Saudi Telecommunications Company (STC) said second-quarter net profit fell 8.6 per cent to 3.1 billion riyals ($826.6 million), beating analysts expectations.

Analysts' forecasts for second-quarter profit ranged from 2.73 billion riyals to 2.97 billion riyals, according to a survey last month.

It was Saudi Telecom's fourth straight decline in quarterly profit after it lost its monopoly on mobile phone services when Etihad Etisalat (Mobily) started operations in 2005. Saudi Telecom is set to lose its fixed-line monopoly this year.

But second-quarter earnings showed an improvement compared to the first quarter of this year mainly in terms of cost control.

Revenue inched down 0.5 per cent in the second quarter to 8.44 billion riyals resulting in an operating profit of 3.22 billion riyals, down 7.1 per cent from the three months to June 30, 2006, according to Reuters calulations based on the statement and earlier reports.

Operating costs fell to 5.21 billion riyals in the second quarter, down 3.4 per cent from the first quarter but up only 1.2 per cent from the year-earlier period. In the first quarter, operating costs were up 6.9 per cent from the same period in 2006.

STC made a net profit of 5.82 billion riyals in the six months to June 30, down 14.5 percent from a year earlier, the company said in a statement.

First-half operating profit was down 11.4 per cent to 6.15 billion riyals.

'The drop (in operating profit) is due to a rise in fees for the use of external networks knowing that the company achieved a 17.3 per cent growth in the number of customers compared to the same period (first half) of last year,' it said.

It did not give a figure on the rise of external networks costs, which were up 18.2 per cent in the first quarter of this year.

Earnings per share fell to 2.91 riyals from 3.41 riyals. The company will pay a dividend of 1.25 riyals per share for the first half of 2007, it added.

STC made a first-quarter net profit of 2.72 billion riyals down 20.5 per cent from the three months ending March 31, 2006.Reuters