Etisalat’s Saudi Arabian affiliate Mobily will reissue its 2014 annual financial statements, increasing the loss for the year by approximately SAR 830 million ($220 million), following an investigation of accounting errors by the kingdom’s Capital Market Authority (CMA), the company said.
However, its performance for Q1 2015 will improve by approximately SAR 207 million ($55 million), to SAR 8 million net profit.
Separately, the company will also “increase provisions by SAR 800 million” relating to Kuwaiti operator Zain’s account receivables, the impact of which it said “will be recognised in Q2 2015”, without elaborating further.
Meanwhile, Etisalat said Mobily’s earnings restatement will “negatively impact” its own 2014 results by AED 616 million ($167.7 million) before royalty payments.
According to Mobily’s statement, a specialised team established by the CMA had “identified certain concerns with the set up and operation of fibre to the home (FTTH) contracts and brand reseller contracts” and “concluded that the legal form of these contracts needs the company to reconsider its accounting approach to such contracts.”
“The report also highlighted concerns over the company’s practice of depreciating fixed assets,” the statement added.
“The board has every confidence in the outcome of the specialised team assigned by the CMA’s comprehensive and professional investigation” and “is confident that Mobily is on the right track to go back to normal operations,” the statement concluded.
Mobily has been under investigation by the CMA since November, after the operator restated figures for 2013 and the first nine months of 2014, which it blamed on an accounting error.
The issue led to the suspension, and then the departure, of long-term CEO Khalid al Kaf.
Earlier this month, Mobily postponed its annual shareholder meeting after the CMA suspended trading of its shares on the country’s stock exchange, saying it would not resume trading until the operator “discloses the financial impact on its financial statements, in light of observations that have been submitted to the company”.
Mobily also claims it is owed SAR2.2 billion by Zain Saudi according to a 2008 contract under which it would provide Zain with services like domestic roaming, and has been in arbitration with the operator, which is number three in Saudi Arabia.