Etisalat says Mobily restatement to hurt results

Abu Dhabi-listed Etisalat  said on Sunday the impact of further earnings restatement by unit Etihad Etisalat (Mobily) would hit its own 2014 results by Dh616 million ($167.7 million) before royalty.

Saudi Arabia's Mobily, 28 per cent owned by Etisalat, said earlier on Sunday that it would reissue its 2014 and first quarter 2015 financial statements.

It follows an investigation by a team appointed by the Capital Market Authority, which found concerns over some of Mobily's contracts with customers.

Etisalat said the impact of a separate provision by Mobily, against receivables from another operator, would be reflected in Etisalat's second-quarter earnings.

The move would hit its 2015 net profit by Dh204 million, it said.

Mobily said in a statement on Sunday that it would book further losses for 2014 after a regulator-led investigation into accounting errors at the company.

The company, the country's second-biggest telecommunications firm, would also increase provisions by 800 million riyals ($213.3 million) in the second quarter of 2015 in a separate impairment relating to Kuwaiti operator Zain.

Mobily has been in the spotlight since late last year when it began disclosing accounting mistakes which it said were due to excessive booking of revenue from wholesale broadband leases and mobile promotional campaigns.

The Capital Market Authority (CMA) launched an investigation into the firm last November after Mobily restated a year and a half of its earnings.

Mobily's statement on Sunday came after the CMA identified concerns over the operator's contracts with certain customers, including those for fibre networks, with the filing adding the team recommended the company reconsider its accounting approach for such contracts.

Under the CMA's recommendation, Mobily re-evaluated its accounts under the International Financial Reporting Standards (IFRS) method of auditing for the year 2014 and the first quarter of 2015, which caused the earnings to be adjusted.

Currently, the auditing of most Saudi companies complies with rules set down by the Saudi Organization for Certified Public Accountants. However, listed firms are expected to follow IFRS from Jan. 1, 2017.

The auditing practice change, according to Sunday's filing, meant Mobily would increase its 2014 loss by about 830 million riyals to 1.745 billion riyals, but would see its first-quarter 2015 earnings inflated by about 207 million riyals, swinging it to a profit of 8 million riyals.

Mobily said it would release revised financial statements for both periods ahead of publishing its second-quarter results, due to take place in July.

Separately, Mobily said it would book an 800 million riyal provision in the second quarter relating to "Zain account receivables", the company added without elaborating.

Mobily has been in arbitration with Zain Saudi, the kingdom's third-largest operator, since last year over 2.2 billion riyals Mobily says it is owed under a 2008 contract by which the former would provide services including domestic roaming and site sharing to the latter, which began commercial operations that year.

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