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Saudi telcos suffer worse than expected first quarter

STC suffers 29% fall in profit, while Zain posts net loss of SR663m ($177m). Rival telco Mobily's results are due in the next two days

KSA market leader STC's drop in profit was steeper than anticipated, according to a Reuters poll.
KSA market leader STC's drop in profit was steeper than anticipated, according to a Reuters poll.

Two of Saudi Arabia's telecom operators, Saudi Telecom Co (STC) and Zain, have posted worse than expected results for the first quarter of the year.

STC suffered a 29% fall in first quarter net profit, while Zain, the most recent entrant to the mobile market in KSA, posted a first-quarter net loss of SR663m (US$177m).

In a statement released to the KSA bourse, STC said it made a net profit of SR1.772 billion (US$472.5 million) for the first three months of the year, down from SR2.49 billion ($664 million) in the same period last year.

KSA market leader STC's drop in profit was steeper than anticipated, according to a poll conducted by Reuters, with analysts expecting the firm to report SR2.42 billion ($645 million) in net profit.

In another Reuters survey, EFG-Hermes said it expected Zain to make a smaller loss of SR618 million ($164 million).

It is an improvement on the same period last year for Zain, which launched in KSA towards the end of 2008 and has an 11% share of the market, when it made a net loss of SR765m ($204m). However, it is a wider loss than the final three months of last year, when the figure stood at SR657m ($175.2m).

The second largest GSM operator in the KSA market by subscriber numbers, Etisalat-backed Mobily, says it will release results in the next two days.

STC said the drop in profit was due to a fall in international call prices, a rise in fees related to using external networks and an increase in group capital spending. It also said that the shrinking of the group's ownership in Malaysia's largest mobile phone service provider Maxis, had an impact.