Alwaleed, a nephew of the Saudi king with a personal net worth estimated by Forbes magazine in March to be just below $20 billion, already owns a 7 percent stake in News Corp and plans to start a cable news channel.

The Twitter stake, bought jointly by Alwaleed and his Kingdom Holding Co investment firm, resulted from "months of negotiations," Kingdom said. Shares in Kingdom jumped 5.7 percent in early trade in Saudi Arabia as investors hailed a deal in what is seen as a high-growth sector.

Applying an $8 billion valuation figure for Twitter used by some analysts, the investment by Alwaleed and Kingdom amounts to a 3.75 percent stake.

"In the last few years Prince Alwaleed has been keen to increase his exposure to telecoms and technology," said Hesham Tuffaha, head of asset management at Bakheet Investment Group in Riyadh.

"One of the few sectors to record significant revenue gains in the last three years has been technology, which is why Kingdom would see Twitter as a good addition to its diversified portfolio."

Twitter, which allows people to send 140-character messages, or Tweets, to groups of so-called followers, is one of the Web's most popular social networking services, along with Facebook and Zynga.

The use of Twitter played a role in the spread of information in the Arab Spring, a series of revolts that have shaken the Middle East and North Africa this year.

Saudi Arabia headed off some rumblings of dissent from its own population by unveiling a $130 billion social spending package.

IPO HOPES

Investors are eagerly anticipating an initial public offering from Twitter, though it said in September that it was in no hurry to go public. It raised $400 million in venture capital financing this summer.

It now counts more than 100 million active users who log onto the service at least once a month.

Facebook, the world's largest social network has more than 750 million active users.

Internet search giant Google Inc recently launched a social networking service dubbed Google+ which some observers say could lure users away from Twitter.

Saudis are increasingly turning to satellite television, online news providers and social networking to stay abreast of world events. The world's No. 1 oil exporter announced a series of stricter regulations for journalists earlier this year.

Alwaleed, who has a sizeable stake in Citigroup, has spoken out in favour of broader political participation, fair elections and effective job creation across the Arab world.

Kingdom owns a near-30 percent stake in Saudi Research and Marketing Group, which runs a range of media titles.

"Our investment in Twitter reaffirms our ability in identifying suitable opportunities to invest in promising, high-growth businesses with a global impact," Alwaleed said in a statement.

Alwaleed, ranked 26th on the Forbes global billionaires list, subscribed $500 million to the General Motors's IPO last year. In August he unveiled plans to build the world's tallest tower in Jeddah.

(Reporting by Sitaraman Shankar; Additional reporting by Matt Smith; Editing by Amran Abocar and Erica Billingham)

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