Saudi Telecom Company (STC) has confirmed that it has entered into negotiations to sell its subsidiary in Indonesia Axis Telekom after failing to generate the returns it had expected from the company.

STC owns 80.1 per cent shareholding directly and 3.725 per cent indirectly in Axis.

STC first invested in Axis in 2007 and again in 2011, with these investments STC envisaged that an exposure to fast growing emerging markets and under penetrated markets would provide a platform for future growth.

Since the acquisition of Axis, STC says that it provided significant operational and financial support to the operator and was actively involved in developing the business by supporting the Axis management with initiatives, which leveraged STC Group’s presence in multiple markets and implemented both revenue enhancing and cost reduction programmes.

STC said however, that the financial performance of the company has been poor and it has not been able to deliver growth as expected due to intense competition in Indonesia, a market with more than 10 mobile operators (five GSM, five CDMA and one WiMAX).

Last month, STC recognised a realized loss of SAR 705 million (US$188 million) on the investment.

Saudi Telecom Company (STC) today announced the company’s preliminary financial results for the period ending June 30, 2013 (6 months)

Net profit for H113 amounted to SAR 2.98 billion (US$795 million) down 40 per cent year-on-year. For Q213 net profit was down 41 per cent year-on-year to SAR 1.43 billion, and down eight per cent quarter-on-quarter. STC attributed the decrease in net profit for H113 to the booking of a one-time, non-recurring and non-cash charge of SAR1.1 billion resulting from fair valuation of its investments in Asia (Aircel and Axis) and unrealised foreign exchange losses of SAR601 million due to the sharp depreciation of Turkish lira , Indian rupee and Indonesian rupiah. Impacting the results was also the disposal of fixed assets with a net book value of SAR 277 million during Q1.

Other key performance indicators included:

· Revenues for H113 reached SAR22.08 billion, an increase of four per cent year-on-year

· Gross profit for H113 increased four per cent year-on-year to SAR 13.23 billion

· EBITDA for H113 amounted to SAR 7.94 billion, down six per cent year-on-year

· Wireless broadband revenue during Q213 grew 29 per cent year-on-year

· Mobile broadband customers during the quarter increased 40 per cent

· Fixed broadband customers during the quarter increased 11 per cent

Revenues from domestic operations during H113 increased five per cent as a result of the growth in business sector and broadband (fixed & wireless) services revenues. H113 also experienced revenue growth of 22 per cent in the controlled subsidiaries year-on-year, which led to the overall increase of four per cent in STC Group consolidated revenue for the period.

STC stated that currently management is evaluating options for some of its international investments in order to take appropriate actions in the best interest of shareholders.

With regards to international operations, STC Group continues to grow the operations of subsidiaries and affiliate companies, with the operator’s overall subscriber base having exceeded 175 million as of Q213. During the quarter the group witnessed revenue growth of 22 per cent in the controlled subsidiaries, though operating profit and net profit were impacted negatively by the following:

· The operational performance of Axis, Indonesia and Binariang Group (mainly due to Aircel) continued to drag the financial results of the group

· The unrealised foreign currency exchange losses during H113 amounting to SAR601 million related to Oger Telecom and Axis resulting from the significant depreciation in the Turkish & Indonesian rupiah against US dollar during the period

· Booking of one-time, non-recurring and non-cash charge of SAR 1.1 billion losses from fair valuation of investments in Asia (Aircel and Axis)

Wataniya Telecom has announced the launch of its LTE based 4G network in Kuwait, although it is currently limiting access to modems and routers.

The company said that it has spent US$350 million modernising its network and preparing for the launch. By the end of the year, the 4G service will cover most of Kuwait.

Customers can access 4G Internet on fixed and pocket routers for a monthly subscription of KD 17 (US$60) with a total usage of 60 GB per month for 12 months.

No indication was given as to when the company will allow smartphones to access the LTE network.

Zimbabwe’s government has reportedly refused to renew the mobile network operator licence held by Telecel until it complies with foreign shareholder limits that require a majority of the company to be owned by local shareholders.

Currently the company is 60 per cent owned by Egypt’s Orascom Telecom (now a subsidiary of VimpelCom), with the remainder held by a company with close links to President Mugabe.

Earlier in the week, management from Orascom Telecom held talks with government officials to try and untie the deadlock, but multiple reports in local media suggest those talks broke down without success.

Despite the failure to renew the operating licence, Telecel is still providing phone service to customers, although it is not clear for how long that will be allowed.

If the two sides can agree on a settlement, then Telecel will also be required to pay US$137 million for the 20-year extension to its licence. There have been suggestions that VimpelCom would prefer to sell the company rather than pump even more money into an operation that it would have lost management control over.

Telecel Zimbabwe, with 2.5 million customers is the country’s second biggest mobile phone operator after Econet Wireless.

Local media reports have suggested tentative discussions have been held between South Africa cellco Cell C and fixed incumbent Telkom regarding consolidating the mobile market.

Telkom used to own a stake in Vodacom, but sold it in 2008 when Vodafone raised its holding to 65 per cent. It later decided to re-enter the mobile market and now owns its own mobile network, Telkom Mobile – previously known as 8ta.

In an interview with a local radio Cell C CEO Alan Knott Craig said: “Whether it will happen or not, I don’t know. In my personal capacity, I think consolidation is one way to solve a lot of the problems.”

Cell C has recently had a fresh injection of funding from its majority shareholder, and also raised fresh debt to fund network expansion.