Etisalat says loss to be ‘insignificant’ from Mobily’s royalty deal
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 yesterday.
“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, 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.
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.