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S&P Revises Saudi Arabia's Outlook to 'Positive'

Rating agency S&P revised Saudi Arabia's outlook to positive from stable, citing improving GDP growth and fiscal dynamics over the medium term. (Reuters)
Rating agency S&P revised Saudi Arabia's outlook to positive from stable, citing improving GDP growth and fiscal dynamics over the medium term. (Reuters)
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S&P Revises Saudi Arabia's Outlook to 'Positive'

Rating agency S&P revised Saudi Arabia's outlook to positive from stable, citing improving GDP growth and fiscal dynamics over the medium term. (Reuters)
Rating agency S&P revised Saudi Arabia's outlook to positive from stable, citing improving GDP growth and fiscal dynamics over the medium term. (Reuters)

Rating agency S&P has revised Saudi Arabia’s outlook to “positive” from “stable”, affirming the kingdom’s long-term foreign currency debt rating at “A-/A-2.”

“The positive outlook reflects our expectation of improving GDP growth and fiscal dynamics over the medium term, tied to the country’s emergence from the COVID-19 pandemic, improved oil sector prospects, and the government’s reform programs,” the agency said.

It expected that the Kingdom, in the medium term, will continue its policy to drive growth in the non-oil sectors through planned economic diversification, the “Saudization” of the workforce, and increased participation of women in the workforce to improve the work environment.

In addition to Saudi Arabia’s policy of structural diversification of the economy away from oil and hydrocarbon facilities, as the non-oil sector represents an increase of more than 50% of the GDP.

The rating agency in its report underlined the efforts to reform the social aspect, including an increase in the indicator of women’s share in the labor market in the total workforce, as well as the Kingdom’s target to reach net zero emissions by 2060 and increase investment in renewable energy, hydrogen and other alternative fuels.

In terms of flexibility and performance, the agency expected to support financial and external accounts in the years 2022-2025 as a result of government efforts to develop public finances.

It further expected a decrease in spending by 6% in the Kingdom’s budget for the year 2022 compared to 2021, an increase in revenues in line with the increase in oil prices by approximately 20%, in addition to an increase in the volume of oil production by at least 14%.

S&P’s amendment of the future outlook of the Kingdom’s credit rating affirms the effectiveness of the efforts and structural measures the country has taken over the past years, in accordance with the objectives of the Kingdom’s Vision 2030, which were positively reflected in the fiscal policy.

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Revenue Growth, Improved Operational Efficiency Boost Profitability of Saudi Telecom Companies

A man monitors the movement of stocks on the Saudi Tadawul index. (AFP)
A man monitors the movement of stocks on the Saudi Tadawul index. (AFP)
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Revenue Growth, Improved Operational Efficiency Boost Profitability of Saudi Telecom Companies

A man monitors the movement of stocks on the Saudi Tadawul index. (AFP)
A man monitors the movement of stocks on the Saudi Tadawul index. (AFP)

Telecommunications companies listed on the Saudi Stock Exchange (Tadawul) achieved a 12.46 percent growth in their net profits, which reached SAR 4.07 billion ($1.09 billion) during the second quarter of 2024, compared to SAR 3.62 billion ($965 million) during the same period last year.

They also recorded a 4.76 percent growth in revenues during the same quarter, after achieving sales worth more than SAR 26.18 billion ($7 billion), compared to SAR 24.99 billion ($6.66 billion) in the same quarter of 2023.

The growth in the revenues and net profitability is the result of several factors, including the increase in sales volume and revenues, especially in the business sector and fifth generation services, as well as the decrease in operating expenses and the focus on improving operational efficiency, controlling costs, and moving towards investment in infrastructure.

The sector comprises four companies, three of which conclude their fiscal year in December: Saudi Telecom Company (STC), Mobily, and Zain Saudi Arabia. The fiscal year of Etihad Atheeb Telecommunications Company (GO) ends on March 31.

According to its financial results announced on Tadawul, Etihad Etisalat Company (Mobily) achieved a 33 percent growth rate of profits, bringing its profits to SAR 661 million by the end of the second quarter of 2024, compared to SAR 497 million during the same period in 2023. The company also achieved a 4.59 percent growth in revenues to reach SAR 4.47 billion, compared to SAR 4.27 billion in the same quarter of last year.

The Saudi Telecom Company achieved the highest net profits among the sector’s companies, at about SAR 3.304 billion in the second quarter of 2024, compared to SAR 3.008 billion in the same quarter of 2023. The company registered a growth of 4.52 percent in revenues.

On the other hand, the revenues of the Saudi Mobile Telecommunications Company (Zain Saudi Arabia) increased by about 6.69 percent, as it recorded SAR 2.55 billion during the second quarter of 2024, compared to SAR 2.39 billion in the same period last year.

Commenting on the quarterly results of the sector’s companies, and the varying net profits, the head of asset management at Rassanah Capital, Thamer Al-Saeed, told Asharq Al-Awsat that the Saudi Telecom Company remains the sector leader in terms of customer base expansion.

He also noted the continued efforts of Mobily and Zain to offer many diverse products and other services.

Financial advisor at the Arab Trader Mohammed Al-Maymouni said the financial results of telecom sector companies have maintained a steady growth, up to 12 percent, adding that Mobily witnessed strong progress compared to the rest of the companies, despite the great competition which affected its revenues.

He added that Zain was moving at a good pace and its revenues have improved during the second quarter of 2024. However, its profits were affected by an increase in the financing cost by SAR 26.5 million riyals and a rise in interest, while net income declined significantly compared to the previous year, during which the company made exceptional returns.