The high-profile account has been handed to Dubai-based Impact Porter Novelli after it and Bates PanGulf pitched for the account in December. Hill & Knowlton, which has managed the business for three years, refused to take part in the pitch.
HP has one of the region's biggest marketing budgets and is the region's fourth biggest spender on magazine advertising, shelling out more than an estimated US$2 million on magazines alone in 2005.
Asked about the PR split, Samer Karawi, marketing manager at HP conceded: "We were not happy with the service of Hill & Knowlton.
"We went through the standard pitching process we do every two years. The proposal from IPN was very strong. IPN is in the best situation to take us where we wanted to go in developing our three areas of enterprise, customer and consumer."
He added: "I think H&K needs a change. Every change has a positive side. I wish that H&K will take advantage of this change to see different things."
Asked to clarify what he had meant about not being happy with the service, he said: "I didn't say that," and declined to comment further.
James Mullan, client services director at H&K, said the agency had decided not to repitch for the account. He said: "The request for a proposal was issued and we declined to participate in it. We just felt it was in the best interest of H&K in the region."
A statement issued by the agency said: "H&K Middle East can confirm that as of February 1st 2006 we will no longer be working with HP Middle East as their PR consultancy. H&K Middle East has worked with HP for the last three years and our contract ends on the 31st of January this year. As is HP's practice globally, the contract was put up for tender among HP's three globally rostered PR agencies of which Hill & Knowlton is one. Hill & Knowlton in the Middle East declined to participate in the tender. We wish HP and its new agency luck in their future relationship."
Tim Walmsley, director at IPN, said the HP business would enable the agency to grow further. "We are going to need some fresh blood. How we structure the team, and who we bring on, are things we are in the process of arranging with HP. We have got the right proposition, with representation in Saudi Arabia, Lebanon and Egypt. We are linking all these together to make it a dynamic regional account."