Between 2006 and 2011 STC suffered a 40% drop in annual profit. Between 2006 and 2011 STC suffered a 40% drop in annual profit.

Saudi Telecom Co (STC) saw an 8% decline in its share price yesterday, to a seven-week low, quickly following its announcement of a 79% year-on-year plunge in fourth-quarter profits, Reuters reported.

STC attributed the fall in earnings - which came as a surprise to analysts - to rising costs and one-off charges in Indian and South African markets. The company took a SAR641m charge on the revaluing of South Africa unit Cell C and was hit with SAR544m from deferred taxes in India on Binariang.

In its home market, the kingdom's former monopoly is facing increased competition from Mobily and Zain Saudi and handed the reins to a new chief executive last year to renew its focus on domestic operations, which account for two thirds of the company's revenue.

Between 2006 and 2011 STC suffered a 40% drop in annual profit, after the market was opened to competitors Mobily (in 2005) and Zain (in 2008). Since then, the operator has concentrated on its fixed-line offerings by packaging phone, TV and Internet services.

The shift in focus to the domestic arena carried STC stock to a three-year high in January, but net income in the last quarter of 2012 was yesterday revealed to have fallen from SAR2.28bn a year earlier, to SAR468m. Market analysts had expected a slight rise in Q4 profits for the telco, to SAR2.4bn.

"The shares have taken a beating after announcing these results as there is insufficient clarity on what's going on in STC; one can't say whether the new strategy is working," said an unnamed Gulf-based telecom analyst. "Recurring earnings were disappointing - costs have risen and revenue has gone down, impacting margins."

STC's main competitor, Etisalat affiliate Mobily, on Saturday announced an 11% rise in quarterly profit in Q4 2012 to SAR1.9bn. Saudi's number-two telco operates mainly in the corporate and mobile data markets, which are both growing. Mobily's full-year profit increased by 18% in 2012, growth the operator attributed to an increase in data revenues, which rocketed by 41% year-on-year and accounted for 27% of total revenues.