Fiber optic to maintain Saudi's Mobily growth

Mobily expects the deployment of an optic fiber network to Saudi homes and businesses and the launch of new mobile technology to maintain the strong profit growth of recent years until 2012.

Khalid Al Kaf, chief executive, said in an interview the deployment of the fiber optic network would be completed before the end of 2010. He was speaking after the second largest Saudi telecom operator posted quarterly profit at the top end of analysts forecasts.

In a telephone interview he said: "We have already deployed the fiber optic network to more than 30 cities in t

Mobily's net profit rose 44 and 49 percent in 2009 and 2008 respectively and by 40 percent over the first half of 2010.

Al Kaf said: "I know there are some analysts out there who keep asking 'how can we sustain this growth'."

He added: "Once completed, the fiber network coupled with our integrated wireless offer will enable us to maintain over 2011-2012 the profit growth of recent years".

The fiber optic network will enable Mobily to provide new services such as Internet Protocol TV and business solutions as well as boost its wholesale businesses with other telecom firms.

The firm, also known as Etihad Etisalat, teamed up with local Integrated Telecom Co for the $267 million fiber optic project, which was first unveiled in 2006.

The network is also expected to boost the number of internet clients for the firm, in which UAE-based Emirates Telecommunications is the largest shareholder.

By the end of June, broadband revenues accounted for 18 percent of Mobily's revenues against 14 percent by end 2009, Al Kaf said. Mobily started as the kingdom's second mobile phone operator five years ago and competes with state-controlled Saudi Telecom and Zain Saudi Arabia.

Mobily also plans to introduce this year the latest mobile network technology called Long Term Evolution (LTE). Al Kaf said the company was also controlling costs and plans to raise the ratio of post paid customers as of total voice customers. Mobily's operating costs rose 0.3 percent in the second quarter.

While they accounted for about 10-11 percent of its total voice customers, postpaid clients contributed 26 percent of the firm's revenues by end June, 2010, Al Kaf said.

Mobily's shares rose by up to 4 percent on Wednesday in their first reaction to the quarterly earnings' announcement. Prior to Wednesday, the stock has gained 16.4 percent so far this year, largely outperforming both the telecom industry and the Saudi all share indices.

In a post earnings note, BMG Financial Group maintained its forecast for a net profit of $957.4 million in 2010, a 19 percent increase over 2009, and reiterated a "Buy" recommendation for Mobily, with a target price that is 36 percent above Tuesday's closing price.

BMG said: "The strategic investment focusing on the broadband segment ... and the marketing strategy concentrating on the Saudi Arabian youth segment - which constitutes almost 52 percent of the overall population -, has underpinned Mobily's operational results." (Reuters)