RIYADH, 30 January 2006 — Fixed-line monopoly Saudi Telecom Co. (STC) doubled its net profit in the fourth quarter but revenue growth slowed in 2005 as the firm faced competition for the first time in the mobile phone business.
Saudi Arabia’s second largest listed company posted a net profit of SR3.27 billion ($872 million) in the three months to December, up almost 100 percent from the fourth quarter of 2004.
Full-year net profit rose 34 percent to SR12.45 billion, but annual revenue growth fell to 7 percent from 12 percent in 2004 as the government opened up the sector by issuing a second mobile phone license. Etihad Etisalat, a joint venture between Saudi and United Arab Emirates investors, began operations in the world’s biggest oil exporter last year and has rapidly expanded its subscriber base.
STC said it still hoped to increase market share and was expecting dramatic growth in demand for high speed Internet.
STC shares surged 9.9 percent after the results were announced early yesterday and were trading at SR1,245 in the afternoon session, up 6.05 percent for the day.
The company made no reference to competition in its statement but said it had managed to increase annual revenue to SR32.54 billion “despite the big cuts in the fees for services.”
Analysts said the strong profit growth was due largely to the company’s drive to cut costs and improve productivity.
“Saudi Telecom has been cutting operating costs recently,” said one Saudi analyst who asked not be named. He said the company had halved growth in operating costs in the first six months of the year.
A senior STC manager said the firm stepped up a promotion drive for mobile phone services last year and hoped to increase market share.
STC has 4 million fixed-line users and 12 million mobile phone customers in a country of 26 million people. The STC manager said Etihad Etisalat’s Mobily operation had 2.3 million customers.
STC is also looking at expanding its fixed line and Internet businesses. “We will try to...provide new services and capitalize on our extensive and exclusive network,” the manager, who asked not to be named, told Reuters. STC has signed deals with firms including France’s Alcatel, Germany’s Siemens and US firms Lucent Technologies and Microsoft and hopes to increase the number of high-speed Internet (DSL) users from 50,000 to 700,000 by the first quarter of 2007, he said.
“We might reach 350,000 to 400,000 DSL subscribers by the end of 2006,” the manager said. The company said it planned to distribute a SR10 cash dividend for the fourth quarter, bringing the total 2005 dividend to 31 riyals, up from SR26 in 2004. The company also said it was planning to issue one bonus share for each three held.
“The profit falls in line with expectations, the cash distribution is lower than expected but the bonus share is good,” said Joe Kawkabani, of Dubai-based Shuaa Capital.
