Riyad Capital maintains Zain Saudi’s ‘hold’ rating; sets TP at SAR 11

Riyad Capital maintained its “hold” rating on Mobile Telecommunications Co. Saudi Arabia (Zain Saudi) and set the stock’s 12-month target price at SAR 11, according to a recent report issued by the firm.

The decision of Saudi's telecom regulator to slash call termination fees by 40 percent to SAR 0.15 from SAR 0.25 is expected to mostly benefit Zain, the firm said.

The authority gave the Saudi-based operator a breather through this move, the report added. The regulator also delayed license fee payments, which were weighing on Zain’s finances due to its low subscriber base.

Zain Saudi previously urged the Communications and Information Technology Commission (CITC) to reduce call connection fees. However, Saudi Telecom Co. (STC) and Etihad Etisalat (Mobily)— its larger rivals in the kingdom— hit out at this attempt.

Zain had warned that its clients would go off-net, unlike Mobily and STC’s subscribers. This in turn undermined the pricing power of the operator’s clients, while competitors enjoyed more flexibility.  

The telecom regulator also plans to compensate Zain Saudi for part of its license fees in order to ease its debt.

The telecom authority’s decision will broadly help Zain and give ample room for the operator to compete in the kingdom, Riyad Capital added.