Abu Dhabi, UAEWednesday 21 August 2019

Etisalat sees 'insignificant' impact in 2018 from Mobily royalty fees deal

UAE telecom operator with stake in Mobily to see its group net profit take a hit in the coming years

Etisalat, the UAE telecoms operator with a 28 per cent stake in Saudi telecom operator Mobily, will see up to Dh175m wiped from group net profits in the coming years after a new annual royalties structure in the kingdom. Akintunde Akinleye for The National
Etisalat, the UAE telecoms operator with a 28 per cent stake in Saudi telecom operator Mobily, will see up to Dh175m wiped from group net profits in the coming years after a new annual royalties structure in the kingdom. Akintunde Akinleye for The National

Etisalat, which owns a 28 per cent stake in Saudi telecoms company Etihad Etisalat (Mobily), expects "insignificant" financial effect in 2018 from changes in annual royalty and licence fees in Saudi Arabia, but group profit will take a hit in the coming years.

The UAE telecoms operator said the agreement between the Saudi government and Mobily could wipe out an estimated Dh125 million to Dh175m a year from its group net profit over the "coming few years", according to the company's statement to the Abu Dhabi stock exchange on Monday.

"The financial implications on Etisalat Group's financial statements are still subject to review," the company said. "The final impact will be disclosed to the market as part of the year-end financial disclosures."

Etisalat's statement was in response to an agreement between the Saudi government and three telecom operators, including Mobily, to change the calculations of their annual royalty fees. Under the agreement announced on Sunday, royalty payments by the operators to the government would drop retroactively from 15 per cent to 10 per cent of net revenues from January 1, 2018.

Mobily said the change will not affect its 2018 earnings massively. Starting from next year it said the company will have to bear additional costs estimated between 450 to 600 million riyals per year over the next few years. Mobily would also have to pay an annual licence royalty equal to 1 per cent of its annual net telecoms revenues.

Etisalat said the agreement will not have a material impact on its financial results in the 2018 fiscal year as Mobily's existing provisions offset a "significant" portion of the effect during the year.

_________________

Read more:

Zain Saudi's third-quarter net income up 15-fold as revenues rise

FTSE upgrades Saudi Arabia to emerging market status

Saudi stocks will have potential 2.3 per cent weighting on MSCI Emerging Markets Index

_________________

The agreement announced on Sunday was between the Saudi government and Mobily, Saudi Telecom Company and Zain Saudi. The companies also said they had reached a deal with the government to settle disputed fees to be paid for previous years up to 2017. In return, the three companies agreed to invest in upgrading their network infrastructure over the next three years.

Updated: December 17, 2018 01:31 PM

SHARE

SHARE