Etisalat on Thursday expressed confidence that its Saudi affiliate, Mobily, will recover after the telecoms company restated 18 months of earnings.
Because of the accounting errors, Mobily, also known as Etihad Etisalat, retroactively cut its profit for last year and the first half of this year by a combined 1.43 billion Saudi riyals (Dh1.4bn).
As a result, Etisalat is reducing its profits for this year by Dh162m.
Mobily’s shares are down 18.5 per cent in the three days since its earnings shock, which also included a 71 per cent drop in third quarter profit. Yesterday alone, Mobily’s shares were down 10 per cent to 58.50 riyals.
Abu Dhabi-based Etisalat has a 27.46 per cent stake in Mobily.
“Mobily is one of the most successful companies in the region,” Etisalat said in a statement. “The company has strong foundations and possesses great innovative capabilities and a talented team which Etisalat Group has every confidence will overcome this issue and return to growth again soon.”
Mobily is now under investigation from the Saudi bourse regulatory body. Mobily had expected to report its third quarter earnings last week, but asked for its shares to be suspended on Thursday to review its accounts.
Etisalat’s post-tax profit for 2013 will be reduced by Dh130m and its profit for the first nine months of this year will be slashed by Dh32m. Etisalat previously announced a net profit of Dh7.08bn last year, of which Mobily provided Dh1.17bn – or 17 per cent – before its earnings shock.
Etisalat said it is providing the required technical and management support to bring Mobily back to success, and growth, as soon as possible.
“The impact of Mobily’s restatements on Etisalat’s Group’s financials is immaterial and will be accounted for in the results of the fourth quarter 2014,” said Serkan Okandan, the group’s chief financial officer in a statement to the Abu Dhabi Securities Exchange. “We are currently in discussion with our external auditors on this matter.”
The Mobily board has begun a review of the matter with support from Etisalat.
While the financial impact is “minimal” according to Petr Molik, managing director of research at the investment bank Menacorp, it is an embarrassing blunder for both companies.
“Financially, it is not a big impact on Etisalat, because a couple of years ago, they had to pull out of India and write off $3bn, so this is a relatively small amount,” said Mr Molik. “But while Etisalat does not have full financial control, they have managerial control. A lot of the top management of Mobily is associated with Etisalat.”
Etisalat’s shares were down 0.44 per cent to Dh11.40 yesterday.
thamid@thenational.ae
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