Moody’s Investor Service has upgraded Saudi Telecom Company’s (STC) baseline credit assessment from a2 to a1, citing that the firm has maintained its strong financial metrics despite the headwinds.
The ratings agency also affirmed the long-term issuer rating of the state-controlled company, which is the biggest telecom provider in Saudi Arabia.
“The upgrade… reflects STC’s conservative financial profile and the ability of the company to maintain strong metrics despite some challenging times, including the oil price crash in 2015-2016 and more recently, the coronavirus pandemic,” Moody’s said.
The ratings agency also noted that STC has built a strong balance sheet over the years and is “well positioned” to take on growth opportunities in the kingdom’s telecom and information and communications technology (ICT) market.
The telecom and technology sectors are two of the strategic sectors the government is focusing on, as part of efforts to diversify the economy and grow the non-oil sector. To align with the diversification strategy, STC has been investing in expanding its other business lines, besides the core telecom operations.
“As the leading [ICT] operator in Saudi Arabia, with more than 70 percent share of total revenue in 2020, STC is well positioned to take advantage of the growth opportunities in the Saudi telecom and ICT market,” said Moody’s.
The company has 7.7 billion riyals ($2.2 billion) in unrestricted cash and cash equivalents as of June 2021. It also has 2.9 billion riyals of short-term Murabaha and 3.9 billion riyals in the form of investments in a sukuk issued by the government of Saudi Arabia, which the company can liquidate.
(Writing by Cleofe Maceda; editing by Seban Scaria)
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