Saudi Telecom Due Windfall If Government Pays Market Rate For Seized Land

A plot of land seized by Saudi Arabia’s government from Saudi Telecom Co (STC) is probably worth multiple times its book value, property consultants estimate, potentially putting the company in line for a huge compensation.

Earlier this month, the telecom operator announced the government had seized a 1.05 million square metre plot in the Al Faisaliah district of Riyadh, stating the land’s book value was SAR105.3 million ($28.08 million).

That equates to SAR101 per square metre.

But land in Al Faisaliah is actually worth SAR1,300-SAR1,700 per square metre in the old part of the district and SAR1,800-SAR2,700 in the ring road industrial zone, JLL, formerly known as Jones Lang LaSalle, told Reuters.

These estimates suggest the land seized from STC is worth between SAR1.36 billion and SAR2.83 billion.

“STC does not have the exact information as to when the government will finalise the land sale transaction and at which price,” STC told Reuters on Monday.

STC, the former telecom monopoly which is 70 per cent owned by the government and made a net profit of SAR9.9 billion in 2013, has not said why the government seized the land. It did not disclose the precise location of the plot when asked by Reuters.

Parts of Al Faisaliah are in Riyadh’s central business district, where land values range from SAR8,000 to SAR20,000 per square metre, said Jang Shabbir, associate director at property consultants Colliers International in Riyadh.

Land in the southern district of Riyadh, which is among the cheapest parts of the city, is worth SAR3,000 to SAR4,000 per square metre, Shabbir said.

Such valuations could make STC’s former plot worth somewhere between SAR3.1 billion and SAR20.9 billion.

“Growing demand across all sectors combined with a generally limited supply has forced real estate prices to accelerate over the past few years,” said Shabbir.