Mobily - 27.4%-owned by the UAE’s Etisalat, the Gulf’s largest telecom firm by market value - restated 27 months of earnings to March 31, 2015

Reuters
Riyadh

Saudi Arabia’s Etihad Etisalat aims to become profitable again within 12 months, its chief executive said this week, a year after the kingdom’s number two telecom operator made the first in a series of shock earnings restatements.
Errors by company - known as Mobily - represented one of the Gulf’s biggest accounting debacles. An ongoing investigation by the Capital Market Authority (CMA) is seen as a test of the regulator’s ability to enforce corporate disclosure standards and punish transgressors.
Mobily - 27.4%-owned by the UAE’s Etisalat, the Gulf’s largest telecom firm by market value - restated 27 months of earnings to March 31, 2015.
This slashed Mobily’s total profits by 3.63bn riyals ($967.97mn) reducing its profits for this period by more than half to 3.07bn riyals.
Mobily made an annual net loss of 1.58bn riyals in 2014.
“Hopefully going back to profitability won’t be too far. Hopefully it is a short-term (situation) and short term may be estimated at more or less twelve months ... though it may take longer,” chief executive Ahmad Farroukh told the Reuters Middle East Investment Summit, his first interview with international media.
His long-serving predecessor Khalid al-Kaf left in February with Farroukh appointed in July, the same month as Mobily’s last earnings adjustment.
The operator, which said the accounting errors were due to its premature booking of revenue from a promotional campaign, subsequently reported losses in the second and third quarters, while its shares have fallen 65% since the first restatement on November 3, 2014.
That precipitous drop led some investors to demand compensation from Mobily, but the CMA found in the company’s favour last month.
“Mobily improved its corporate governance model in a way that ensures such violation will not happen again,” said Farroukh.
“Our strategy is to bring back confidence and deliver value to our shareholders. What can bring back confidence is the consistency of performance. This is a journey that we need to embark (on) and it needs some patience.”
Farroukh said Mobily would try to increase its revenue through more so-called value-added telecoms services such as mobile money transactions should the industry regulator allow, plus further developing data and home broadband services.
“If you look at the bottom line across all operators you will find it went down, and this is an indication that there is pressure on prices, there is pressure on revenues,” said Farroukh.
Mobily is considering selling its mobile transmitter towers, most likely to a specialist tower company which would then lease these back to the seller.
“We are doing this to bring value to shareholders and to better utilise an asset not because of any financial or cash constraint or funding concerns,” he said.