Saudi Telecom Company’s (STC) third-quarter earnings beat consensus estimates, registering an 18 percent year-on-year (YoY) rise to SAR 2.62 billion (+10 percent quarter-on-quarter), Falcom Financial Services said in a company review.
STC’s margins improved sequentially, reflecting the positive impact of its cost-control initiatives to improve profitability.
"STC faces intensifying competition and saturation in mobile penetration level in KSA. However, its leadership position, strong customer base, operational efficiency, and robust dividend yield are key positives overweighing the constraints," Falcom said.
Saudi Arabia’s telecom regulator, the Communications and Information Technology Commission (CITC) approved reducing local voice call rates on mobile networks (MTRs) and local voice fixed termination rates (landline charges), which will likely attract smaller players in the market, thus intensifying competition, the report said.
STC has the largest market share in the mobile segment and a near monopoly in the fixed-line network segment. It is well positioned to gain from increasing data usage. The Saudi telecom operator also has a healthy balance sheet, with cash of SAR 3.1 billion as of Q3 2017, it added.
"Growing investments in joint ventures and subsidiaries will result in increasing capacity and thus, reach," Falcom said.
Falcom’s target price on STC is SAR 75.51, with an ‘overweight’ recommendation.
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