Saudi Telecom Co. — Interim / Quarterly Report 2014

Jul 21, 2014

SAUDI TELECOM COMPANY ANNOUNCES THE INTERIM CONSOLIDATED FINANCIAL RESULTS FOR THE PERIOD ENDING ON 30-6-2014 (6 MONTHS)

7010 · 21/07/2014 08:56:03 · Announcement #35273 · View on Saudi Exchange

SAUDI TELECOM COMPANY ANNOUNCES THE INTERIM CONSOLIDATED FINANCIAL RESULTS FOR THE PERIOD ENDING ON 30-6-2014 (6 MONTHS)

Element	Current quarter	Similar quarter for previous year	% Change current	Previous quarter	% Change previous
Net profit (loss)	2,803	1,429	96.15	2,391	17.23
Gross profit (loss)	7,024	6,734	4.31	6,211	13.09
Operational profit (loss)	2,961	2,591	14.28	2,666	11.07
All figures are in (Millions) Saudi Arabia, Riyals

Element	Current period	Similar period for previous year	% Change
Net profit (loss)	5,194	2,979	74.35
Gross profit (loss)	13,235	13,228	0.05
Operational profit (loss)	5,627	4,809	17.01
Earning or loss per share, Riyals	2.6	1.49	-
All figures are in (Millions) Saudi Arabia, Riyals

