Mobily troubles hit Etisalat profits

30 June 2015

Saudi telecoms company restates 2014 results

  • Saudi Arabia’s Mobily restates 2014 results to show SR1.7bn loss ($465m)
  • Revised results will reduce UAE’s Etisalat’s 2014 profit by AED616m ($168m)

Saudi Arabia’s telecom operator Mobily has restated its 2014 results to increase its losses from SR914m ($244m) to SR1.7bn.

This is the third time the 2014 results have been revised down due to errors in the timing of revenue recognition.

The UAE’s Etisalat, which owns 27.5 per cent of Mobily, has advised that the restatement will negatively affect its own 2014 results by AED616m ($168m).

A team from Saudi Arabia’s Capital Markets Authority (CMA) advised Mobily to change the accounting of its sales contracts and asset depreciation to bring them in line with international standards.

The alterations also changed Mobily’s results from the first quarter of 2015, bringing them from an SR207m loss to an SR8m net profit.

Mobily has also decided to increase bad debt provisions by SR800m, for account receivables due from local Mobile Telecommunications Company (Zain KSA). Mobily claimed in late 2014 that it is owed SR2.2bn by Zain for roaming and data-sharing services. The case is still under arbitration.

This provision will impact Mobily’s second-quarter 2015 results, and also reduce Etisalat’s consolidated net profits for 2015 by AED204m.

Trading in Mobily shares on the Saudi Stock Exchange, the Tadawul, was suspended in early June as part of the long-running scandal, due to investigations of insider trading.

Mobily’s CEO, Khalid Omar al-Kaf, was suspended in November 2014 and discharged following the March loss announcement. A number of board members also resigned, including the chairman Abdulaziz al-Saghyir, who remained on the board.

Bloomberg reported in March 2015 that Abdulaziz Alsaghyir Commercial Investment (AACI) sold 9.49 million shares, or two thirds of its stake in Mobily, before Al-Saghyir resigned in February. Al-Saghyir is founder and chairman of AACI.

Mobily was also unable to meet financing repayment obligations. It is in negotiation with lenders.

Mobily’s difficulties highlight the need for Saudi businesses to improve their transparency and accounting practices as the Tadawulopens up foreign institutional investors, to encourage foreign investment.

Stay informed with the latest in the Middle East
Download the MEED app today, available on Apple and Androiddevices

A MEED Subscription...

Subscribe or upgrade your current package to support your strategic planning with the MENA region’s best source of business information. Proceed to our online shop below to find out more about the features in each package.

Get Notifications