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Wed 21 Jul 2010 12:37 AM

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Saudi Telecom Q2 net profit falls 31 percent

Drop was within the $426 million to $642 million range predicted by analysts.

Saudi Telecom Q2 net profit falls 31 percent
PROFIT DROP: Saudi Telecom saw its operating income fall by 27% year on year, slightly below its level in Q1 of this year. (Getty Images)

Saudi Telecom (STC) posted a drop in second quarter net profit within analysts' forecasts as it continues to pay the cost of strong competition at home and bear the financial burden of foreign expansion.

The state controlled firm made net income of $549.3 million in the three months to end June, down from $797.2 million a year earlier, it said a statement on the bourse website.

This was within a $426.6 million to $642.5 million range predicted by five analysts in a Reuter survey.

The country's largest telecoms group by market value saw its operating income fall 27 percent year on year to $626.5 million, slightly below its level in the first quarter of this year.

It did not explain the annual drop in quarterly earnings.

Instead, it said a 30 percent fall in net profit during the first half stemmed from higher costs linked to the usage of external networks - an apparent reference to its local competitors - lower tariffs for international calls and higher spending to deploy optic fiber.

The company will give shareholders a 0.75 riyals dividend for the second quarter, equivalent to 73 percent of its earnings per share for the period.

Saudi Telecom has spent about $7 billion since 2007 to aggressively strengthen its foreign presence, mainly in Asia, while the domestic market it once monopolised opened to more players.

This has put it under intense pressure to maintain profitability levels as a telecom war heats up in the region with such rivals as Kuwait's Zain and Emirates Telecommunications.

STC's shares are down 13.2 percent this year while those of its immediate rival Mobily are up 18.7 percent. (Reuters)

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