Mobily’s Q2 losses wider than estimates on lower margins: NCBC

Etihad Etisalat Co.’s (Mobily) net loss of SAR 189.7 million in Q2 2017 was larger than NCB Capital’s estimates of a loss of SAR 150 million, the brokerage said in an earnings review Monday.

The consensus estimates had pointed to Mobily making a loss of SAR 164 million in Q2.

“We believe lower than expected gross margin and higher zakat were the key reasons behind the deviation,” NCB Capital said.

Revenues declined 13.2 percent year-on-year (YoY), but were flat against the previous quarter at SAR 2.85 billion. The decline was due to higher competition, lower interconnection rates, and the telco’s fingerprint initiative, the report said.

Gross profit at SAR 1.6 billion was also lower than NCBC estimates, due to higher roaming and interconnection charges.

Gross margin at 57.2 percent fell short of NCBC estimates of 59.5 percent, and was down from 58.1 percent in Q1.

NCBC affirmed a “neutral” rating on Mobily at a target price of SAR 22.8 per share.

“Weak sales, increasing competition and ongoing losses remain the key concerns,” the brokerage said, adding that the telecom operator’s ability to control declining sales will be the key catalyst going forward.