Mobily cuts profit after rival scraps tie-up
Dubai, June 2, 2014
Saudi Arabia mobile operator Mobily will cut its second-quarter profit by SR338.7 million ($90.3 million) after fixed-line rival Etihad Atheeb scrapped a deal between the two companies, it said on Monday.
Shares in Mobily, the kingdom's No.2 mobile operator by subscribers, fell 4.3 per cent to a 17-week closing low after the company originally said the reduced profit would be included in re-stated first-quarter results.
That would have cut its profit in the first three months of 2014 to SR1.06 billion from SR1.4 billion, according to Reuters calculations, but after market hours Mobily issued a second statement saying the deal cancellation would be reflected in its second-quarter, not first-quarter, results.
Mobily and Atheeb concluded a so-called Indefeasible Rights of Use (IRU) agreement on March 30 that would enable Atheeb to use Mobily data subsidiary Bayanat's fibre network.
But Atheeb has now exercised a clause to cancel the deal, Atheeb said in a separate bourse statement, "due to some technical and logistical difficulties".
Mobily did not respond to requests for comment.
A separate agreement that allows Mobily to include Atheeb's voice lines in its fixed data and voice packages remains in place, Atheeb's chief executive Ahmad Maali told Reuters.
Such bundled services are considered an important means to attract and retain customers.
Last week Mobily and some of Atheeb's founding shareholders ended talks over Mobily buying a 20 per cent stake in Atheeb, which has about 200,000 customers, according to its website.
Atheeb has struggled to compete against former monopoly Saudi Telecom Co and made a loss of SR249 million for the 12 months to March 31.
Analysts say the main attraction for Mobily, an affiliate of the United Arab Emirates' Etisalat, was to acquire Atheeb's landline call licence. - Reuters
