Fingerprinting, slow growth hit Mobily

48m is the number of mobile subscriptions in saudi arabia in Q2

riyadh/dubai — Saudi Arabia’s demand that all phone and Internet customers be fingerprinted for identification is pressuring Etihad Etisalat Company’s sales and profits in the kingdom, according to CEO Ahmad Farroukh.

Introduced this year, the requirement affects all carriers and is hurting subscriber numbers at Etihad Etisalat, or Mobily, as the company is known, Farroukh said in a television interview in Riyadh with Bloomberg Markets Middle East. Saudi Arabia’s slowing economic growth will also be a drag on its finances, he said.

“Consumer spending definitely will be a little bit impacted and definitely this will have an impact on our top line and on our bottom line,” Farroukh said. Businesses could also delay in investing in some of their communication needs, he said. “And that will also have an impact.”

Lackluster growth and the fingerprinting task is adding to troubles for the second-biggest carrier in Saudi Arabia. The total number of mobile subscriptions in the kingdom has fallen to 48 million in the second quarter from 53 million last year, with further decreases expected, according to the Communications and Information Technology Commission. Mobily is still recovering from accounting irregularities discovered in 2014 that cost it billions in market value and led to the ousting of then-CEO Khalid Omar Al Kaf.

The kingdom’s gross domestic product is forecast to expand 1.5 per cent this year as the world’s largest oil exporter grapples with lower oil prices and government austerity measures, according to a Bloomberg survey of economists. That’s the slowest pace since the 2009 global recession. Point of sale transactions, an indicator of consumer spending, were down 16 per cent in July compared to the same month last year, while cash withdrawals fell 19 per cent, according to central bank data.

Mobily’s share price has dropped 24 per cent this year, compared to 14 per cent for the benchmark Tadawul All Share Index. Mobily reported a profit of 18.8 million riyals ($5 million) in the second quarter, compared with a loss of more than 900 million riyals a year earlier, still well below the level of profit before the irregularities surfaced.

“I think in the very near future, hopefully, we’ll be able to get back to a level of profitability that a No 2 player can have in a market like Saudi Arabia,” Farroukh said.

The accounting errors are “resolved and it’s behind us,” Farroukh said. Mobily is working to apply new accounting standards required in the kingdom from 2017, he said. — Bloomberg