Saudi Telecom Co. (STC), the largest listed telecom operator in the Middle East, said Tuesday its second-quarter net profit fell 31 percent to SR2.1 billion ($549.9 million) from SR2.9 billion in the year-earlier period, beating analyst forecasts. STC attributed the decline mainly to a rise in capital expenditure on its foreign investments in telecom operators, lower prices of international calls and higher fees related to using external networks, a statement posted on the Saudi bourse website said. STC said its first-half earnings per share came at SR1.92 compared with SR2.74 in the year-ago period, while second-quarter operating profit fell 27 percent to SR2.4 billion. STC shares finished trading 0.26 percent lower Tuesday at SR38.30. The country's largest telecoms group by market value saw its operating income fall 27 percent year on year to SR2.35 billion, 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 SR0.75 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 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.
