RIYADH, 14 February 2004 — Saudi Telecommunications Co. (STC), the Kingdom’s largest listed firm, recorded a 140 percent surge in 2003 net profits to SR8.53 billion ($2.3 billion), exceeding some analysts’ forecasts.

The results, posted on the company’s Website yesterday after the close of the trading week, are likely to fuel increased investor optimism on the Saudi bourse, which jumped 76.5 percent last year.

The all-share index of the largest Arab bourse ended on Thursday near a new peak, buoyed by gains in STC due to expectations it would record solid earnings and distribute generous dividends.

The Kingdom’s sole telecoms provider said its 2003 operating income rose 16 percent to SR27.29 billion. Its board recommended distributing second-half dividends of SR14 per share - bringing total 2003 payments to SR22 per share.

STC attributed the surge in profits to cost-cutting and a large increase in subscribers but gave no details. It said the increase in profits came despite the allocation of SR700 million to human resources development.

Saudi Arabia has the biggest telecommunications market in the Gulf. The sector has been growing by some 30 percent a year.

The firm has emerged as a showcase for the state’s plans to privatize public entities to help meet growing demand for services while cutting spending.

The government floated 30 percent of STC in 2002 to Saudi and other Gulf Arab investors and to two Saudi state funds for SR15.3 billion. The firm dominates the Saudi bourse.

In December, Saudi Arabia invited mobile telephone firms to build and operate GSM networks to end STC’s monopoly. It hopes competition would attract investment and meet growing demand for telecom services in the oil-rich state of 22 million people.

STC’s earnings per share rose to SR28.42 from SR11.82 in 2002.

Saudi Arabia’s National Commercial Bank had forecast in a report that STC’s net profits would surge to SR8.3 billion.

Bakheet Financial Advisors said on Thursday STC’s financial results and its dividend would determine market moves next week.

STC, with a capitalization of SR131.4 billion, closed on Thursday up 1.7 percent at SR438.00, near an all-time high of SR440.00 hit on Wednesday.