Arab Today, arab today telecom margins ‘hit by pricing race’
Last Updated : GMT 22:03:31
Arab Today, arab today
Arab Today, arab today

Telecom margins ‘hit by pricing race’

Arab Today, arab today

Arab Today, arab today Telecom margins ‘hit by pricing race’

Jeddah - Arabstoday

Growth in the Saudi telecom sector sector is mainly focused on broadband and corporate segments, according to analysts. The outlook on broadband remains strong with lower cost handsets expected to increase penetration rates, NCB Capital says in its latest report analyzing the Saudi telecom sector. NCB Capital, the GCC’s major wealth manager and the Kingdom’s largest asset manager, notes that growth in the sector is mainly focused on the broadband and corporate segments. While pricing competition remains high and margins could be pressured as a result, valuations remain attractive with the sector trading at 8.6x 2013E P/E. NCB Capital continues to be Overweight on STC, with a PT of SR 50.8 (upside of 19 percent), and Mobily with a PT of SR 88.6 (upside of 17 percent), while remaining Neutral on Zain KSA, with a PT of SR 8.4 (upside of 5 percent). “Although the outlook for Saudi Telecom Company (STC) and Mobily remains positive, we prefer the latter due to strong fundamentals, good dividends and its Saudi focused business,” commented Farouk Miah, head of equity research at NCB Capital.” He said: “We have raised our price target for Mobily by 8.2 percent due to the strong outlook of the broadband and corporate segment. On the other hand, our PT of STC is down by 1.9 percent due to weaker than expected Q3 2012 numbers and limited change in terms of outlook. STC has benefited from improved local operations; however, FX volatility remains a concern given around 31 percent of 2012 revenues are expected to be from abroad. The report notes that Zain KSA PT is down by 26 percent to S R8.4. This is primarily, due to the very weak Q3 2012 results (net losses increased YoY for the first time in two years), as well as ongoing concerns of how it will deal with its high interest costs and compete with STC and Mobily. NCB Capital continues to believe the sector has a strong growth potential. The outlook on broadband remains strong with lower cost handsets expected to increase penetration rates. The report considers that profit growth will be driven by growth in data, cost efficiencies, and international operations for STC, while Mobily’s recent MoU with Atheeb coupled with its joint venture with IBM positions it strongly to take market share in the corporate segment and drive its bottom-line. Miah added: “We believe the sector’s main concern remains price-led competition in the main growth segments i.e. data and corporate. Additionally, with increasing penetration rates across all segments, additional areas of growth may become difficult to source.” The Saudi telecom sector trades at a 2013e P/E of 8.6x, 10 percent below regional peers. A relatively stronger macro environment in the Kingdom is likely to support faster growth in the sector than in other regional countries. Summary of telecom-specific ratings: STC NCB Capital retains its Overweight call on STC with the PT down 1.9 percent to SR 50.8. Growth will come from both its domestic and international operations with a focus on broadband. Margin pressures in key growth segments as well as the volatility of FX are the stock’s main concerns. Use of excess cash is a key catalyst; any increase in dividends will be seen as a positive, continued international expansion may be put pressure on the stock. Mobily NCB Capital remains Overweight on Mobily, with the PT increasing by 8.2 percent to SR 88.6. The recent JV with IBM as well as the success of the MoU with Atheeb will strongly position Mobily for growth in the corporate segment. Mobily remains well positioned to benefit from increased broadband penetration. The bonus share should be a short-term catalyst with the strong dividend outlook also supporting the stock. Zain KSA NCB Capital remains Neutral on Zain KSA, with its PT falling significantly to SR 8.4. Currently, the company’s main concern is refinancing its debt under improved terms; however the long-term concern remains its ability to effectively compete with STC and Mobily. Due to its weak balance sheet, capex investment remains behind what is required to compete effectively. A significant restructuring of its business model is needed to improve the outlook of Zain KSA. From Arabnews

Name *

E-mail *

Comment Title*

Comment *

: Characters Left

Mandatory *

Terms of use

Publishing Terms: Not to offend the author, or to persons or sanctities or attacking religions or divine self. And stay away from sectarian and racial incitement and insults.

I agree with the Terms of Use

Security Code*

Arab Today, arab today telecom margins ‘hit by pricing race’ Arab Today, arab today telecom margins ‘hit by pricing race’

 



Arab Today, arab today
Arab Today, arab today Jordan airline suggests flyers 'talk'

GMT 11:59 2017 Friday ,24 March

Jordan airline suggests flyers 'talk'
Arab Today, arab today 5 Crafty Must-Have Limited-Budget Ideas

GMT 17:03 2017 Saturday ,25 March

5 Crafty Must-Have Limited-Budget Ideas
Arab Today, arab today Rebel supporters flood Yemen streets

GMT 06:39 2017 Monday ,27 March

Rebel supporters flood Yemen streets
View News in Arabic - Business: أخبار الشركات
Arab Today, arab today
Arab Today, arab today
Arab Today, arab today Yemen children dream of school

GMT 07:25 2017 Friday ,24 March

Yemen children dream of school
Arab Today, arab today Trump to roll back Obama clean power plan

GMT 11:10 2017 Monday ,27 March

Trump to roll back Obama clean power plan
Arab Today, arab today Prepares to give stargazers an eyeful

GMT 13:38 2017 Monday ,06 March

Prepares to give stargazers an eyeful
Arab Today, arab today Uber grounds self-driving cars

GMT 09:11 2017 Monday ,27 March

Uber grounds self-driving cars
Arab Today, arab today Audi RS 5 Coupe acquires new design

GMT 13:22 2017 Thursday ,23 March

Audi RS 5 Coupe acquires new design
Arab Today, arab today Nermein Al Fekki films “Foxes in the Valley”

GMT 09:58 2017 Saturday ,25 March

Nermein Al Fekki films “Foxes in the Valley”
Arab Today, arab today Salvage of South Korea's Sewol ferry

GMT 04:51 2017 Friday ,24 March

Salvage of South Korea's Sewol ferry

GMT 06:21 2017 Friday ,24 March

MP submits a petition to dismiss university head

GMT 18:57 2017 Tuesday ,21 March

Accessories designer reveals her new collection

GMT 15:25 2017 Tuesday ,21 March

2017 already marked

GMT 13:26 2017 Friday ,24 February

Expresses Algerian history by woody figures

GMT 20:03 2017 Saturday ,25 March

Health expert warns from dust sensitivity

GMT 07:36 2017 Wednesday ,22 March

US, Britain ban laptops on flights

GMT 06:31 2015 Thursday ,04 June

Pluto's unruly moons

GMT 19:27 2017 Saturday ,11 March

Boualsof launches "Priestess Kahina" collection
Arab Today, arab today
Arab Today, arab today
 
 Arab Today Facebook,arab today facebook  Arab Today Twitter,arab today twitter Arab Today Rss,arab today rss  Arab Today Youtube,arab today youtube  Arab Today Youtube,arab today youtube
arabstoday arabstoday arabstoday arabstoday
arabstoday arabstoday arabstoday
arabstoday
بناية النخيل - رأس النبع _ خلف السفارة الفرنسية _بيروت - لبنان
arabstoday, Arabstoday, Arabstoday