Earnings of telecommunication companies were not spared in the second quarter as Saudi Telecom Co (STC), the country's biggest telecoms firm, and Zain Saudi Arabia, the third telecom operator in the Kingdom, reported negative quarterly profits on Tuesday. STC posted a 22 percent fall in second-quarter net profit, its sharpest fall this year despite a rise in income from operations. STC made a net profit of SR2.99 billion ($797.3 million) in the three months to June 30, down from SR3.84 billion in the same period last year, the firm said in a statement. It did not explain the drop in second-quarter profit but said foreign expansion costs and higher roaming fees hurt profitability in the first half of this year. The second-quarter net profit was slightly above the average forecast of SR2.89 billion in a Reuters survey of five analysts. Operating profit fell by an adjusted 26 percent to SR3.23 billion while income from operations rose 5 percent at SR12.7 billion, marking a considerable slowdown from the 27 percent annual growth recorded in the first-quarter. Earnings per share in the second quarter stood at SR1.5 versus SR1.92 a year earlier and SR1.24 in the first quarter. The firm will pay a share dividend of SR0.75 for the second quarter, it 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 in the region. Last month EFG-Hermes upgraded Saudi Telecom's short-term rating to “accumulate” from “neutral”. Cell operator Etihad Etisalat (Mobily), STC's most serious rival, posted a 50 percent rise in second-quarter net profit, setting the bar high for STC and the third mobile phone Zain Saudi Arabia. Last month Etihad Atheeb Telecommunications Co ended STC's monopoly over fixed line phone services after it started high speed internet in Saudi Arabia's two largest cities, Riyadh and Jeddah. STC spent about $3.5 billion in 2008 to buy a 35 percent stake in Oger Telecom and a 26 percent stake in Kuwait's third mobile phone license. In 2007, it spent $3 billion to take a 25 percent stake in Malaysia's Maxis, in a deal that opened markets in Malaysia, Indonesia and India. Zain Saudi Arabia, which started operations in late 2008, posted a 291 percent increase in second-quarter losses. Zain made a net loss of SR857 million ($228.5 million) in the three months ending June 30, 2009, compared to SR219 million in the same period last year, it said in a statement on the Saudi bourse website. The telecom firm, a unit of Kuwait's Zain, blamed higher costs, as well as marketing and advisory expenses. Emaar E.C. loss widens Saudi developer Emaar Economic City, an affiliate of Dubai-based Emaar Properties, said second-quarter losses widened by 180 percent due to higher costs. Emaar Economic City, which is developing the giant King Abdullah Economic City (KAEC) project on Saudi Arabia's Red Sea coast, posted a quarterly net loss of SR113 million ($30 million) compared to SR40 million a year ago, the firm said in a statement. The company cited rising costs due to long-term provisions for building maintenance and the use of some deposits for project development. Emaar Economic City's operational losses rose to SR110.2 million in the second quarter of this year after SR74.8 million in the same period a year ago, it said. KAEC is the most prominent among a series of “economic cities” that are part of Saudi Arabia's plan to diversify the country's oil and gas-based economy and provide more jobs for the country's growing population. Emaar Economic City faced some delays delivering housing and business units, as well as a 6-12 month delay on the first phase of the city's port which it expects to complete in 2011.
