Scandal-hit Saudi Mobily swings to Q2 net loss due to Zain dispute

Saudi Arabia’s Etihad Etisalat (Mobily), which last week slashed 27 months of profits, swung to a second-quarter net loss on Sunday that missed forecasts as it took provisions relating to a dispute with rival telecom operator Zain Saudi.

Mobily, an affiliate of the United Arab Emirates’ Etisalat , made a net loss of SAR 900.9m ($240.2m) in the three months to June 30, it said in a bourse statement.

This compares with a profit of SAR 92.5m in the prior-year period.

Analysts polled by Reuters had on average forecast that Mobily, which competes with the Gulf’s No.1 operator Saudi Telecom Co and Zain Saudi, would make a quarterly loss of SAR 633m.

Mobily said the quarterly loss was largely due to it taking an additional provision of SAR 800m relating to claims against Zain Saudi. This dispute is in arbitration.

In the second quarter, Mobily also paid additional taxes and its depreciation costs rose. Combined, these totaled SAR 126m.

The firm’s revenue for the three months to June 30 was SAR 3.57bn, which is flat year-on-year.

On Thursday, Mobily restated its results for the 27 months to March 31, slashing total profits over the period by nearly SAR 1.76bn in its latest attempt to resolve an accounting scandal.

The company had attributed its woes to the premature booking of revenue from wholesale broadband leases and mobile promotional campaigns and it has also made further changes to the way it accounts for some contracts and the depreciation of property and equipment.

Mobily’s shares have been suspended since June pending its response to a regulator investigation. The stock is down 58 per cent since the accounting scandal broke, wiping about $9.4bn off the company’s value.

Mobily’s earnings restatements have also put it in breach of loan covenants and it remains in talks with lenders to agree new terms on its outstanding borrowings, it said in Sunday’s bourse statement.

The company’s net debt as of June 30 was SAR 14.96bn, down slightly from SAR 15.03bn at 2014-end. It said it serviced all its debt obligations for the first half of 2015.