* Saudi Telecom Q4 profit falls 79 pct to 468 mln riyals
* Takes one-off charges for South Africa, India units
* Analysts also highlight Q4 revenue drop
* Rival Zain Saudi also misses estimates (Recasts, add analyst quotes, details)
By Matt Smith
DUBAI, Jan 21 - Saudi Telecom Co (STC) shares dropped to a seven-week low on Monday after the former monopoly reported a 79 percent fall in fourth quarter profits due to rising costs and one-off charges at its Indian and South African affiliates.
State-owned STC, with operations spanning much of the Muslim world from Indonesia to Turkey, appointed a new chief executive last year to help it to focus more on its domestic market, which has become more competitive.
The Saudi market, which accounts for about two-thirds of STC's sales, has opened up to other players including Etisalat affiliate Mobily in 2005 and Zain Saudi in 2008.
STC has responded after a 40 percent fall in annual profit from 2006 to 2011 by exploiting its dominant position in fixed-lines to woo back customers with packages including Internet, phone and TV services.
Initial optimism about STC's shift of emphasis to its domestic market from overseas expansion helped to drive the company's shares to a three-year high in early January.
But STC's results on Monday revealed net income in the three months to Dec. 31 of 468 million riyals ($124.79 million), down from 2.28 billion riyals a year earlier.
This came as a shock to analysts, who had forecast a quarterly profit of 2.4 billion riyals.
The company's shares fell eight percent.
"The shares have taken a beating after announcing these results as there is insufficient clarity on what's going on in STC - one can't say whether the new strategy is working," said a Gulf-based telecom analyst who declined to be identified.
"Recurring earnings were disappointing - costs have risen and revenue has gone down, impacting margins," said the analyst.
STC's quarterly revenue fell 1.7 percent to 15 billion riyals.
STC's service costs rose 4.6 percent in the fourth quarter. Marc Hammoud, Deutsche Bank telecoms analyst, said this was likely to be from an increase in international charges.
Hammoud said it was too early to say whether Mobily had taken significant market share from STC, which has the country's largest fibre network. "Mobily's growth is coming from data and business - there's still plenty of demand to be met given the vibrant economy."
STC took a charge of 641 million riyals on revaluing South Africa unit Cell C and 544 million riyals on India affiliate Binariang due to deferred taxes.
STC's loss-making rival Zain Saudi, the country's No.3 mobile company, also posted below-forecast results on Monday.
Zain Saudi reported a fourth-quarter loss of 443 million riyals, which fell short of estimates. This compared with a net loss of 461 million riyals in the prior-year period.
"Zain Saudi's earnings are stable at best," said Hammoud.
The company, 37 percent owned by Kuwait's Zain, said losses shrank due to a 26 percent drop in financial charges to 823 million riyals from a year earlier.
Saudi Arabia's No.2 operator Etihad Etisalat - or Mobily - had reported an 11 percent fourth quarter profit rise on Saturday.
($1 = 3.7502 Saudi riyals) (Additional reporting by Asma Alsharif; Editing by Amran Abocar and Jane Merriman)