Saudi Telecom Co. — Interim / Quarterly Report 2013

Jan 20, 2014

Saudi Telecom announces the interim Consolidated financial results for the period ending on 31-12-2013 (Twelve Months)

7010 · 20/01/2014 18:42:57 · Announcement #33043 · View on Saudi Exchange

Saudi Telecom announces the interim Consolidated financial results for the period ending on 31-12-2013 (Twelve Months)

Element	Current quarter	Similar quarter for previous year	% Change current	Previous quarter	% Change previous
Net profit (loss)	3,623	393	821.88	3,386	7
Gross profit (loss)	6,992	6,121	14.23	7,193	-
Operational profit (loss)	2,852	1,983	43.82	3,377	-
All figures are in (Millions) Saudi Arabia, Riyals

Element	Current period	Similar period for previous year	% Change
Net profit (loss)	9,987	7,276	37.26
Gross profit (loss)	27,413	25,262	8.51
Operational profit (loss)	11,039	9,746	13.27
Earning or loss per share, Riyals	4.99	3.64	-
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 4th quarter increased by SR 3,230m (822%) compared to the comparable quarter in the previous year mainly due to the following: (1) The decrease in losses from investments accounted for under equity method by SR 2,239m (151%). In Q4, 2013 there was a gain of SR 754m compared to losses of SR 1,486m for the same period last year. This is attributed to the following: - STC group conducted review of its investments in BGSM group (joint venture) including the manner in which this investment is being managed and how joint control has been effectively exercised. As a result of such review, STC signed an amendment to the BGSM shareholders agreement with other shareholders of BGSM Group on 31 December 2013 with respect to certain operational matters of the Aircel Group. Consequently it has been concluded that STC group shall stop to account for the investment in Aircel Group using the equity method effective from the second quarter 2013. This has resulted in STC group reversing its share of losses from Aircel Group for the period from 1 April 2013 to 30 September 2013 amounting to SR 795m. - The comparable 4th quarter of 2012 numbers - included a non-recurring and non-cash charge of SR 641 million for impairment of intangible assets pertaining to Cell C and Aircel, and SR 544 million on account of deferred taxes charge related to Aircel operations. There are no one-off provisions pertaining to the above in 4th quarter of 2013 and as a result the profit for the quarter is higher as compared to corresponding period last year. (2)The increase in operating profit by SR 869m compared to same period last year, as a result to the improvement in the operations efficiencies during the 4th quarter, as cost of services declined by SR 837m (16%) compared to same period last year.
Reasons of increase (decrease) for period compared with same period last year	The Net Profit for the twelve months period increased by SR 2,711 (37%) compared to the previous year, this increase is attributed to the following: (1)The SR 1,293m (13%) increase in operating profit compared to the previous year, as a result to the SR 857m increase in revenue from services (2%) compared to the previous year, and the decline of SR 1,295m in cost of services (7%) compared to the previous year. This increase in operating profit materialized despite the increase in operating expenses during 2013 due to the booking of one-time, non-recurring and non-cash charge of SR 1,104m resulting from fair valuation of STC investments in Asia (Aircel and Axis) during the 1st half of 2013 (2)The decrease in losses from investments accounted for under equity method by SR 1,130m compared to the previous year, as a result of STC group not consolidating the results of Aircel group (for reasons mentioned above) and Axis (Investment held for sale) starting from the 2nd quarter of 2013 as compared to the previous year. (3)The increase of other income in other Income & Expenses by SR 748m compared to the previous year, mainly due to accruing of revenue from the projects resulting from the Universal Service Fund related to Authority of Communications and Information Technology, and revenues from devices sales and Mega projects. (4)The SR 534m decline in Finance cost compared to the previous year. (5)Included in the twelve months results is a non-cash charge of SR 1,122m million on account to FX losses mainly from depreciation of Turkish Lira from operations in turkey during the year.
Reasons of increase (decrease) for quarter compared with previous quarter	The Net Profit for the 4th quarter increased by SR 237m (7%) compared to the immediate prior quarter due to: (1)STC group reversing its share of losses from Aircel Group for the period from 1 April 2013 to 30 September 2013 amounting to SR 795m. (2)Operating profit for Q4, 2013 declined by SR 525m compared to the immediate prior quarter, mainly as a result to the decline in revenue from services by SR 159m and the increase of SR 324m in operating expenses.
