Our business risk profile assessment is underpinned by STC's leading market position in the liberalized Saudi telecom market, with a difficult-to-replicate national network, implicit state support, high operating profitability margins in its domestic market, and strong underlying cash flows. These strengths are only partly offset by STC's increasing exposure to country risk, associated with its expansion into emerging markets, as well as the potential for increasing competition in its home market.
Our financial risk profile assessment reflects STC's solid credit metrics, its conservative financial policy, and limited recourse to debt of its foreign investments. Somewhat offsetting these strengths are the historically high
level of dividend payout ratios, as well as the risk of merger and acquisition activity abroad, which could adversely affect credit quality.
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