Saudi telco Etihad Etisalat (Mobily) has awarded IBM a five-year contract worth 1.05 billion riyals ($280 million) to outsource its information technology operations, it said in a bourse statement on Sunday.

The contract will be self-financed and will lead to improvements in Mobily's products as well as making the company more flexible, it said without further elaboration.

Mobily, which has a market value of $12.3 billion and is the No. 2 operator in Saudi Arabia, reported a 22-percent rise in second-quarter profit to 1.42 billion riyals last month, while its 2011 annual profit was 5.08 billion riyals.

Parent firm Etisalat could increase its 28 percent stake in the telco, its chief executive told Reuters in July, as the United Arab Emirates' firm focuses its attention on high growth, high population countries like Saudi.

Shares in Mobily dipped 0.8 percent on Sunday, trimming year-to-date gains to 24.3 percent.

($1 = 3.7505 Saudi riyals)