EQUITY RESEARCH
Regulated by CMA – License no 06017-37
TELECOM
SAUDI TELECOM SECTOR
QUARTERLY UPDATE
KINGDOM OF SAUDI ARABIA
ENDING THE YEAR ON A POSITIVE NOTE
 Mobile market share 2009: All three subscribers disclosed their subscriber count. However, we believe that some
numbers are exaggerated as they are not well reflected in the top line figures. According to our estimates, we
believe STC ended the year with a market share of 46%, Mobily retained 39%, and Zain KSA reached 15%.
 Contribution of data services leads to boost in revenues: All three mobile operators offered data services
packages that contributed to the growth in revenues. STC’s broadband subscribers increased to 1.4 million. Mobily
continues to be a leader in wireless broadband and will also witness revenue growth from WiMAX in 2010. Mobily’s
mobile broadband subscribers reached 1.0 million. Zain Saudi Arabia introduced new data packages as well as Black
Berry services.

Saudi Telecom Company has been developing and expanding new networks on the domestic and regional front to
lessen the impact of domestic competition and strengthen future revenues. 4Q 09 earnings were inflated from the
one time gain of Maxis Malaysia’s IPO. Normalizing yearly earnings, 2009 earnings would have decelerated by 8% to
SAR 10,138 million.

Mobily reported an impressive quarterly net income of SAR 1,052 million. Management stated that it will continue
to realize growth in coming years from continuously new offerings, especially in data services. WiMAX is expected to
be promising in Saudi Arabia. Mobily announced a dividend per share of SAR 1.25 for 2009, higher than consensus
expectations.

Zain Saudi Arabia reduced its loss for the second consecutive quarter. It also reached a milestone this quarter by
achieving an EBITDA breakeven point between November 2009 and December 2009.



Hajj seasonality: Hajj season was better than expected with an estimated 2.5 million visitors. Mobily attracted the
majority of visitors. STC came in second, and Zain KSA was the third. While the Hajj season effect was clearly
reflected in Mobily’s and Zain KSA’s bottom line, it was not the case for STC where the added revenues from the Hajj
season were counterbalanced by capital spending on its regional expansion plans. 


Going forward: With the positive contribution of data services in Saudi Arabia to all operators, the three will
compete in this domain by providing faster services, competitive prices, and user-friendly interface for pragmatic
purposes. The one ahead of the race will be the biggest winner.
Valuation: Having incorporated 2009 results into our valuation models, we don’t see an urgent need to update the
target prices that we have set in our report “Saudi Telecom Sector: Calling for Growth” dated July 1, 2009.
TELECOM COMPANIES
Sector Coverage
Louna Merhi
Equity Analyst
[email protected]
+961 1 964997
Saudi Telecom
Company
Mobily
Zain KSA
Current
Price (SAR)
45.9
Target Price
(SAR)
63.95
Upside
Potential
39.3%
Recommendation
PB
PE 2009
PE 2010
Buy
2.26
8.48
8.05
46.7
10.2
53.44
11.69
14.4%
14.6%
Accumulate
Accumulate
2.92
1.41
10.85
-
9.98
-
Youssef Nizam
Head of Equity Research
[email protected]
+961 1 964914
January 21, 2010
1/6
EQUITY RESEARCH
Regulated by CMA – License no 06017-37
SAUDI TELECOM COMPANY (STC)
QUARTERLY UPDATE
TELECOM
KINGDOM OF SAUDI ARABIA
SAR 45.90
CURRENT PRICE
EXPANSION PLANS SEEM TO PAY OFF, AS SEEN WITH THE RISE IN REVENUES
 Operating revenues reported for the year ending December 2009 were SAR 50,750 million compared to SAR 47,469
million in 2008, a 7% advance. According to management, this was the highest ever reported revenues.
Management stated that around 70% of the company’s revenues were from domestic operations. We await the
detailed financial statements to see segmented information by subsidiary in order to see where revenues have
increased and where revenues have been retained.
 Operating profit for the quarter amounted to SAR 2,588 million vs. SAR 2,818 million, an 8% decline Y-o-Y.
Saudi Telecom Company reported fourth quarter earnings of SAR 2,941 million, compared to SAR 1,156 million last
year, a 154% boost. This would lead to a 22% jump from the previous quarter’s SAR 2,403 million. According to the
company, the positive earnings growth for the quarter is due to the increase in revenues and the gain of SAR 684
million from the gain on IPO of its 30% stake in Maxis Malaysia in the fourth quarter. After normalizing earnings by
deducting the one-time gain on the IPO, quarterly net income would have been SAR 2,257 million, relatively stable
with a 1% decrease Y-o-Y.
The 2% slight decrease in earnings for the twelve months in 2009 compared to the twelve months in 2008 is due
to the company’s ongoing expansion plans, such as developing new networks and upgrading existing ones.
Mobile subscribers increased by 8% to reach 21 million. Broadband subscribers were up 30% reaching 1.4 million.
2009 EPS was SAR 5.41 compared to SAR 5.52 in 2008. The company recommended a dividend per share of SAR
0.75 for the fourth quarter, the same amount as the previous three quarters. This implies a dividend yield of 6.54%.
WHAT THE FUTURE HOLDS

