By: Mohamed Idris
Riyadh – Mubasher: The agreement signed by the Saudi Telecom Company (STC) and Mobily will boost the operating margins as well the profit per share of both companies, according to market analysts.
STC signed a memorandum of understanding (MOU) with Mobily on Sunday, 31 July, to jointly explore options for extracting value from their owned telecommunications towers, aiming to cut costs and enhance operating efficiency.
“Selling the towers will be the first of its kind in the Middle East,” Aba Al Khail, financial analyst at Riyad Capital, told Mubasher.
The number of current telecom towers in the Kingdom is estimated to be 34,000, although there is no accurate figures available by official bodies so far, added the analyst.
STC owns 50% or 17,000 towers of the Kingdom’s total number of towers, to become the biggest owner of telecom towers in Saudi. Mobily comes in second place by 28% or 9,500 towers, followed by Zain by 22% or 7,500 towers, he added.
About the reason of the towers’ sale, Riyad Capital analyst pointed that STC aims to reduce expenses, while Mobily and Zain need the yield to pay their debts.
Aba Al Khail highlighted that total classified assets of the three telecom companies by a net book value amount to SAR 52.6 billion as it accounts for 76% of total fixed assets, according to the companies’ financial statements.
The joint agreement would end in one of two solutions, either selling the telecom towers or establishing a tower company owned by the three companies, incase Zain joined.
The analyst added that incase of setting up a company for establishing towers, its initial public offering (IPO) will be interesting for all three companies and the investors as well.
Revenues of mobile and data services represent 86% of STC’s revenues, while the depreciation of mobile sector reached SAR 3 billion in 2015 and SAR 700 million for the data services, said Ibrahim Al Harby, technical analyst at Al Istithmar Capital.
Al Harby sees that the main reason for setting up a company for establishing towers is providing annual maintenance which will benefit the towers and raise their efficiency.
Translated by: Sara Ghali
