STC posts 22% jump in fourth quarter profit as royalty fee changes boost revenues

Saudi's telecom operator records net profit of 3.16 billion riyals in fourth quarter after royalty fee changes

A Saudi Telecom Company (STC) telecommunications store is illuminated at night in Riyadh, Saudi Arabia, on April 22, 2016. Waseem Obaidi for The National *** Local Caption ***  002Riyadh assignment_.jpg
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Saudi Telecom Company posted a 22 per cent increase in fourth-quarter net profit as its revenues rose and the cost of services declined after a government agreement to change royalty fee calculations.

The telecom operator's net profit reached 3.16 billion Saudi riyals (Dh3bn) in the three months to December 31, STC said on Thursday in a statement to the Saudi stock exchange. Fourth-quarter revenues rose 5.3 per cent to 13.16bn riyals.

The results reflect the "strong and continuous" performance of the company as it works to expand its business, diversify its portfolio and enhance the integration between the group and its subsidiaries for sustainable growth, Nasser Al Nasser, group chief executive of STC said.

The kingdom's biggest telecom company said in December its fourth-quarter earnings will get a boost from an agreement with the Saudi government that will see annual royalty for commercial services dropping retroactively from 15 per cent to 10 per cent of net revenues starting January 1, 2018. Last month, the kingdom's three major telecom operators, STC, Etihad Etisalat (Mobily) and Zain Saudi Arabia agreed with the government to change the calculation of their annual royalty fees.

STC's fourth-quarter net profit beat one analyst estimate of 2.98bn riyals, according to Bloomberg data.

The cost of services declined by 640 million riyals due to the changes in the mechanism for calculating royalty fees for commercial services, the company said on Thursday.

STC recorded a 7.7 per cent increase in annual net profit to 10.79bn riyals because of a 2.7 per cent increase in yearly revenues to 52bn riyals.

The company's board of directors approved a dividend policy starting from the fourth quarter of 1 riyal per quarter for the next three years, with the possibility of paying additional dividends depending on the company's financial position and capital requirements, it said.

The board recommended the distribution of additional dividends of 2 riyals per share for 2018, which will be presented at the next general assembly meeting for approval.

The dividends that will be distributed for 2018 amount to 12bn riyals.