The company plans to upgrade its networks to next generation networks (NGNs). It also plans on upgrading to
3.5G networks and providing this coverage to all areas in the Kingdom, offering faster services.
PERFORMANCE INDICATORS
Stock Data
Stock Price (SAR)
Market Cap (SAR)
91,800,000,000
Market Cap (USD)
24,483,151,800
Bloomberg Code
STC AB
PE 09
8.48
PB
2.26
PE 10 E
8.05
Dividend Yield 09 E
50
40
30
Dec-09
16.3%
Sep-09
Free Float (est.)
60
Jun-09
33.80
Mar-09
52-week Low (SAR)
Dec-08
56.75
Sep-08
52-week High (SAR)
70
Jun-08
212,458,071
Mar-08
Av. Mthly Liquidity (USD)
6.54%
Yearly Earnings (SAR million)
14,000
12,447
Quarterly Earnings (SAR million)
12,799
4,000
3,840
12,022
12,000
11,038 10,822
10,000
80
2,000,000,000
Dec-07
Shares Outstanding
90
3,500
3,060
3,029
3,012
3,000
9,314
2,990
8,525
2,488
2,500
8,000
2,941
2,403
2,000
6,000
1,500
3,546
2,000
January 21, 2010
Dec-09
Sep-09
Jun-09
Mar-09
Dec-08
Sep-08
Jun-08
2009
2008
2007
2006
2005
2004
2003
0
Mar-08
500
2002
0
1,156
1,000
Dec-07
4,000
2/6
EQUITY RESEARCH
Regulated by CMA – License no 06017-37
TELECOM
ETIHAD ETISALAT (MOBILY)
QUARTERLY UPDATE
KINGDOM OF SAUDI ARABIA
SAR 46.70
CURRENT PRICE
IMPRESSIVE RESULTS CONTINUING TO BEAT ANALYSTS ESTIMATES
 The company’s highest ever quarterly earnings were reported in the four quarter of 2009 jumping 35% Y-o-Y; SAR
1,052 million compared to SAR 778 million last year. Quarterly net profit grew by 30% Q-o-Q from SAR 807 million.
Earnings reported were above fourth quarter consensus expectations. Net income for the twelve-month period was
SAR 3,014 million from SAR 2,092 million last year, a 44% advance.
Operating profit posted was SAR 1,085 million for the fourth quarter of 2009 compared to SAR 880 million in the
same quarter last year; a 23% increase. Mobily’s total revenue for the quarter came in at SAR 3,537 million, almost
flat on a Q-o-Q basis and up 14% Y-o-Y.
Subscribers reached 18.2 million. This is mainly due to Mobily being the leader in wireless broadband services in
the kingdom. The company exceeded 1 million mobile broadband subscribers by the end of 2009. Not only did the
number of subscribers contribute to positive results, but the quality of the subscribers also did. Mobily’s postpaid
subscribers increased on the back of STC’s billing problems.
Also, the Hajj season was better than expected as there were concerns about a dramatic decrease in visitors from
the swine flu. Visitors were around 2.5 million this year, lower than 3 million in 2008. The company stated that it had
a market share of 52% of the pilgrims that came to the kingdom.
EPS reported for the twelve months of 2009 was SAR 4.31 from SAR 4.0 reported for the same period in 2008.
Mobily will be paying dividends per share for 2009 of SAR 1.25, compared to SAR 0.75 in 2008. This offers a dividend
yield of 2.68%
WHAT THE FUTURE HOLDS

