Saudi Telecom Co (STC) reported a 20.2 percent fall in fourth-quarter profit on Wednesday, missing analysts’ estimates as the benefits of higher revenue were wiped out by rising service costs and expenses.
STC has now reported falling profits in three straight quarters and five out of the last six quarters, stalling a sudden improvement in its bottom line that had been sparked by the operator trimming its international ambitions and refocusing on its home market.
The former monopoly, which competes domestically with Etihad Etisalat (Mobily) and Zain Saudi, made a net profit of 1.95 billion riyals ($520 million) in the three months to Dec. 31. This compared with 2.44 billion riyals in the prior-year period, a bourse statement said.
Five analysts polled by Reuters had on average forecast STC, which own stakes in operators in the Gulf, Turkey, South Africa and Asia, would make a quarterly profit of 2.36 billion riyals.
The profit fall came despite revenue jumping 12 percent year on year to 13.25 billion riyals, with the company reporting continuing strong growth in data services.
This increase came at a price though, as cost of services and operating expenses rose by 687 million riyals and 540 million riyals respectively. No overall figures for either were given.
In September, STC’s chief executive told Reuters his firm would spend another $1 billion in the second half of 2015 on enhancing its networks as it tries to meet surging demand for web-based services.
Other income also fell by 634 million riyals, as STC failed to repeat a large gain from the sale of land on top of making contributions to an early retirement programme and foreign exchange losses.
STC, which is currently holding a tender offer to try and fully acquire Kuwaiti affiliate Viva, said annual profit was 9.34 billion riyals, down 14.8 percent from the previous year.
The company’s board has recommended paying a fourth-quarter cash dividend of 1 riyal per share, it said in a separate statement. This is the same as the payout for the corresponding quarter of 2014.
In November, STC said it would pay a minimum quarterly dividend of 1 riyal per share for three years from the fourth quarter of 2015 onwards.