Headquartered in Riyadh, Etihad Etisalat Co. (Mobily) is a leading provider of integrated telecom services to a diverse customer base across Saudi Arabia, including individuals, businesses and carriers. Established in 2004, Mobily through Saudi Arabia’s second Global System for Mobile Communications (GSM) license, ended the monopoly in the wireless industry, providing more choices in national mobile telecom services to local consumers.
Over the years, Mobily has rapidly grown organically and diversified through strategic acquisitions, driven by cutting-edge infrastructure investment. The company launched 3.5G services in 2006, 4G services in 2011, and 5G services in 2019. Mobily owns its network infrastructure, including Saudi Arabia’s newest fiber-optic network, which extends 60,670 km with access to all major cities.
Continuous investment in expanding the network has enhanced regional connectivity, including to the UAE, Bahrain, Kuwait, Qatar, Yemen and Jordan. As of the December 2023, the Usage segment generated 65.6% of the company’s total revenue, while the Activation and Subscription segment contributed 18.1%, and the remaining 16.3% was generated by the other segment.
Thriving telecom sector
Saudi Arabia ranked 2nd among G20 countries in the ICT Development Index, published by the ITU. The Saudi ICT market is the largest and fastest growing in the MENA region, with average monthly data consumption per person exceeding the global average by more than three times. Mobily achieved an impressive speed of 324.15 Mbps for Mobile 5G and 168.05 Mbps for Fixed broadband in third quarter of 2024, compared to the KSA median download speeds of 120.74 Mbps for Mobile and 112.45 Mbps for Fixed broadband.
Additionally, Mobily leads in download speed for popular gaming platforms in KSA, ranking #1 for PlayStation, Xbox, and Steam, and is rated highest in latency performance in 10 out of 18 of most popular video games. Furthermore, Mobily is evolving into a TMT company as part of its 2023+ strategy, positioning itself as a leading ICT player in KSA.
Robust financial performance
Mobily has experienced a consistent increase in revenue over the last five years, achieving a 7% CAGR to reach SAR16.76bn, the highest reported revenue in the past decade. This growth is attributed to the expansion across all revenue streams and a healthy increase in the overall subscriber base.
During the same period, Mobily turned around in earnings, achieving the highest net profit of SAR2.23bn in the decade, compared to a net loss of SAR0.71mn in 2017, largely due to the company’s overall operational efficiency. As a result, Mobily’s FCF surged to SAR3.7bn in 2023, up from SAR2.1bn in 2019. Consequently, the debt has declined to SAR11.8bn in 2023 from SAR14.9bn in 2019, with the Debt / Equity ratio improving from 0.98x in 2020 to 0.65x in 2023.
In comparison, its local peer, Saudi Telecom, demonstrated superior performance, clocking a net profit CAGR of 4% over the past five years to reach SAR13.3bn in 2023, with margins of 18%. However, it performed in line in terms of revenue growth.
Reasonable valuations
The stock is currently trading at a P/E of 16x, based on the estimated FY24 EPS of SAR3.7, which is comparatively lower than the global average of 20x. The company is also trading below its historical 3-year average P/E of 19x but is in line with its peer, Saudi Telecom, at 16x. Similarly, Mobily is trading at an EV/EBITDA of 7.4x, based on the projected 2024 EBITDA of SAR6.91bn, which is lower than the global average of 10.5x, the 10-year historical average of 7.6x and its peer, Saudi telecom, at 8.5x.
Additionally, the company has consistently paid out healthy dividends with an average payout of 50%. For 1H24, Mobily declared an interim dividend of SAR0.9. Based on the projected DPS of SAR2.0 for the full year 2024, Mobily offers an attractive dividend yield of around 3.5%. Out of the 13 analysts covering stock, 7 have given a “Buy” recommendation, with an average target price of SAR64.75, implying an upside potential of around 12% from the current market price.
Furthermore, over the next three years, analysts predict revenue to grow by around 7.0% CAGR, reaching SAR20.5bn in FY26, while EBITDA is projected to grow at CAGR of 5.5%, with margins of 38.0% in 2026. This performance is better than its peer, Saudi Telecom.
Mobily has positioned itself as a leading ICT player in KSA by developing internal capabilities, expanding product portfolio and strengthening partnerships to deliver a comprehensive end-to-end ICT ecosystem. Key risks arise from company’s susceptibility to cybersecurity threats and uncertainty owing to the evolving regulatory telecom network in KSA.