Element	EXPLAINATION
Reasons of increase (decrease) for quarter compared with same quarter last year	The net profit for the 2nd quarter increased by SR 1,374m (96%) compared to the comparable quarter in the previous year mainly due to the following: (1) The comparable 2nd quarter of 2013 numbers includes: (A) The reclassification of Axis as assets held for sale during Q2, 2013, the group re measured the net assets related to the investment at fair value. In Q2 2013, we had booked a non-cash charge of SR 604m from losses resulting from assets held for sale related to Axis, Indonesia. (B) Net loss of SR 598 million resulting from consolidating Axis (Indonesia) financial results, which was not consolidated during the 2nd quarter 2014 as a result to selling Axis (as announced in Q1 2014). (2) Recording gains of SR 41m from investments accounted for under equity method during the 2nd quarter compared to losses of SR 718m during the same period last year (an increase of SR 759m). This has resulted mainly from stopping to account for the investment in Aircel Group using the equity method effective from the 2nd quarter 2013 (as announced earlier). (3) The increase in depreciation and amortization during the 2nd quarter by SR 207m (14%) compared to the same period last year, and the SR 268 million decline in Other Income & Expenses; Other, net for the current quarter compared to the same period last year. (4) The increase in the provision for Zakat & Tax by SR 55m (105%) compared to the same period last year.
Reasons of increase (decrease) for period compared with same period last year	The net profit for the 1st half of 2014 increased by SR 2,215m (74%) compared to the comparable period in the previous year mainly due to the following: (1) The comparable 1st half of 2013 numbers includes: (A) A none cash, none recurring charge of SR 1,104m resulting from fair valuation of STC investments in Asia, Aircel of SR 500m and the reclassification of Axis as assets held for sale during Q2 2013, the group re measured the net assets related to the investment at fair value. In Q2 2013, we had booked a none cash charge of SR 604m from losses resulting from assets held for sale related to Axis, Indonesia. (B) Net loss of SR 598 million resulting from consolidating Axis (Indonesia) financial results, which was not consolidated during the 1st half 2014 as a result to selling Axis (as announced in Q1 2014). (2) The decrease in losses from investments accounted for under equity method during the 1st half by SR 1,168m compared to the same period last year. This has resulted mainly from stopping to account for the investment in Aircel Group using the equity method effective from the 2nd quarter 2013 (as announced earlier). (3) The increase in depreciation and amortization during the 1st half by SR 216m (7%) compared to the same period last year. (4) The increase in the provision for Zakat & Tax by SR 284m (252%) compared to the same period last year.
Reasons of increase (decrease) for quarter compared with previous quarter	The Net Profit for the 2nd quarter increased by SR 412m (17%) compared to the immediate prior quarter due to: (1) The increase in operating profit for Q2 2014 by SR 296m (11%) compared to the immediate prior quarter, mainly as a result to the 9% increase in revenue from services compared to the previous quarter. (2) The decrease in the provision for Zakat & Tax by SR 181m (63%) compared to the immediate prior quarter.
Reclassifications in quarterly financial results	Certain comparatives figures for the period ending at 30 June 2013 have been reclassified to conform with the presentation used for the period ending at 30 June 2014.
Other notes	Revenue from services for the 1st half 2014 amounted to SR 22,505 million compared to SR 22,907 million for the corresponding period last year, a decrease of 2 %, and revenue from services for the 2nd quarter increased 3% compared to same period last year. Earnings before interest, taxes, zakat, depreciation and amortization (EBITDA) for the 2nd quarter amounted to SR 4,680 million compared to SR 4,103 million for the corresponding period last year, an increase of 14%, and for the 1st half EBITDA amounted to SR 8,970 million compared to SR 7,937 million for the corresponding period last year, an increase of 13%. Commenting on the results, STC Group chairman and managing director, Mr. Abdulaziz Alsugair, stated: The financial results achieved during the 1st half of the current year reflects the efforts being made to constantly evolve, improve and develop the company strategy and operations both domestically and internationally. STC is playing a major role in building the knowledge based economy and the transformational role for information and communication technology, and now STC is a main contributor in planning the future path for the development of digital smart in the country. This will improve & enhance STC position domestically, regionally and will positively impact the future performance of the company which will lead to generating higher returns to the shareholders. Mr. Alsugair also stated, The growth in international subsidiaries operations during the 2nd quarter contributed to the 3% growth in consolidate revenue from services compared to same period last year. Meanwhile, consolidated revenue for the 1st half of 2014 declined by 2% compared to the same period last year (due to the decline in the 1st quarter revenue). Despite this decline, cost of services and operating expenses during the 1st half decreased 4% and 10% consecutively compared to the same period last year, as a result to the company continuous efforts to control cost and improve the overall efficiency of the operations. Mr. Alsugair concluded We will continue with our ongoing efforts to remain customer centric, which is clearly delivering results. This is a position we intend to maintain, by striving to lead through investing in technology and innovative solutions across fixed, mobile and data products for both business and personal sectors. Internationally, VIVA Bahrain & VIVA Kuwait during the 2nd quarter continue to grow their customer base and their market shares. As a result, the revenue grew for both companies during the 2nd quarter compared to the same period last year. Also, during the 1st half of 2014, STC continued to grow its international operations revenues from the controlled international subsidiaries (excluding Axis 1st half, 2013 revenues for comparison purposes) grew 22% compared to corresponding period last year. Domestically, STC during the 2nd quarter continued with the introduction of innovative and value added services and customized offers with the appropriate smart phones that encourages mobile usage for both post-paid and pre-paid (SAWA). These offers were customized to meet various customers needs, for calls, internet and social media usage. Also the 1st half of this year witnessed a huge increase in data traffic over the 4G network with an unprecedented growth, where the monthly data volume over the 4G network surpassed the total data traffic over the 3G and 2G networks together by 9%. During the 1st half data traffic over the 2G and 3G network grow 196% compared to same period last year. Therefore, STC will continue with deploying 4G as the coverage during Q2 reached around 85% of populated areas. This growth was facilitated by the smart bundles that STC was keen to meet the needs of different customer segments being individuals, residential or business customers by expanding sale points and satisfying the desires of the user in addition to the after-sale services and expansion of virtual channels, social media channels and smart device applications. In preparation for 2014 Ramadan, Hajj, Umrah and summer vacation seasons, STC has adapted its networks in Makkah and Medina by upgrading their capacities and raising the level of readiness. The company focused on keeping up with the expected increase of demand on mobile data services by reinforcing 4G and 3G networks. In order to meet this demand STC has added 202 new 4G sites in Makkah and Medina which represents an increase of 44% compared to last year. STC also added 226 new 3G sites with very high capacities with the intent of accommodating the expected increase in voice and data services. Also, 2G network has been reinforced with 248 additional base stations. STC continues with the deployment of the fiber optic network. (FTTH) customers increased 44% during the 2nd quarter compared to the same period last year and increased 11% compared to the immediate previous quarter. Enterprise business unit overall revenues increased 6% during the 2nd quarter compared the same period last year, driven by the 14% increase in Business sector data services revenues, and the increase in the fixed line revenues during the 2nd quarter compared to same period last year. In addition, STC launched new managed data service plans during the 2nd quarter in order to accommodate business sector needs.

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