Mobile telecoms operator Zain Saudi on Sunday reported its third consecutive quarterly loss, as a drop in revenues and gross profit weighed on its second quarter earnings.
Zain Saudi, part owned by Kuwait's Zain Group, swung to a net loss of 38 million riyals (Dh37.2m) for the three month month period to June end, from a profit of 8m riyals in the second quarter of 2017, it said in a statement to the Saudi Stock Exchange, where its shares are traded. The earnings missed 52m riyals average loss estimate of analysts polled by Bloomberg. The operator's revenue dropped 1 per cent to 1.85 billion riyals.
An "increase in depreciation of 39m riyals as a result of acquiring spectrum and additional property equipment" also contributed to the net-income loss, the company said in the bourse filing. The number of subscribers remained unchanged from the previous quarter at 8.4 million customers.
Saudi Arabia’s telecom sector profitability will be hurt this year by economic reforms being undertaken in the kingdom and changes in policies of the telecom regulatory authority, according to a report by NCB Capital, the investment arm of Saudi lender National Commercial Bank. It forecast a 1.4 per cent drop to 9.3bn riyals in the net income of the sector this year.
"Zain KSA subscriber base stabilised during this quarter compared with first quarter of 2018, despite the economy changes, reaching 8.4 million," the telecom operator said.
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The kingdom has imposed measures to boost non-oil revenues, including introducing a 5 per cent value-added tax in January, that are expected to increase the inflation rate and hurt consumer spending.
NCB is projecting a 2.9 per cent drop in mobile users to 39 million, which will push down the penetration rate to 123 per cent, compared with a 16 per cent year-on-year decline in 2017, where the penetration rate reached 127 per cent.
Saudi's telecom regulator has also implemented new rules that are expected to dent the income of telecom operators. For example, the removal of a ban on VoIP will reduce income from international calls, which account for around 7 per cent of sector revenue, NCB Capital said.
Zain Saudi, the kingdom's third biggest telecoms operator, has struggled to compete with incumbents STC and Mobily since its 2008 launch.
