Gulf telcos pursue acquisitions to boost revenue streams, says S&P

KUWAIT CITY, March 20: Standard & Poor’s Credit Ratings Agency (S&P) said that Gulf telecommunications companies have resorted to making small to medium-sized acquisitions, worth $1.24 billion, over the past two years, with the aim of increasing their revenues, reports Al-Anba daily.

S&P believes that mergers and acquisitions in the region will continue due to the healthy balance sheets of telecom companies in the GCC countries and growth ambitions, as well as the fragmentation of the IT market in the GCC region.

A recent report issued by the agency indicated that high growth rates, wide business diversification, and low capital intensity are all factors that push Gulf telecommunications companies to invest in the field of technology.

The agency explained that the mature telecommunications markets in the Gulf region, where mobile phone usage rates range between 130% and 210%, provide limited organic growth prospects for telecommunications companies, and that these companies are looking for new ways to expand their business and diversify their revenue sources.

Tatjana Leskova, a credit analyst at the agency, said: “We do not expect the increasing contribution of revenues from operations not related to telecommunications activities to have an impact on the credit ratings of rated Gulf telecom companies during the next two or three years, and we expect a continued decline in indebtedness among rated Gulf telecom companies.”

Leskova added, “But, in the long term, we will consider the potential impact of the changing business mix of Gulf telecom companies, competitive threats, and the ability to balance growth and debt on the credit ratings of these companies.”

The report revealed that the telecommunications markets in the Gulf countries are “mature,” which limits the growth of telecommunications companies’ revenues in the GCC countries to 1 to 3% annually.

This is in stark contrast to the revenues of technology companies, which the agency expects to increase by double digits.