Saudi Telecom profit drops 4%

UPDATE 1: Company misses forecasts as Q3 net income drops to $803.7mn, attributed to expansion costs.

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By  Ola Galal Published  October 26, 2008

Saudi Telecom Co. (STC) posted on Sunday its first decline in quarterly profit since June 2007 and missed analysts forecasts on growing expansion costs from new foreign operations.

Net profit in the three months to Sept. 30 was 3.01 billion riyals ($803.7 million) compared with 3.14 billion riyals in the year-earlier period, it said in a statement on the bourse website.

It was "the result of the major expansion of networks of companies the firm has invested in to cover larger geographical areas", it said in a statement posted on the bourse's website.

STC bought a 26 percent stake in VIVA, Kuwait's third telecom operator, in November last year.

Through its 25 percent stake in Malaysia's Maxis, the Saudi firm is also involved in network expansion in India and Indonesia.

STC's quarterly earnings came below forecasts from four brokerage and research firms, ranging from 3.35 billion riyals to 4.01 billion riyals, in a survey by newswire Reuters last month.

STC will give shareholders 2 billion riyals in dividends for the third quarter.

Income from operations rose 58 percent in the third-quarter to 13.54 billion riyals, apparently bolstered by acquisitions the firm has made over the past 15 months and operating profit rose 20.5 percent to 4.2 billion, it said.

Saudi Telecom made a net profit of 9.88 billion riyals in the nine months ended Sept. 30, compared with 8.96 billion riyals a year earlier, it said.

STC has come under pressure to improve profitability with stiffening competition at home from rivals led by Kuwait's Zain and Emirates Telecommunications Corp. (Etisalat). It has also been expanding abroad, snapping up assets worth billions of dollars.

STC paid $2.56 billion this year to buy a 35 percent stake in Oger Telecom and its first foreign investment was in 2007 when it took the 25 percent stake in Maxis for $3 billion deal that opened up markets in India and Indonesia.

STC is also among bidders for a 25 percent stake in Oman Telecommunication Co. (Omantel), which the government of Oman is selling.

The company's shares are down 28.96 percent this year to Saturday's close, outperforming the main index, which has lost 49.05 percent. (Reuters)

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