Investors are expected to punish STC's shares when the
Saudi bourse reopens on Saturday.
Yet it outperformed Etihad Etisalat (Mobily) and Zain
Saudi in the quarter, according to Asim Bukhtiar, Riyad Capital's head of
research, with the other two operators' profits also missing estimates.
"Saudi investors do react to headline numbers but,
once the market digests the details, STC's share price should stabilize —
subscriber numbers continue to grow and it is doing well domestically in terms
of EBITDA margins and operating income," he said.
"Zain Saudi's growth decelerated quite rapidly,
Mobily's quarter-on-quarter data growth was much weaker than expected, while
for STC, its profit drop was more of an earnings issue than a revenue
issue."
The former monopoly made a net profit of SR1.56 billion
($416 million), down from SR3.3 billion in the same period a year ago, it said
in a statement on Saudi Arabia's bourse website.
Analysts polled by Reuters on average expected the firm
to post a quarterly profit of SR2.47 billion.
STC said it made foreign exchange losses of SR780 million
in the quarter and took SR134 million in provisions after a state decree saying
it should pay extra pension-related costs.
Saudi Arabia's mobile penetration ranks third in the
world at 188 percent, according to the International Telecommunication Union,
with the Kingdom's conservative rules restricting mixing of the sexes and
spurring demand for alternative ways to communicate.
Finnish handset maker Nokia says Saudi Arabia is in the
top five countries globally for downloads, accounting for nearly one in four of
these on its platforms in the Middle East and Africa.
The three Saudi operators are betting on data demand to
offset slumping voice margins, and Mobily halved some BlackBerry tariffs in the
third quarter.
"STC's shares had been discounted because Mobily was
seen as a tough competitor and winning subscribers at the expense of STC, but
in the past two quarters this trend has reversed," added Bukhtiar.
STC, which owns 35 percent of Turkey's Oger Telecom,
licenses in Bahrain and Kuwait and a controlling stake in Indonesian firm Axis,
said revenue was SR14 billion in the quarter, up from SR13.2 billion a year
earlier.
Subsidiary and affiliate companies provided 34 percent of
group revenue, STC said, without stating whether this was for the third quarter
or the nine months to the end of September.
In a separate statement, STC said it will pay a dividend
of 0.5 riyals per share for the third quarter.
The operator's shares closed 0.3 percent lower on Saudi
Arabia's bourse before the results were announced.
