A NCB Capital report on the Saudi telecom sector provides a cautiously optimistic view on Saudi telecom companies, as the sector has been providing good growth potential, particularly in the broadband segment.
On the individual telecoms firms, NCB Capital picked Mobily as its top pick, with growth combined with a good dividend as the key strengths.
The report believes that profit growth for telecoms companies will be driven by a higher focus on value-added services (particularly broadband), costs efficiencies, and benefits derived through international exposure (for STC).
Obstacles to growth
The report did highlight key obstacles to this growth, including pressure on ARPU levels (Average Revenue Per User), high Capex requirements and a saturated voice market (a major contributor to overall revenues).
In conclusion, NCB Capital said it "believed the telecoms sector in Saudi continues to remain attractive, despite the relatively stronger macro environment in Saudi which should fuel faster growth in the telecom sector than in other regional countries."