Saudi Telecom Company’s  (STC) rising domestic revenue, halting a downward trend for the former monopoly, may lead it to slow its overseas push where it faces a tougher operating environment and limited buying opportunities.

STC has won back domestic market share by aggressively pricing broadband bundle packages, while the firm - majority-owned by the government - has operations across the Muslim world from Turkey to Indonesia.

'We are concentrating on ICT (information communication technology) in our local market as well as in other markets we operate in,' Saad al-Qahtani, group chief executive for strategic operations, told reporters at a conference in Doha. 'We are more worried about that than expansion.'

In March 2011, STC upped its stake in Indonesia's Axis to 80 percent and it has a minority holding in Malaysia's Maxis . But the main jewel in STC's foreign portfolio is its 35 percent stake in Oger Telecom, which in turn owns 55 percent of Turk Telekom.

When asked whether STC wanted to up its stake in Oger Telecom - majority owner the Hariri family is thought to be a willing seller - Qahtani said STC was talking internally about it, but no decision had been made.

'STC, like other Gulf operators, wants management control of their foreign subsidiaries and so they either up their stakes to get a majority shareholding or sell out altogether - no company wants to hold a minority stake for 10 years,' said Marc Hammoud, Deutsche Bank telecoms analyst.

International revenue rose 9.8 per cent last year, but group annual profit fell 19 per cent to 7.67 billion riyals ($2.05 billion), largely due to 1.1 billion riyals of foreign exchange losses from its international operations.

'Other Saudi companies have been more successful in hedging against FX risk,' said Asim Bukhtiar, Riyad Capital head of research. 'STC say this is because it's tied up with partners and can't force them to hedge one way or another, which is one reason STC has sought majority control of its foreign units.'

STC's foreign units provided 32 percent of revenue in 2011, the same as a year earlier and well short of its 50 per cent target, while the firm's push abroad mirrors similar moves by other former Gulf monopolies, such as Etisalat in the United Arab Emirates and Qatar Telecom.

They have often struggled outside their home region and away from the protection of a benign regulator, with markets in Asia and Africa more competitive and less affluent.

Yet STC, unlike Etisalat, has a growing home market in its favour. Domestic revenue rose 8 percent in 2011 as STC won back customers from Mobily and Zain Saudi.

'Capital expenditure for STC's foreign operations has been expensive, so if the company is doing well at home is there any need to expand internationally?' said Bukhtiar. 'Expanding internationally also carries risks, whereas STC knows the Gulf markets and the regulatory environment here - it's much safer.'

There is also a dearth of acquisition opportunities. Few new licences are expected in the Middle East and Africa and Gulf operators no longer seem keen on entering markets as the third or fourth player, while the cheap borrowing that fuelled the previous decade's spending splurge is a fading memory.

'STC is now only looking at acquisitions that will be profitable from day one - it doesn't want to pump in a load of money and then wait years for a return,' added Bukhtiar.

'I see STC making acquisitions of companies providing peripheral services, such as data and content providers, rather than buying foreign mobile operators or new mobile licences.' – Reuters