Riyadh: Saudi Arabia’s top two telecom operators will show the rewards of their efforts to cut costs and lure customers to more costly contracts when they post results later this month.
Saudi Telecom Co (STC) and Etihad Etisalat (Mobily) dominate an increasingly saturated home market and are having to get smarter to drive growth. Both are trying to move users on to more lucrative contracts and consume more profitable data services, but earnings growth is likely to have been sluggish in the most recent three months.
STC’s fourth-quarter profit will rise by a slim 1.4 percent to 2.37 billion Saudi riyals ($630 million), according to the average forecast of analysts polled by Reuters, while Mobily’s will likely increase 5.1 per cent to 1.78 billion riyals.
“We’re seeing more and more customers switching to smart phones and operators are trying to sell them handsets tied to post-paid contracts that will push them to use more data,” said Asim Bukhtiar, Riyad Capital’s head of research.
“It’s not about increasing mobile penetration any more, but getting existing customers to increase their usage.”
Figures are expected by the end of the month yet under Saudi rules neither company has to set a date for the release.
STC and Mobily dominate the sector locally, accounting for 48 and 41 per cent of total revenue respectively for the nine months to September 30, NBK Capital estimates. Loss-making Zain Saudi is a distant third with 11 percent.
STC has won back market share by taking advantage of its near-monopoly on fixed-line to woo customers with discounted packages that include phone, broadband and television services.
This helped turn around its operations, with profit for the nine months to September 30 rising 28 per cent year-on-year to 6.88 billion riyals. That followed a 40 drop in annual profit between 2006 and 2011 as the sector opened up to competition with the launch of Mobily in 2005 and Zain Saudi in 2008. “STC’s new management team has been focusing more on domestic operations and cutting costs at home, the effect of which will be visible in Q4,” said Nishit Lakhotia, telecoms analyst at Securities & Investment Co (SICO) in Bahrain.
