Mobily, officially known as Etihad Etisalat, made a loss of 913mn riyals ($243.4mn) in 2014 after it took an additional charge of 1.13bn riyals, it said in a statement to Riyadh’s bourse that summarised its audited results. This compares with a profit of 219.8mn riyals announced in January’s unaudited earnings, which included a fourth-quarter loss of 2.28bn riyals.
Reuters/Riyadh/Dubai
Mobily’s problems piled up yesterday after Saudi Arabia’s second largest mobile operator said it made a $243mn loss in 2014, had breached covenants on long-term loans and removed its chief executive.
These disclosures are certain to unnerve investors in former market darling Mobily and serve as a broader warning ahead of the kingdom’s opening of listed companies to direct foreign ownership later this year.
Saudi’s bourse regulator suspended Mobily’s shares before trading yesterday. They have fallen by 56% since an accounting scandal first broke in November, wiping $9.1bn from its market value.
Mobily—officially known as Etihad Etisalat—made a loss of 913mn riyals ($243.4mn) in 2014 after it took an additional charge of 1.13bn riyals, it said in a statement to Riyadh’s bourse that summarised its audited results.
This compares with a profit of 219.8mn riyals announced in January’s unaudited earnings, which included a fourth-quarter loss of 2.28bn riyals.
The company did not specify yesterday whether its earnings for the fourth-quarter of 2014 had also been revised.
The loss is another setback for Mobily, whose problems stem from what it describes as accounting errors relating to the booking of revenue from wholesale broadband leases and mobile promotional campaigns.
These mistakes also led it to cut its profits for 2013 and the first half of 2014 by a combined 1.43bn riyals in November. These announcements sparked a market regulator investigation into Mobily.
The company - 27.5% owned by Abu Dhabi-listed Etisalat—has breached covenants on long-term loans with various lenders, it said in yesterday’s statement.
Mobily did not elaborate but most loans to companies have ‘cross-default clauses’. This means a loan’s terms are considered in breach—usually triggering a call for immediate repayment—if the firm violates the covenants of any of its loans.
The company said it was in talks with lenders to amend the loan covenants and believed these negotiations would be successfully concluded in the second quarter of 2015.
Mobily said the covenant breaches has led to its long-term loans being reclassified as current liabilities, which were 15.3bn riyals at 2014-end.
Mobily’s long-term loans totalled 14.65bn riyals last year that mature 2017-2024, according to its unaudited results.
Earlier yesterday, Mobily said it had removed chief executive Khalid al-Kaf, who had been suspended since November pending the company’s own investigation into its accounting problems.
