Telecom sector revenues to grow 2% by year-end

Revenues of the telecom sector in the Kingdom are poised to grow by 2 percent by year-end and 4.7 percent by the end of next year (2015), local media said quoting a financial report.
“We expect the sector to record a revenue growth of 2 percent in 2014 and 4.7 percent in 2015 to reach SR82.6 billion,” said Iyad Ghulam, equity research analyst at NCB Capital.
He said valuations will remain attractive for the Saudi Telecom Co. (STC) and Etihad Etisalat Co. (Mobily) boosted by strong fundamentals, dividend outlook and opening of Saudi stock market to international investors. For future outlook, the analyst gave “overweight” for STC and Mobily and “neutral” for Zain Saudi Arabia, the paper said.
The slowdown in the telecom sector remains a key concern, he said.
Despite the expected growth of revenues, key strengths of the sector come from attractive valuations and high dividend yield, he said.
He gave preference to STC based on its strong balance sheet, potential of higher dividends and attractive P/E of 12.0X for next year (2015), the paper said.
The report said frequent and high dividend yields are the sector’s key strength.
The current dividend yield for the telecom sector is 4.3 percent compared with nearly 2.6 percent for the Saudi stock market (TASI).
STC and Mobily are among few companies in the market that pay quarterly dividends, the report said.
The analyst expected that growth in the telecom will continue in the next two years driven by the data sector and, further, by the growing penetration rates of the low-cost smartphone sets.