Riyadh: Tassnief has maintained long-term entity rating of “(AAA)’’ and short-term entity rating of “T-1” assigned to Saudi Telecom Company. The outlook on the rating is “Stable”. The long-term rating of ‘AAA’ denotes the highest creditworthiness and minimal credit risk, relative to other issuers or obligations in the Kingdom of Saudi Arabia. The short-term rating of T-1 indicates the strongest capacity for timely payment of financial commitments relative to other issuers or obligations. The outlook on the assigned rating is ‘Stable’.

Rating Rationale: stc’s AAA rating incorporates robust operating & financial performance and expected continuity in the same over the rating horizon. Key rating considerations include the Company’s leading market position as an ICT conglomerate, strong franchise, and extensive network infrastructure. Ratings also consider stc's low business risk profile, strong balance sheet, conservative financial policy, low leveraged capital structure and abundant liquidity (cash & cash equivalents and investments), which provide the company with financial flexibility and are key rating drivers.

The company has a diversified product portfolio and presence across almost all facets of the ICT industry. stc is successfully implementing a strategy of strengthening and growing the core telecom business (including international expansion where a 9.9% stake in Spain-based Telefonica was completed) while continuing to invest in enhancing existing telecom infrastructure. The Company has significantly enhanced 5G infrastructure encompassing 8,470 towers across the kingdom. Around the core business, the Company has made significant progress in developing adjacencies (IT solutions, telecom distribution, Tower infrastructure, digital financial services, cybersecurity services, media services, cloud computing, Internet of Things, Real Estate venture capital, gaming/e-sports and data center hosting) which complement and support growth in core telecom business. The Company’s sizeable customer base allows it to cross-sell various related product offerings to existing customers. Broad based growth has been witnessed across all adjacencies resulting in an increase in the contribution of the non-telecom sector in total revenues to 23% in 2023 (2022: 18%; 2021: 8%). Tassnief has noted focused efforts to enhance diversification through acquisitions (as noted in the case of IoT squared and acquisition of stake in Devoteam Middle East) and organic growth. Given the healthy cash buffers, Tassnief expects stc’s credit rating matrix to remain sound even if the Company proceeds with any further investment/acquisition.  

Rating Triggers: Ratings remain dependent on maintaining leading market position, low business risk, and strong financial profile. Maintaining conservative financial policy is considered important from a rating perspective. A decline in EBITDA margins or an increase in leverage indicators translating into a significant increase in debt to EBITDA from current very low levels will remain key rating sensitivities. Given the expected financial profile over the rating horizon, Tassnief does not anticipate any downward pressure on the ratings of stc over the rating horizon.

About the Company: Saudi Telecom Company (stc) is the largest telecom operator in the Kingdom of Saudi Arabia and has an international footprint in Kuwait and Bahrain. stc's KSA subsidiaries offer ICT and financial services product portfolio.

For further information on this rating announcement, please contact Mr. Talha Iqbal, email at RS@Tassnief.com.

RELATED CRITERIA AND METHODOLOGY

Rating Methodology for Corporate (v.2. 2019) can be found on the website: www.tassnief.com