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UPDATE 1-Saudi Telecom's $500 mln tech fund expects first deal by Q4

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RIYADH, May 25 (Reuters) - Saudi Telecom Co's (STC) new $500 million venture capital fund expects to complete its first transaction by the fourth quarter of this year, the fund's chief executive said on Thursday at its launch in Riyadh.

Abdulrahman Tarabzouni told reporters that initial investments were currently being studied and areas under consideration included artificial intelligence, virtual reality, banking services, logistics and digital health services.

"We have a lot in the pipeline," said Tarabzouni. "Our job is going to be to identify the winners and make bets on them over the next few months."

STC CEO Khaled Biyari said the fund, STV, would be run independently from parent company STC. It would aim to spend its $500 million over the next four to five years in $100 million tranches.

STC, the kingdom's largest mobile operator, is using the fund to branch into digital technology investing following its purchase of a 10 percent stake in Dubai-based Middle Eastern ride-hailing app Careem in December.

Biyari said the $100 million Careem stake would be managed by STV, on top of the fund's $500 million in new investments.

Parent STC is also involved in discussions with several e-commerce players, he added, but said the "space is now getting crowded" following the setting up of online shopping venture Noon and Amazon's acquisition of Souq.com.

At the same time, STC is pressing ahead with long-term projects in its traditional telecom business, including a joint bid with a local partner for Oman's third mobile telecom licence. Biyari said he expected a response within about six months.

STC and Mobily, the kingdom's second-largest operator, have also agreed on a joint financial adviser as they aim to merge their mobile tower operations, which Biyari said would be announced "very soon."

Third telco operator Zain Saudi, which has not made a quarterly profit since it started operations in 2008, was not part of the joint appointment, he said.

"Its a very complex piece of work. We have to worry about lots of details," he said. "To be honest, its taking more than we expected, but we are marching along." (Reporting by Katie Paul; Editing by Mark Potter)