Zain Saudi extended the maturity of a SR9bn ($2.40bn) Islamic loan for another 21 days on Wednesday, the fifth time the loss-making telecom operator has deferred payment.
The company, an affiliate of Kuwait's Zain, has agreed with lending banks to put back the maturity of the murabaha facility - a sharia-compliant cost-plus-profit arrangement - originally due in July 2011, until December 19. A longer-term deal remains elusive.
"The Company announces that it has been granted an approval from the Lenders to extend the maturity date of the syndicated Murabaha facility until 19 December 2012 and could also be extended further," it said.
The firm said the purpose of this extension was to allow it and its lenders the opportunity to finalize a new long-term financing agreement to replace the existing one.
"People are worried that Zain Saudi can't renegotiate its existing debt with the banks that have supported the company from the beginning," said Marc Hammoud, Deutsche Bank telecoms analyst.
"If the company is going to extend the loan for another five years, which is what we expect it wants to do, how is it going to pay this back when its operations are deteriorating?"
Zain Saudi has not made a quarterly net profit since launching operations in 2008.
Last month, it said its third-quarter loss widened by 2 percent over the prior-year period, while for the nine months to Sept. 30 its revenue fell 6 percent and costs rose 3 percent.
The company's subscriber base has fallen 11 percent this year, according to data from Deutsche Bank.
Banque Saudi Fransi arranged the original SR9.75bn loan in July 2009 and Zain Saudi exercised options to extend the initial maturity by a year.
Since then, it has paid off SR750m, reducing the facility to SR9bn and agreed to three two-month extensions, the latest of which was announced on Wednesday.
The company's debts stood at SR19.4bn as of September 30 and it has struggled to compete against rivals Saudi Telecom Co (STC) and Mobily, an affiliate of UAE's Etisalat, which between them claim nearly 90 percent of the kingdom's mobile subscribers.
"The subscriber base is shrinking and the company can't get into the broadband, corporate and post-paid segments, which are the three main growth areas for STC and Mobily," added Deutsche's Hammoud. "I don't think we'll see a great improvement in the short term."
Mounting losses led the firm to restructure its capital in July to comply with bourse rules, with Zain raising its stake in Zain Saudi to 37 percent from 25 percent following a tepid response from other shareholders.
Zain Saudi's shares ended flat on the Saudi bourse, equalling Tuesday's record low.