UPDATE 1-Saudi Telecom Q2 net profit falls 22 pct

* Income from operations rises, but slower than Q1

* Pays half Q2 EPS in dividend

* Earnings not as good as immediate rival

(adds background, details)

RIYADH, July 21 (Reuters) - Saudi Telecom Co 7010.SE (STC), the country's biggest telecoms firm, posted a 22 percent fall in second-quarter net profit, its sharpest fall this year despite a rise in income from operations.

STC made a net profit of 2.99 billion riyals ($797.3 million) in the three months to June 30, down from 3.84 billion in the same period last year, the firm said in a statement.

It did not explain the drop in second-quarter profit but said foreign expansion costs and higher roaming fees hurt profitability in the first half of this year.

The second-quarter net profit was slightly above the average forecast of 2.89 billion riyals in a Reuters survey of five analysts [ID:nL56636300]

Operating profit fell by an adjusted 26 percent to 3.23 billion riyals while income from operations rose 5 percent at 12.7 billion riyals, marking a considerable slowdown from the 27 percent annual growth recorded in the first-quarter.

Earnings per share in the second quarter stood at 1.5 riyals versus 1.92 riyals a year earlier and 1.24 in the first quarter.

The firm will pay a share dividend of 0.75 riyal for the second quarter, it said.

Saudi Telecom is under intense pressure to improve profitability as a regional telecom war heats up, with rivals like Kuwait's Zain (ZAIN.KW) and Emirates Telecommunications ETEL.AD competing in the region [nLL481022]

Last month EFG-Hermes upgraded Saudi Telecom's short-term rating to "accumulate" from "neutral" [nBNG458734]

Cell operator Etihad Etisalat (Mobily) 7020.SE, STC's most serious rival, posted a 50 percent rise in second-quarter net profit, setting the bar high for STC and the third mobile phone Zain Saudi Arabia 7030.SE.

Zain Saudi Arabia posted a 291 percent rise in its net loss during the second-quarter.

Last month Etihad Atheeb Telecommunications Co 7040.SE ended STC's monopoly over fixed line phone services after it started high speed internet in Saudi Arabia's two largest cities, Riyadh and Jeddah [nL6399090]

STC spent about $3.5 billion in 2008 to buy a 35 percent stake in Oger Telecom and a 26 percent stake in Kuwait's third mobile phone licence. In 2007, it spent $3 billion to take a 25 percent stake in Malaysia's Maxis, in a deal that opened markets in Malaysia, Indonesia and India. (Reporting by Asma Alsharif and Ulf Laessing; Editing by Souhail Karam; Editing by David Cowell)