Zawya Dow Jones/Dubai
Mobile Telecommunications Co Saudi Arabia, better known as Zain KSA, said it had signed an agreement with the kingdom’s Ministry of Finance to postpone till 2021 the 5.6bn Saudi riyals ($1.49bn) of payments due to the government over the course of the next seven years.
The payments, estimated at 800mn riyals per year, will be converted into a commercial loan, with the first instalment due on June 1, 2021, according to an e-mailed statement from Kuwait’s Zain Group, the parent company of Zain KSA and minority shareholder. The payments relate to royalties, or taxes, and other fees to the government, a Zain Group spokesperson told Zawya Dow Jones.
“The agreement signed with the Ministry of Finance will assist Zain KSA’s liquidity position as it [will] reduce part of the financial obligations the company faces,” Fahd bin Ibrahim al-Dughaither, chairman of Zain KSA, said in a statement.
“This will in turn result in the reduction of financing costs and accordingly allow the company to use part of that liquidity to continue the expansion and development of its network,” he added.
Facing fierce competition in the Saudi market from STC and Mobily, Zain KSA has lost money every year since its formation in 2008. It reported a net loss of 398mn riyals in the first quarter, a 10% smaller loss than in the same period a year earlier.
The telco has repeatedly rolled over the repayment of a 9bn riyals syndicated loan from a consortium of banks. The last extension given by the banks is until June 30.
Saudi market rules on market capitalisation compelled the parent company, Zain Kuwait, to increase its stake in Zain Saudi Arabia last year, from 25% to 37%.