04


Analysis suggests that the Middle Eastern telecoms industry is actually stronger in terms of credit health, than its European equivalent, despite the impact of the Arab Spring.


Written by Pavle Sabic, Solutions Architect at S&P Capital IQ


Middle East Telecoms: Credit Health In The Wake Of The Arab Spring


The political unrest in the Middle East


has had a wide range of economic rami- fications, not least to the financial perfor- mance of companies in the Gulf Coopera- tion Council (GCC) area, particularly those in the telecommunications sector which have come under scrutiny from investors and companies’ counterparties. By tracking the fundamental credit health


of three major Middle East telecom firms – Qtel, Du and Saudi Telecom – for the relevant period, and comparing the results to various peer groups inside and outside the region, a clearer picture of the impact of the Arab Spring develops. It seems that the impact of political uncertainty has not had the negative effect one might expect.


From A Regional Perspective Using S&P’s Credit Health Panel (CHP) scoring system, the three companies were ranked against their Arab nations peer group using 33 fundamental metrics


categorized by three main panels: Income (ability to generate income), Operational (ability to manage its balance sheet), and Liquidity (ability to repay its debt obliga- tions on time). Table 1 shows the relative rank for 18


regional peers to provide a snap shot of the region’s telecommunication industry post- Arab Spring. Out of the three companies selected, Qtel rests at “Bottom” overall and Saudi Telecom is classed “Below Aver- age”. Du has an “Above Average” score. However, in terms of Income, Qtel and Saudi Telecom have an “Above Average” and “Top” score, respectively, while Du is scored as “Bottom”. In terms of liquid- ity, Qtel and Saudi Telecom have “Above Average” scores, while Du has a “Below Average” score. However, while Table 1 provides a useful


snapshot of the relative credit health of key ME telecom businesses, it does not indicate how the entire regional sector was affected


by the Arab Spring. For this, a wider per- spective is required.


Is The Signal Strong In EMEA? With this in mind, the research was extended to encompass a peer group of 22 companies in the integrated telecom- munication services and wireless telecom- munication services sub-industries across Europe and Africa. Table 2 shows that all three companies are


performing relatively well against their Euro- pean and African peers. Indeed, this broader analysis suggests that the Middle Eastern telecom industry is actually stronger in some instances – in terms of credit health – than its European equivalent, despite the negative economic impact of the Arab Spring. To find an answer to why GCC telecoms


have performed so well, it is worth a deeper examination of the credit profile and market perception of Qtel – the biggest mover under the previous two peer groups. »


Middle East Market Review | November 2011


Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10  |  Page 11  |  Page 12  |  Page 13  |  Page 14  |  Page 15  |  Page 16  |  Page 17  |  Page 18  |  Page 19  |  Page 20  |  Page 21  |  Page 22  |  Page 23  |  Page 24