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Mobily beats profit forecasts

Saudi mobile operator reports Q4 profit of $137.1mn by targeting remote customers, CEO says

Saudi mobile phone operator Etihad Etisalat (Mobily) surpassed fourth-quarter profit forecasts by targeting new customers in remote areas and expanding services in a market close to saturation.

Mobily, Saudi Arabia's second mobile phone firm, made 514 million riyals ($137.1 million) in the three months ended December 31 compared with 330 million riyals a year earlier, it said in a statement on the Saudi bourse website.

The quarterly profit topped all six forecasts for Mobily's earnings in a net profit survey by newswire Reuters last month, which ranged from 349 million riyals to 481 million riyals. The average forecast was for a profit gain of 23.8%.

"We established our footprint in remote areas of the kingdom by adding new sales outlets," Mobily chief executive Khaled Al-Kaf told Reuters of the reasons for the earnings growth.

"We also introduced new services, such as broadband, which accounted for 10% of our turnover in 2007 alone," Al-Kaf said.

Mobile phone penetration in the largest Arab economy was 97% in the third quarter, investment bank Shuaa Capital said in a report this month.

Al-Kaf said penetration had hit 100% in the country, where a third mobile phone firm, affiliated with Kuwait's Mobile Telecommunications Company (Zain), plans to start operations this year.

"This does not mean growth potential has dried out," he said. "There is still potential in this market whether you are looking at geographic areas or services, such as broadband," Al-Kaf said.

The company, in which the UAE's Etisalat owns 35%, said 2007 profit almost doubled to 1.38 billion riyals, from 700 million riyals in 2006, as sales grew 44.3% to 8.44 billion riyals.

Mobily's net margins improved as a result by 37%, based on Reuters' calculations. Earnings per share rose to 2.76 riyals at the end of 2007 from 1.4 riyals in 2006.

Mobily, which did not release subscriber numbers, increased its market share to 40% by the end of 2007 from 30% at the end of 2006, Al-Kaf said.

The firm started operations in May 2005 and competes with incumbent Saudi Telecom Company, the largest Arab telecom firm by market value, for mobile phone users in the largest Arab economy, home to about 25 million people.

Saudi mobile phone operators may be generating 55 billion riyals in revenue in 2010 in the world's top oil exporter, 38% more than 2006, the kingdom's Telecom Ministry Mohammed bin Jamil Al-Mullah said in May.

Mobily would seek to boost the percentage of its post-paid clients, which now account for 10-11% of total clients, Al-Kaf said. About a quarter of new subscribers were post-paid, he said.

Al-Kaf warned a price war between the three operators would backfire on all of them. "This market can cope with more operators. Everything now depends on what strategy Zain will opt for," he said.

Shares of Mobily bucked a slide on the Saudi stock market on Sunday after the results, gaining 1.1% to 67.75 riyals.

The index plunged 7.45% after profits of the biggest Arab firm, Saudi Basic Industries Corporation (Sabic), missed analysts' forecasts.

Global Investment House set a price target of 76.8 riyals on the Mobily shares in October, while National Bank of Kuwait's price target is 76 riyals. (Reuters)

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