Mobily Plunge Wipes $4.4 Billion From Shares on Saudi Probe

A three-day slump in Etihad Etisalat Co. (EEC) has wiped 16.5 billion riyals ($4.4 billion) from shares of the largest Saudi telecom company after the market regulator began a probe and quarterly results missed estimates.
 

The phone operator, also known as Mobily, dropped 10 percent at 12:10 p.m. in Riyadh on about 15-times the three-month average trading volume to 58.50 riyals, the lowest since August 2012. The shares have retreated 27 percent since trading resumed on Nov. 4 after a three-day halt. TheTadawul All Share Index (SASEIDX) fell 0.2 percent today.

The market regulator started procedures to determine if Mobily violated rules after the company sought a trading halt to provide more time for its audit committee to work on the results.

The United Arab Emirates’ Emirates Telecommunications Corp. (ETISALAT), which owns about 27 percent of Mobily, said in a statement today that it’s providing technical and management support to its affiliate, whose foundations are “strong.”

“There is a risk now that the dividends would be impacted and investors don’t like it,” Sebastien Henin, who oversees $100 million as the head of asset management at the National Investor in Abu Dhabi, said by telephone. “It was a darling of investors, especially the foreign investors, but the governance issues and profits have disappointed them.”

The company reported a decline of more than 70 percent in third-quarter profit, missing the average of seven analyst estimates. Mobily distributed a cash dividend of 1.25 riyals in the last three quarters, data compiled by Bloomberg show.

The company is set to pay the same dividend to shareholders in the next quarter, according to analyst estimates on Bloomberg.

Mobily, citing a chartered accountant’s report, said on Nov. 3 an error in timing of revenue recognition of a promotional program affected the interim consolidated financial statements for 2013 and the first half of this year.

The period ended June 30 was also impacted by an error in revenue relating to leasing elements of the fiber-optic communication network because of a lack of readiness for use in full by the end user of the service, Mobily said.