Saudi Arabia's STC plans first sukuk sale under $5bn debt programme

Saudi Telecom Company, the biggest telecommunications operator in the kingdom by market value, will start selling Sharia-compliant bonds next week to help it diversify its finances and pursue growth plans.

The US dollar-denominated bond sale is the first tranche of $5 billion (Dh18.4bn) debt programme set up earlier in March, the company said in a bourse filing to Tadawul stock exchange, where its shares trade.

STC did not specify the size of the possible bond sale and said the final “value of the first issuance will be subject to market conditions and company’s requirement”, it said in the bourse filing.

The issuance of the proposed sukuk will be completed between April 26 and June 30, targeting institutional and qualified investors in several jurisdictions. HSBC, JP Morgan Securities, Standard Chartered, Samba Capital & Investment Management, First Abu Dhabi Bank and KFH Capital Investment are advising STC on the sukuk sale, it added.

A number of sovereigns, government-related entities (GRE), financial institutions and private companies from across the region have tapped the debt capital markets this year following the US Federal Reserve’s dovish stance on interest rate hikes. Saudi sovereign and GREs in recent months have attracted heightened investors’ interest for their credit. Saudi Aramco, the biggest oil producing company in the world, received more than $100bn of bids in orderbook for its $12bn debut international bond offering.

A potential fund raising by STC will help shore up company’s finances and having an international presence in debt capital market through the programme will enhance the company's financial standing in investor community, the company said in a statement last month.

“The aim of the sukuk programme is to support the execution of the company’s strategy and future plans,” it said at the time. “It will help the company to diversify the sources of funding and benefit from the features of international debt capital market in terms of liquidity, competitive pricing and diversification of investors’ base.”

The company earlier this week reported a 6.3 per cent year-on-year rise in its first quarter net profit as revenues surged. Net income for the first three months, climbed to 2.75bn Saudi riyals, which beat Egyptian investment bank EFG Hermes’ profit forecast on the back of a better than expected earnings before interest, taxes, zakat, depreciation and amortisation (ebitda) margin.

STC’s first quarter ebitda climbed to 5.4bn riyals, an increase of 19 per cent, while its revenues advanced 8.4 per cent to 13.4bn riyals, it said in a bourse filing.