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Mobily earnings disappoint

Saudi mobile telecom misses forecasts in Q1 with smallest gain in quarterly profit since inception.

Etihad Etisalat (Mobily) posted a 30% rise in first-quarter profit on growth of its mobile phone business, but missed all analysts' forecasts as it braces for greater competition in Saudi Arabia.

Mobily made 326 million riyals ($86.9 million), or 0.65 riyals per share, in the three months ended March 31, compared with 251 million riyals, or 0.5 riyals per share, a year earlier, it said in a statement on the Saudi bourse website.

That was the smallest gain in quarterly profit since the firm started operations in 2005.

First-quarter profit missed four forecasts of analysts in a net profit survey by newswire Reuters last month that ranged from 335.1 million to 529 million riyals.

Revenue rose 23% to 2.31 billion riyals - also the smallest rise since its inception - while operating profit grew 17% to 371 million riyals.

Profit growth resulted from "putting the emphasis on developing mobile phone services inside the kingdom, increasing the sales outlets and developing customer service," Mobily said in the statement, without elaborating.

Mobily shares were unchanged on Wednesday, the last trading day, at 60.5 riyals, 33% below a 91.4-riyal price target set by HSBC in February.

HSBC had raised its target price from 81.3 riyals, citing the contribution from broadband internet services, even though it said over all subscriber growth appeared slower than expected.

Mobily, which started operations in May 2005, competes with incumbent Saudi Telecom Company, the largest Arab telecom firm by market value, for mobile phone users in the kingdom, the world's largest oil exporter and home to 25 million people.

Zain Saudi Arabia, an affiliate of Kuwait's Zain, plans to start operations this year after selling shares to the public in the first quarter.

Mobily, which did not release subscriber numbers, claims a 39% market share with 11.1 million subscribers, its Chief Executive Khaled Al-Kaf told a shareholders' assembly this month.

Mobile phone penetration in the largest Arab economy probably exceeds 100%. Saudi mobile phone operators may be generating 55 billion riyals in revenue in 2010, 38% more than 2006, the government said last year.

Mobily's stock has fallen almost 18% this year, underperforming the index, which is down about 13%.

UAE telecom Etisalat owns 26.25% in Mobily, having sold an 8.74% stake in the firm at 55 riyals per share this year. (Reuters)

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