Reclassifications in quarterly financial results	STC started reporting the results of its associates using Equity Method as prescribed by the accounting standards from 1st January 2013 (as against proportionate consolidation method used previously). All figures for the 4th quarter and full year 2012 have been shown as per the equity method in order to be aligned and consistent with the new presentation method.
Other notes	Revenue from services for the 12 months amounted to SR 45,602 million compared to SR 44,745 million for the corresponding period last year, an increase of 2 %. Earnings before interest, taxes, zakat, depreciation and amortization (EBITDA) for the 4th quarter amounted to SR 4,505 million compared to SR 3,601 million for the corresponding quarter last year, an increase of 25%, and for the 12 months EBITDA amounted to SR 17,417 million compared to SR 16,082 million for the corresponding period last year, an increase of 8.3%. Commenting on the results, STC Group chairman and managing director, Mr. Abdulaziz Alsugair, stated: The strong financial results achieved during the 4th quarter & the full year 2013 reflects the efforts being made to constantly evolve, improve and develop the company strategy and operations both domestically and internationally. We continue to maintain an acute focus on reinforcing our presence in our home market and make all resources available in order to capture share of this growth. At the same time, we continue to rationalize STC international portfolio, and evaluate options for some of these investments in order to take appropriate actions in the best interest of the shareholders. Mr. Alsugair also stated, STC continued to grow its operations, domestically and internationally. Revenues from domestic operations during the year 2013 increased 3.2% as a result to the growth in business sector services revenues and Broadband (fixed & wireless) services revenues. Revenues from the controlled international subsidiaries grew 21% compared to previous year. Mr. Alsugair concluded that STC cooperates with government and private entities in order to develop an infrastructure that is capable of providing complete telecom solutions and contribute to adopting new ideas, products for building smart cities centered on information and communication technology. Internationally, the strong performance of VIVA Bahrain & VIVA Kuwait continues and both these operations delivered above target results. As announced previously, STC has signed an Sale and Purchase Agreement (SPA) to sell its stake in Axis to PT XL Axiata Tbk. The completion of the transaction remains subject to the applicable Indonesian regulatory approvals as well as the approval of XL shareholders at its Extraordinary General Meeting. Domestically, STC continues with the introduction of innovative and value added services that encourage mobile usage and targeted packages bundled with advanced smart phones. This is underpinned by the Company customer-centric approach and its efforts to enhance the overall customers experience. The company, continued increasing the coverage of 3G & 3.5G networks to reach various parts of the country covering more than 96% of populated areas and deployment of the 4G network. As a result, the wireless broadband revenues grew more than 200% during the 4th quarter compared to the same period last year and grew 80% during 2013 compared to the previous year. STC fiber optic network (homes & Businesses) reached more than 830,000 home pass (site) with an increase of 88% during the 4th quarter compared to same period last year, and 12% compared to the previous quarter. The ongoing network expansion has also led to a further increase of 32% in the number of (Invision) subscribers (STC Interactive TV service) during the 4th quarter compared to same period last year. The number of subscribers in bundled services grew by 4% during the 4th quarter compared to same period last year. Enterprise business unit overall revenues increased 11% during the 4th quarter compared to same period last year, driven by the 20% increase in Business sector data services revenues, and 10% increase in the fixed line revenues during Q4 compared to same period last year. For the twelve months, Business sector data services revenues increased 18% compared to the previous year, attributed mainly to the 27% increase in government sales and in 20% increase in key accounts sales during the year compared to the previous year.

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