Saudi Telecom's Q1 profit rises as it gains from Uber-Careem deal

Saudi Telecom Company, the biggest telecoms operator in the kingdom by market value, reported a 5.9 per cent increase in its first-quarter net profit, propelled by a one-off gain from the sale of the company's direct share in Careem to Uber.

Net profit for the three months to March 31 increased to 2.91 billion Saudi riyals (Dh2.85bn), the company said in a statement to Saudi Arabia’s Tadawul stock exchange, where its shares trade.

Operating profit, however, slid 8.3 per cent year on year to 3bn riyals.

The company’s revenue increased 4.1 per cent yearly to 13.94bn riyals during the quarter.

STC earned a one-off gain of 431 million riyals from the sale of its 8.8 per cent stake in Careem to Uber.

The California-based ride hailing company completed the acquisition of Careem in January this year.

"The increase of enterprise business unit revenue was supported by innovative products in the field of Internet of Things, cloud computing and cybersecurity … in addition to other telecom products and services," Nasser bin Sulaiman Al Nasser, STC's group chief executive said.

STC is majority-owned by the kingdom's Public Investment Fund, which holds a 70 per cent stake in the telco.

Headquartered in Riyadh, it employs about 13,500 employees in Saudi Arabia and more than 19,000 across the STC Group.

Owing to its innovative business solutions, the telco was able to grow its business in the first quarter despite the challenges posed by the coronavirus outbreak, Mr Al Nasser said.

"We are living nowadays under the unfortunate conditions to combat the Covid-19 virus … [it] motivates us to continue our daily work proactively by taking the necessary actions and decisions to provide all our capabilities to actively handle the situation," he said.

STC’s first-quarter results are “encouraging as they provide some reassurance to the market that the sector has not been affected by the current events, at least for now”, EFG Hermes, the Egyptian investment bank, said in a note.

"However, we caution about a possible slowdown in demand from enterprise customers – particularly the government – if the current challenges [Covid-19 and low oil prices] remain for a longer period of time."

STC said it had increased the network's capacity to maximum levels and distributed traffic in accordance with the growth in demand as the outbreak confined people to their homes as governments enforced lockdowns.

Besides distributing 40,000 free internet SIM cards to support those who have no access to the internet, the telco said it would bear the cost of the temporary service suspension fees for small and medium-sized enterprises that are suffering financial losses.

The operator extended the time frame for acquiring a majority stake in Vodafone's Egyptian unit by 90 days because of the outbreak.

Earlier this year, STC sealed a deal to buy Vodafone's 55 per cent stake for 8.98bn riyals as part of its regional expansion.