Mobily shares to stay suspended as irregularities are investigated

Mobily’s shares have been suspended from trading since June 8, after the market regulator raised concerns over the accounting approach used in some of the Saudi company's contracts.

Shares of Saudi Arabia’s second-biggest mobile operator, Etihad Etisalat, also known as Mobily, will remain suspended pending further investigation into its accounting irregularities by the stock market regulator.

Mobily has been under investigation by Saudi’s Capital Market Authority (CMA) since late last year.

The company’s shares have been suspended from trading since June 8, after the CMA team raised concerns over the accounting approach used in some of Mobily’s contracts.

On Sunday, it said it would restate its losses for 2014, adding 830 million Saudi riyals (Dh813m), and take more provisions in the second quarter of this year. The move affected its biggest shareholder, the UAE operator Etisalat.

"Mobily's responses to the observations made by our specialised team are under study. Until then, the shares will be suspended," Abdullah Al Kahtani, CMA's spokesman, told The National, without stating when the suspension would be lifted. The next key development will be the disclosure by Mobily of its restated financial statements for last year.

Omar Maher, an equity analyst at Cairo investment bank EFG-Hermes, said that he is advising clients to remain cautious on the stock, as the outlook is uncertain.

“Our view on Mobily is that more problems might come up,” said Mr Maher. “We will keep finding out new aspects. We tell investors to wait. The company is reshuffling its management; it is under investigation, negotiating a reset of a debt covenant, and going through arbitration with [rival operator] Zain KSA.”

In November Mobily restated 18 months of earnings after auditing errors and later the same month suspended its chief executive. The Riyadh-listed company’s market capitalisation has plunged since then.

Etisalat owns a 27.5 per cent stake in Mobily. Its shares closed yesterday down 2.88 per cent at Dh13.50. Etisalat said on Sunday that it would take a hit of Dh616 million before federal royalty as a result of Mobily's accounting changes for last year and its net profit this year will also be affected by about Dh204m due to the increased provisions. Mr Maher said that Mobily's effect on Etisalat was not good news but that the drop in share price could also have been off the back of an investor sell-off after the initial excitement of the lifting of restrictions on foreign ownership died down.

“In the grand scheme of things, the situation for Etisalat is not optimal,” said Mr Maher. “They are the main shareholder of Mobily and provide technical assistance. However, Etisalat gets most of its value from the UAE. Its exposure to Mobily in terms of value is not as important as it was in the past.”

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