Saudi Telecom says its investment in Maxis-promoted Aircel is not performing up to expectations

Telecom Lead Asia: Saudi Telecom Company (STC), which has 18.5 percent indirect stake in Aircel, said its investments in Maxis-promoted Aircel are not performing up to expectations.

The Dubai-based STC recently said it intends to employ continued focus to enhance the performance of Aircel.

In fact, Aircel is the process of restructuring its operations in India by reducing exposure to several key markets.

STC is also not satisfied with the performance of other two investments — Cell C and Axis.

STC says it posted 40 percent revenue growth in the controlled subsidiaries (international operations) compared to 2011, driven by continued subscriber additions in post-paid, pre-paid and wireless broadband. “However, our investments in Aircel, Cell C and Axis, were not performing up to expectations and we intend to employ continued focus to enhance the performance of these companies,” said STC in a statement during the quarterly result.

In fact, its investment in Aircel affected STC’s fourth quarter net profit. STC’s net income for the 4th quarter decreased 79 percent to SR468m from SR2,278m. For 2012, net income decreased 4.9 percent to SR7,350m from SR7,729m.

STC said the decrease in net income for the 4th quarter & the 12 months (despite the 2.6 percent & 7.2 percent increase in gross profit consecutively) is attributed to two main reasons: First, the group re-evaluation of its investments fair value in in Cell C, South Africa and Aircel, India during the fourth quarter, which resulted in recognizing a one-time, non-recurring and non-cash charge of SR641m provisions from impairment of intangible assets.

Second, due to the change in telecom regulations in India, Binariang group had to take a deferred taxes charge related to Aircel operations, STC group share of these deferred taxes was SR544m, and this is also a one-time, non-recurring and non-cash charge. With the exception of these two transactions, the net income would have been SR8,535m for the year, an increase of 10.4 percent compared to 2011. while the decrease in net income for Q4 compared to the previous quarter, is attributed to the 4.6 percent in the cost of services.

STC reported 6.7 percent increase in revenues to SR59,372m for the 12 months.

Krishna Arvind
[email protected]