Regulatory pressures weigh on Mobily’s Q3 revenue, says Falcom

Etihad Etisalat Co.’s (Mobily) revenue in Q3 2017 slid by 2 percent quarter-on-quarter (QoQ) to SAR 2.8 billion after the application of the fingerprinting process, a drop in interconnection rates, and higher pricing competition, Falcom Financial Services said in a company review.

The Kingdom’s second largest telco reported a net loss of SAR 174 million for the quarter, while the total debt dropped by SAR 1.3 billion.

“Q3 performance has reflected a drop in the firm’s market share, a sharp decline in its capital expenditure and a rise in the cost of debt, in addition to regulatory pressures,” Falcom said.

Market share fell to 29 percent in 2016, compared to 42 percent in 2011, and it is expected to drop even further in the near future due to regulatory pressures that will likely affect the firm’s revenues— such as the fingerprinting process, and expat fees.

The company in May acquired a 2x5 MHz block in the 1800 MHz spectrum band for SAR 422 million, which is expected to boost Mobily’s network capacity, improve customer experience, and reduce capital expenditure.

Capital expenditure in Q3 reached SAR 438 million, yet such a drop could lead to lower growth rates at market’s rough times, Falcom said.

In February, the telco received a SAR 7.9 billion re-financing facility that increased its cost of debt, which would affect its annual earnings, the report said.

The debt-to-equity ratio remained high at 102 percent in Q3 2017.

Falcom has recommended an “underweight” rating on the stock with a target price of SAR 11.96 per share.