By Rory Jones

LONDON--Telecom Egypt, the country's sole fixed line provider, posted a 61% drop in third-quarter net profit on Wednesday, below most analysts' forecasts, as the telecommunications company reported lower revenue and higher operating costs.

Net profit for the three months ended Sept. 30 amounted to 251 million Egyptian pounds ($35 million), down from EGP650 million in the year-earlier period, Telecom Egypt said in a statement to the London Stock Exchange.

The company's latest quarterly result was below most forecasts. Cairo-based EFG-Hermes had predicted a third-quarter net profit of EGP675 million, while Kuwait-based NBK Capital had penciled in EGP358 million.

Telecom Egypt said the contribution from its investments, which include a 45%-stake in Vodafone Egypt, was EGP228 million in the third quarter. Costs increased year-on-year by EGP338 million, or 20%, it said.

Telecom Egypt was granted a long-awaited EGP2.5 billion license in April to offer mobile services to its customers, allowing it to provide a full telecommunications service for the first time and challenge the dominance of the country's three international mobile operators: France Telecom-controlled Mobinil, a unit of U.A.E.'s Etisalat and Vodafone Egypt.

Mobile services will be launched before the end of the year, or early next year, Chief Executive Mohamed Elnawawy said in August.

Write to Rory Jones at rory.jones@wsj.com

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