JEDDAH: Ratings agency Moody's said Monday it saw a moderate recovery in the Gulf telecoms and utilities sectors, but that the property sector remained challenged by oversupply. Moody's said credit conditions of rated corporates in the Gulf Cooperation Council (GCC) showed moderate recovery and stabilizing conditions, with some benefiting from rising oil prices and improving market conditions. Others however continued to suffer from sector-specific weaknesses, the agency said in a report. It also said the political unrest in countries in the Middle East and North Africa region could affect some issuers. Turmoil has spread across the Arab world since January, leading to the ouster of longtime regimes in Tunisia and Egypt as well as violent clashes in Libya, Syria, Yemen and Bahrain. The outlook for the telecommunications industry was stable and would see a moderate revenue growth, Moody's said, but added there were risks associated with merger activity. Regional telcos serve about 39 million people in the six Gulf Co-operation Council (GCC) states – two-thirds of whom are in Saudi Arabia – and most governments have a protectionist bent, a stance that is harder to sustain as revenues sag. Annual profits at four of the Gulf's six former monopolies – UAE's Etisalat, Saudi Telecom Co. (STC), Omantel and Bahrain's Batelco – fell by more than 10 percent last year and first-quarter earnings were also downbeat. Mobile penetration rates in the Gulf are among the highest in the world, ranging from 130 percent in Kuwait to more than 230 percent in the UAE. Moody's said its outlook for the property industry remained negative due to oversupply in key GCC markets. "The excess supply of commercial and, to a lesser extent, residential property reflects excessively high growth projections made before the global financial crisis," said Moody's analyst Martin Kohlhase. Global financial turmoil in 2008 saw projects worth billions shelved in Dubai and the Gulf region, while oil output also fell as crude prices plunged, impacting overall growth. The outlook for the GCC utilities sector was stable, as rapid economic and demographic growth in the GCC was spurring demand, and ratings of the entities benefit from strong government support, Moody's said.
