Etisalat’s Saudi subsidiary stands to benefit from an overhaul of the kingdom’s telecoms licensing regime, with the prospect of lower annual licence costs bringing comfort to the country’s troubled operators.
The Communications and Information Technology Commission (CITC) has extended the operating licence of fellow telco Zain KSA for a further 15 years, according to an announcement yesterday by the country’s Capital Market Authority.
Under the new licensing arrangement, Zain KSA will pay 5 per cent of its annual net income to the government for the duration of the “unified” licence. A unified licence enables operators to offer landline telephone and internet services as well as mobile services, breaking the fixed-line monopoly of Saudi Telecom.
The CITC has offered similar extensions to the other three operators – Etihad Etisalat, known as Mobily, Saudi Telecom and Etihad Atheeb Telecommunications – the statement said.
In the statement there was no mention of an upfront fee for the licence renewal.
The CITC is understood to have had extensive discussions with all four operators regarding the new licensing regime, according to a person with knowledge of the matter who asked to remain anonymous.
The CMA suspended trading of shares in the four telcos, requiring them to state how the regime will affect their profits and losses.
The new licensing arrangement is likely to affect Zain KSA’s earnings positively in the future, with Mobily and other operators also likely to see benefit.
According to Nayal Khan, the head of institutional equities sales trading at Saudi Fransi Capital in Riyadh, Zain KSA paid 23 billion Saudi riyals (Dh22.5bn) for the licence it won in 2007 and charges yearly on its earnings a 936 million riyals amortisation cost for the licence.
“Up to 2015, the operator has charged 6.5bn riyals against amortisation to its P&L [profit and loss] sheet. It is as yet not clear whether [the] operator will look to writeback an excess amortisation expense of approximately 2.5bn riyals in 2016, or just take a lower charge for remaining life of [the] licence,” said Mr Khan. “If it writes back excess amortisation, 2016 earnings could rise to a profit of 1.3bn riyals. Alternatively, their annual amortisation expense could fall from 936m riyals to 496m riyals per annum.”
Zain KSA made a net loss of 972m riyals last year.
Mr Khan said that a similar licence extension would support Mobily in its attempts to turn around its finances, depending on the whether the licence conditions were the same as those of Zain KSA.
A spokesman for Mobily declined to comment yesterday on the status of licensing talks with the CITC, saying that it would make an announcement during the coming days.
Mobily’s chief executive, Ahmad Farroukh, told Bloomberg Markets Middle East last month that Saudi Arabia’s slower economic growth, coupled with new regulations that require all phone and internet customers to be fingerprinted for identification purposes, was putting pressure on telcos’ revenues and profits.
The operator, in which the UAE’s Etisalat owns a 27.45 per cent stake, is gradually repairing its finances after having to slash 27 months of previously reported earnings by nearly US$1bn owing to accounting errors.
Saudi telecom stocks have significantly underperformed the Saudi stock exchange’s already grim performance this year, falling by 24 per cent since the start of the year, compared with 21.17 per cent for the index as a whole.
The Tadawul closed down by 3.1 per cent yesterday at 5,448.20, its lowest close for more than five years, with Saudi Electricity and Samba falling by 8.1 per cent and 6.3 per cent respectively.
jeverington@thenational.ae
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The specs
- Engine: 3.9-litre twin-turbo V8
- Power: 640hp
- Torque: 760nm
- On sale: 2026
- Price: Not announced yet
The schedule
December 5 - 23: Shooting competition, Al Dhafra Shooting Club
December 9 - 24: Handicrafts competition, from 4pm until 10pm, Heritage Souq
December 11 - 20: Dates competition, from 4pm
December 12 - 20: Sour milk competition
December 13: Falcon beauty competition
December 14 and 20: Saluki races
December 15: Arabian horse races, from 4pm
December 16 - 19: Falconry competition
December 18: Camel milk competition, from 7.30 - 9.30 am
December 20 and 21: Sheep beauty competition, from 10am
December 22: The best herd of 30 camels
Liz%20Truss
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McIlroy's struggles in 2016/17
European Tour: 6 events, 16 rounds, 5 cuts, 0 wins, 3 top-10s, 4 top-25s, 72,5567 points, ranked 16th
PGA Tour: 8 events, 26 rounds, 6 cuts, 0 wins, 4 top-10s, 5 top-25s, 526 points, ranked 71st
Ten tax points to be aware of in 2026
1. Domestic VAT refund amendments: request your refund within five years
If a business does not apply for the refund on time, they lose their credit.
2. E-invoicing in the UAE
Businesses should continue preparing for the implementation of e-invoicing in the UAE, with 2026 a preparation and transition period ahead of phased mandatory adoption.
3. More tax audits
Tax authorities are increasingly using data already available across multiple filings to identify audit risks.
4. More beneficial VAT and excise tax penalty regime
Tax disputes are expected to become more frequent and more structured, with clearer administrative objection and appeal processes. The UAE has adopted a new penalty regime for VAT and excise disputes, which now mirrors the penalty regime for corporate tax.
5. Greater emphasis on statutory audit
There is a greater need for the accuracy of financial statements. The International Financial Reporting Standards standards need to be strictly adhered to and, as a result, the quality of the audits will need to increase.
6. Further transfer pricing enforcement
Transfer pricing enforcement, which refers to the practice of establishing prices for internal transactions between related entities, is expected to broaden in scope. The UAE will shortly open the possibility to negotiate advance pricing agreements, or essentially rulings for transfer pricing purposes.
7. Limited time periods for audits
Recent amendments also introduce a default five-year limitation period for tax audits and assessments, subject to specific statutory exceptions. While the standard audit and assessment period is five years, this may be extended to up to 15 years in cases involving fraud or tax evasion.
8. Pillar 2 implementation
Many multinational groups will begin to feel the practical effect of the Domestic Minimum Top-Up Tax (DMTT), the UAE's implementation of the OECD’s global minimum tax under Pillar 2. While the rules apply for financial years starting on or after January 1, 2025, it is 2026 that marks the transition to an operational phase.
9. Reduced compliance obligations for imported goods and services
Businesses that apply the reverse-charge mechanism for VAT purposes in the UAE may benefit from reduced compliance obligations.
10. Substance and CbC reporting focus
Tax authorities are expected to continue strengthening the enforcement of economic substance and Country-by-Country (CbC) reporting frameworks. In the UAE, these regimes are increasingly being used as risk-assessment tools, providing tax authorities with a comprehensive view of multinational groups’ global footprints and enabling them to assess whether profits are aligned with real economic activity.
Contributed by Thomas Vanhee and Hend Rashwan, Aurifer
