The Saudi Government has announced its plan to increase Saudi Telecom Company (STC) paid capital by 25 percent and to offer 30 percent of the monopoly operator for public subscription before the end of this year. Only Saudi nationals and organizations will be eligible for buying Saudi Telecom’s shares.
The government has also announced that the GSM (global System for Mobile Communications) market will be open for competition in the last quarter of 2004, while competition in the PSTN (public switched telephone network) market is set for 2008.
A newly released report from the Arab Advisors Group asserts that the public offering will be preceded by an increase in STC’s paid capital from 12 billion Saudi riyals ($3.19 billion) to SR15 billion ($3.99 billion), a 25 percent increase, by reallocating part of the retained earnings to the paid capital.
The new capital will be divided into 300 million shares each with a nominal value of SR50 ($13.5). The government hopes to sell the shares at $54.2 and hopes to cash in as much as $4.06 billion from the 30 percent stake sold. This translates into a Saudi Telecom Company market capitalization of $13.655 billion: A PE Ratio of 14.4, which is a higher ratio when compared with those of other telecom operators in the Gulf region.
“Despite the higher than average valuation, STC still holds great potential, especially that both PSTN and GSM markets in the Kingdom have not yet reached their envisaged potential and the company has ample time to satisfy the pent-up demand in these segments. By end of 2001, the number of mainlines stood at 3.2 million and the number of cellular subscribers at 2.5 million, a penetration rate of 15 percent and 12 percent respectively,” Arab Advisors Group’s analyst Shain Shahin noted.
“The introduction of prepaid service in the GSM market in April of this year has already resulted in a boom in GSM market growth and will enhance STC’s revenues from the rapidly growing GSM service,” Shain added. “Add to this the plans to reduce the governments’ revenue sharing agreement with STC, and the more than six years of monopoly time left, and STC has a lot of time to put its house in place and justify its high valuation”. — (menareport.com)
© 2002 Mena Report (www.menareport.com)
