Moody's affirms ratings of stc, Saudi Electricity, outlook 'Stable’

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Moody's Investors Service affirmed the ratings of telecom operator stc and Saudi Electricity Co. (SEC) at "A1", with a "Stable” outlook.

The ratings of both companies reflect their continued strategic importance to the Public Investment Fund and the government.

stc's rating did not benefit from any uplift under the GRI methodology, as the company has a standalone assessment, which has the characteristics of a strong A profile.

Moody's indicated that the affirmation of stc's A1 ratings reflects the telco’s solid financial profile, as illustrated by its consistently low debt/EBITDA of below 1.0x, as well as its leading position in the domestic market. In addition, the company has a strong EBITDA margin and strong liquidity despite high dividend payments.

The ratings consider the concentration and increasing competitive nature of the telecom market in Saudi Arabia, saturation in the mobile segment, as well as the low aggregate revenue contribution from international operations in 2021.

Moody's stated that Saudi Electricity’s standalone assessment is supported by the low business risk profile of its integrated electricity activities, its dominant market position in Saudi Arabia and continued ongoing support from the government, including fuel and other forms of subsidies.

Since January 1, 2021, the utility provider operates under a new regulated asset base framework that is transparent and supportive. SEC's A1 rating also reflects a growing debt load as substantial investments are incurred to meet the growing demand for electricity in the Kingdom, Moody’s said.