Saudi Telecom, the Arab world's largest telco, has reported a worse-than expected 62% slump in Q4 profits
Saudi Telecom Co (STC), the Arab world's largest telecom company by market value, posteda worse-than-expected 62 percent fall in Q4 profit, on Tuesday, blaming the fall on foreign currency fluctuations.
STC made 1.17 billion riyals ($311 million) in the three months to Dec. 31, down from the 3.06 billion riyals it made a year earlier, the state-controlled firm said in a statement.
Analysts' forecasts for STC's fourth-quarter earnings ranged from 3.1 billion riyals to 3.48 billion riyals, according to a Reuters survey last month.
"The drop in the fourth-quarter net profit stemmed from currency differentials in the company's investments abroad," it said.
It estimated the cost of currency fluctuations at 2 billion riyals.
Saudi Telecom spent about $3.5 billion in 2008 to buy a 35 percent stake in Oger Telecom and a 26 percent stake in a consortium that won a third mobile phone licence in Kuwait.
The expansion helped STC post a 24 percent rise in second-quarter net profit, while it was struggling to show any growth at all just a year earlier.
Analysts said the losses caused by foreign currency fluctuations were unusually big for the total value of acquisitions STC made in 2008.
"The 2 billion riyals loss on currency fluctuations is just huge. We are used to seeing Saudi firms delaying the announcement of bad news to the last quarter of 2008," said Ibrahim al-Alwan, deputy chief executive at KSB Capital Group.
STC's Chairman, Mohammed al-Jasser, who is also the kingdom's central bank vice-governor, could not immediately be reached for comment.
The company's fourth-quarter operating profit fell 20 percent to 2.38 billion riyals.
"The decline in operating profit shows that STC has suffered from growing competition in the fourth-quarter," Alwan said.
Saudi Telecom is under intense pressure to improve profitability as a regional telecom war heats up, with rivals like Kuwait's Zain and Emirates Telecommunications competing within Saudi Arabia.
STC is the latest Saudi blue-chip company to announce sharply lower earnings for the fourth quarter.
The Saudi bourse closed 2.41 percent down on Tuesday after its largest listed stock, the Saudi Basic Industries Corp, announced a 95.5 percent fall in fourth-quarter profit it attributed to the impact of the global economic crisis on demand for its products.
All but one Saudi bank showed lower fourth-quarter earnings, and Kingdom Holding Co, owned by Saudi billionaire Prince Alwaleed bin Talal, shocked analysts on Tuesday with a $8.26 billion net loss for the fourth quarter.
"STC was expected to do better than other blue-chip firms like SABIC or banks, because it is the least exposed to the financial crisis," Alwan said.