The company in April released financial statements for its first two periods of operation since incorporation in May 1998. Net profits totalled SR 4,122 million ($1,099 million) for the period up to the end of 1999, and SR 3,953 million ($1,054 million) in 2000 (MEED 3:5:02). 'Completing these first sets of accounts was a remarkable achievement, given that for several years we had been operating without a proper accounting system,' says chief executive officer Khalid al-Molhem. 'With the sale of some of the company, we are aiming to achieve best practice in terms of disclosure.'

The publication of two sets of accounts is a precondition for offering shares to the public.

Al-Molhem says the accounts for 2001 and the first quarter of 2002 have also been prepared. The 2001 figures will be released following the company's upcoming general assembly, he says.

Over the past year, Saudi Telecom has steadily reduced its fees and charges, but Al-Molhem says total revenues and profits have increased thanks to the rapid growth in subscriber numbers - particularly for mobile phone services - and better utilisation of services. STC has also expanded the range of services available, with the recent launch of pre-paid mobile cards and short messaging services (SMS). The pre-paid card service led to a 200,000 increase in mobile subscribers in its first three weeks of operation, says Al-Molhem. He says bottlenecks in the provision of cards will ease now that new distribution chains, including sub-dealers, have been launched.

Another area ripe for expansion is the data network. Al-Molhem says that the network itself is well developed, but as yet under utilised. 'There are some bottlenecks on the access side, but these should be sorted out by December,' he says.

Saudi Telecom's accounts show that the company is paying royalties of about 20 per cent of total revenues. Al-Molhem says the royalty structure will need to be reviewed in light of the government's plans to open the sector up to competition.

The IPO is just one element in the telecoms sector reform programme. The overall advisers are JP Morgan Chase & Company, Baker & McKenzie, Booz Allen & Hamiltonand PricewaterhouseCoopers.