Al-Babtain Power & Telecoms is well-placed to benefit from growth in some of the region’s fastest-growing sectors, notably electricity and telecoms.
Aljazira estimates that mobile operators Zain and Mobily are spending SR3-5bn a year on expanding their coverage in Saudi Arabia. This provides a solid market for the design, installation and maintenance of telecommunication systems, as well as telecoms towers. The maintenance of newly installed telecommunication systems should also provide Al-Babtain with a sustained recurring source of revenue.
The company’s production of telecom towers, lighting poles and masts is complemented by its testing stations and galvanising services. Its integrated production processes and experience in executing large projects puts the firm at an advantage. However, there are some challenges.
Growing competition from low-cost Asian manufacturers presents a challenge to margins, along with well-placed regional providers such as the local Zamil Steel and Arabian Pipes Company. Al-Babtain must also deal with price volatility. For example, increases in steel prices have caused margins to become more erratic. Both raw materials prices and competition are likely to put pressure on margins.
Al-Babtain’s technical expertise and ability to execute large projects will help it secure new orders, both within the region and internationally. In this it will clearly be supported by its relationship with ABL.
The management’s strong level of experience in executing projects will stand it in good stead as it bids for new business, and some of its overseas ventures look well-timed, such as its new investment in Qatar. The major challenge going forward is to remain competitive in an increasingly crowded marketplace, where input costs are looking increasingly volatile.