When management was asked about where future growth will come for Mobily, management answered that
growth will continue to come from broadband (advanced services, new technology, etc..) as Mobily is a leader in
that segment.
PERFORMANCE INDICATORS
Stock Data
Stock Price (SAR)
Market Cap (SAR)
32,690,000,000
Market Cap (USD)
8,718,455,690
Shares Outstanding
700,000,000
Av. Mthly Liquidity (USD)
241,497,518
52-week High (SAR)
60
50
48.00
52-week Low (SAR)
31.40
Free Float (est.)
58.5%
Bloomberg Code
EEC AB
30
Yearly Earnings (SAR million)
Dec-09
Sep-09
2.68%
Jun-09
Dividend Yield
20
Mar-09
9.98
Dec-08
PE 10 E
Sep-08
2.92
Mar-08
PB
Jun-08
10.85
Dec-07
PE 09
40
Quarterly Earnings (SAR million)
3500
1200
1052
3,014
3000
1000
2500
807
778
800
2,092
675
2000
600
1,380
1500
539
514
480
448
400
326
1000
700
Dec-09
Sep-09
Jun-09
Mar-09
Dec-08
Sep-08
Jun-08
2009
2008
2007
2006
January 21, 2010
Mar-08
0
0
Dec-07
200
500
3/6
EQUITY RESEARCH
Regulated by CMA – License no 06017-37
TELECOM
ZAIN KSA
QUARTERLY UPDATE
CURRENT PRICE
KINGDOM OF SAUDI ARABIA
SAR 10.20
REVENUES BOOSTED FROM THE INTRODUCTION OF NEW SERVICES AND DATA PACKAGES
Q4 revenues posted were SAR 895 million; up 111% Y-o-Y (SAR 424 million) and an 8% rise (SAR 826 million) Q-oQ. This increase is due to the increase in subscribers, new offers for high speed mobile internet, and the demand
for its Blackberry services. Revenues for the 12 months ended Dec 2009 were SAR 3,004 million compared to SAR
505 million reported in the period March 12, 2008 till Dec 31, 2008, a 495% advance.

