share of voice and broadband services due to fierce competition and pricing regulation.

Elsewhere, Beltone added it expects the sector's total subscribers to grow at a compound annual growth rate (CAGR) of 2.3 percent between 2019 and 2023, backed by the Kingdom's demographic composition.