GCC telcos expand business in tech sector to tap expected growth: S&P Global

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Rated GCC telecom operators are looking for new ways to expand their businesses and diversify revenue streams, said S&P Global Ratings.

This is due to the maturity of core telecom operations, compared to the strong growth prospects in the technology sector.

Rated GCC telecom operators are expected to achieve revenue growth of 1-3% annually from 2024 to 2025 from core telecom operations. Meanwhile, the technology firms will likely record revenue growth of 8-10%.

Saudi Arabia is the largest telecom market in the Gulf region, as the low mobile phone penetration rate compared to the rest of the GCC countries provides higher growth potential than others, the rating agency noted.

The acquisitions by telcos in the technology sector exceeded $1 billion over the past two years, S&P Global said, expecting these operations to continue, given the companies’ healthy budgets, as the GCC technology market is fragmented.

The GCC government efforts for digital transformation will further support telcos, due to their strong shares in the technology market and close relations with governments.

The expansion of telecom operators in the technology sector will unlikely lead to a rating downgrade. However, the higher interest rates and the companies' needs to finance acquisitions and dividends may lower the ratings, S&P Global said.

It noted that the telecom assets of such companies, such as towers, may allow them to generate additional income.