DUBAI: Bond credit rating firm Moody’s has upgraded the baseline credit assessment (BCA) of Saudi Arabia’s “stc”, saying it has maintained “very strong financial metrics.”
The telecom company’s BCA was revised from a1 to a2, and Moody’s also affirmed its A1 long-term issuer rating.
“The upgrade reflects stc's leading position in the Saudi telecom sector, which has considerable growth opportunities,” Julied Haddad, a senior analyst at Moody’s, said in a recent report.
The ratings agency factors in financial profile, market dominance, and liquidity in deciding on companies’ BCA.
According to the report, “stc” was able to maintain a conservative financial profile, as well as maintain strong metrics despite several economic factors, including an oil price crash and the COVID-19 pandemic.
The company has sustained its debt to EBITDA ratio, and has built a strong balance sheet over the years, Moody’s said in a report.
This has given “stc” a headroom to grow organically through investments, the report explained, as well as develop its footprint outside the Kingdom through acquisitions.
“As of June 2021, stc had SR7.7 billion ($2.1 billion) in unrestricted cash and cash equivalents, in addition to SR2.9 billion ($0.8 billion) of short-term Murabaha and SR3.9 billion ($1.0 billion) in the form of investments in a sukuk issued by the Government of Saudi Arabia, which the company can liquidate, should the need arise,” it added.
The BCA also looked at the competition within the telecom industry in the Kingdom, where “stc” holds 70 percent of market share.
“Following the upgrade of stc's BCA to a1, the company is now one of the highest rated telecom operators on a stand-alone basis globally,” the report said.
The new “stc” rating could be affected positively if the sovereign rating of the Kingdom is upgraded, Moody’s said.