Gross profit came in at SAR 356 million versus SAR 243 million in the previous quarter, a 47% rise. It is 1,048%
higher than SAR 31 million in the same quarter last year. Gross margin was 39.8% compared to 29.4% in the third
quarter of 2009. This could be an indicator of the effect of economies of scale as the company is becoming more
operationally efficient. We believe it will reach a gross margin of 420 basis points in 2010, slightly lower than
Mobily.
Zain KSA reported a quarterly loss of SAR 657 million, 29% better than last year’s loss of SAR 930 million. Earnings
also improved 20% more than last quarter’s net income loss of SAR 820 million.
The Company stated that it reached its EBITDA breakeven point between November and December 2009.
Zain KSA’s management stated that it grabbed a market share of more than 18% with subscribers exceeding 6
million subscribers as of the end of December 2009. We believe that this number is exaggerated since it is not well
reflected in the top-line figures. We expect its market share reached 15% as of the end of 2009.
The telecom company provides coverage for more than 83% of the Kingdom.
EPS reported for the twelve months of 2009 was negative SAR 2.21 compared to negative SAR 1.63 in the period
March 12, 2008 till Dec 31, 2008. Annualizing this number for comparison periods, we would arrive at a figure
similar to EPS 2009.
We expect that Zain KSA will need at least 2 more years to distribute dividends.
PERFORMANCE INDICATORS
Stock Data
Stock Price (SAR)
Market Cap (SAR)
14,280,000,000
Market Cap (USD)
3,808,490,280
Shares Outstanding
1,400,000,000
Av. Mthly Liquidity (USD)
30
25
703,958,486
52-week High (SAR)
13.25
52-week Low (SAR)
10.15
Free Float (est.)
45.0%
Bloomberg Code
ZAINKSA AB
15
Dec-09
Sep-09
Jun-09
Mar-09
-
Dividend Yield 09 E
Sep-08
PE 10 E
10
Jun-08
1.41
Dec-08
-
PB
Mar-08
PE 09
20
0%
Dec-09
Sep-09
Jun-09
Dec-08
500
Mar-09
Quarterly Earnings (SAR million)
2009
2008
Yearly Earnings (SAR million)
0
-500
-200
-400
-1,500
-600
-2,500
(657)
-2,278
-800
(765)
(857)
-3,099
-3,500
January 21, 2010
-1000
(820)
(930)
4/6
EQUITY RESEARCH
Regulated by CMA – License no 06017-37
QUARTERLY UPDATE
TELECOM
SAUDI TELECOM SECTOR
KINGDOM OF SAUDI ARABIA
APPENDIX
Table 1: Saudi Telecom Company Quarterly Results
SAR million
Q4 08
Q3 09
Q4 09
Y-o-Y
Q-o-Q
Revenues
12,326
12,934
12,999
5.5%
0.5%
EBIT
2,818
3,112
2,588
-8.2%
-16.8%
EBIT Margin
22.9%
24.1%
19.9%
-
-
Net income
1,156
2,403
2,941
154.4%
22.4%
Q4 08
Q3 09
Q4 09
Y-o-Y
Q-o-Q
3,109
3,511
3,537
13.8%
0.7%
Table 2: Mobily Quarterly Results
SAR million
Revenues
EBIT
880
862
1,085
23.3%
25.9%
EBIT Margin
28.3%
24.6%
30.7%
-
-
Net income
778
807
1,052
35.2%
30.4%
Table 3: Zain KSA Quarterly Results
SAR million
Q4 08
Q3 09
Q4 09
Y-o-Y
Q-o-Q
424
826
895
111.1%
8.4%
31
243
356
1048.4%
46.5%
GP Margin
7.3%
29.4%
39.8%
-
-
EBIT
-783
-668
-436
44.3%
34.7%
Net income
-930
-820
-657
29.4%
19.9%
Revenues
Gross Profit
January 21, 2010
5/6
EQUITY RESEARCH
Regulated by CMA – License no 06017-37
SAUDI TELECOM SECTOR
QUARTERLY UPDATE
TELECOM
KINGDOM OF SAUDI ARABIA
DISCLAIMER
"All rights reserved. This research document is prepared for the use of clients of Audi Capital - KSA and Bank Audi SAL and may not be redistributed,
retransmitted or disclosed, in whole or in part, or in any form or manner, without the express written consent of Audi Capital – KSA and Bank Audi
SAL. Receipt and review of this research document constitute your agreement not to redistribute, retransmit, or disclose to others the contents,
opinions, conclusion, or information contained in this document prior to public disclosure of such information by Audi Capital - KSA and Bank Audi
SAL. The information herein was obtained from various public sources believed to be reliable but we do not guarantee its accuracy. Audi Capital KSA and Bank Audi SAL make no representations or warranties whatsoever as to the data and information provided and Audi Capital - KSA and Bank
Audi SAL do not represent that the information content of this document is complete or free from any error. This research document provides
general information only. Neither the information nor any opinion expressed constitutes an offer or an invitation to make an offer, to buy or sell any
securities or other investment products related to such securities or investments. It is not intended to provide personal investment advice and it
does not take into account the specific investment objectives, financial situation and the particular needs of any specific person who may receive
this document.
Investors should seek financial, legal or tax advice regarding the appropriateness of investing in any securities, other investment or investment
strategies discussed or recommended in this document and should understand that statements regarding future prospects may not be realized.
Investors should note that income from such securities or other investments, if any, may fluctuate, and that the price or value of such securities and
investments may rise or fall. Accordingly, investors may receive back less than originally invested. Audi Capital - KSA and Bank Audi SAL or its officers
or one or more of its affiliates (including research analysts) may have a financial interest in securities of the issuer(s) or related investments. Audi
Capital - KSA and Bank Audi SAL shall not be liable for any loss or damages that may arise, directly or indirectly, from any use of the information
contained in this research document. This research document is subject to change without prior notice."
January 21, 2010
6/6