Eti­salat and Mo­bily dis­cuss new al­liance

Kuwait Times - - BUSINESS -

DUBAI: United Arab Emi­rates telecom­mu­ni­ca­tions con­glom­er­ate Eti­salat said yes­ter­day that its man­age­ment agree­ment with Saudi Ara­bian af­fil­i­ate Mo­bily had ex­pired and the com­pa­nies were work­ing on a new ar­range­ment. Eti­salat, which owns 27.4 per­cent of Mo­bily, helped to found the Saudi com­pany more than a decade ago and has played a ma­jor role in its man­age­ment.

But Mo­bily has been hit by con­tro­versy in the last cou­ple of years af­ter it re­stated 27 months of earn­ings to March 31, 2015, cit­ing ac­count­ing er­rors due to pre­ma­ture book­ing of rev­enue from a pro­mo­tional cam­paign. The re­state­ment slashed Mo­bily’s to­tal prof­its by 3.63 bil­lion riyals ($968 mil­lion). “Eti­salat Group and Mo­bily are cur­rently work­ing on devel­op­ing a ser­vice and tech­ni­cal sup­port agree­ment which will take into con­sid­er­a­tion Mo­bily’s re­quire­ments for the com­ing pe­riod given the scale of its op­er­a­tions and cus­tomer base,” Eti­salat said yes­ter­day. Eti­salat added in a brief state­ment, “Eti­salat Group and Mo­bily will con­tinue to work closely and foster the re­la­tion be­tween each other to en­hance the share­hold­ers’ value of both com­pa­nies.” It did not elab­o­rate.

In a brief state­ment of its own, Mo­bily said its man­age­ment agree­ment with Eti­salat had ex­pired on Fri­day “and Mo­bily and Eti­salat Group agreed on the non-re­newal of the same”. It did not give any de­tails. Shares in Eti­salat closed 0.6 per­cent higher on Sun­day while Mo­bily shares were flat in late trade, un­der­per­form­ing a 1.5 per­cent rise in the Saudi stock in­dex. “Mo­bily has reached a level of growth that of­fers it the flex­i­bil­ity to work in­de­pen­dently, and maybe Mo­bily does not need mi­cro-man­age­ment from Eti­salat any­more,” said Nishit Lakho­tia, head of re­search at Se­cu­ri­ties & In­vest­ment Co in Bahrain. “Whether this has any­thing to do with the cri­sis and cred­i­bil­ity chal­lenges which Mo­bily faced over the past few years is dif­fi­cult to com­ment upon.” He added, “For Eti­salat, Saudi is a very im­por­tant coun­try, and it will re­main one of their key in­ter­na­tional op­er­a­tions out­side the UAE.”

Eti­salat has a sub­stan­tial rep­re­sen­ta­tion on Mo­bily’s board and should there­fore re­tain some in­flu­ence on Mo­bily de­spite the ter­mi­na­tion of their man­age­ment agree­ment, he added. — Reuters

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