Mobily’s new spectrum deal likely to boost revenue: Riyad Cap

Etihad Etisalat Co.’s (Mobily) purchase of additional spectrum this month is expected to improve the telco’s topline in addition to helping raise selling prices, Riyad Capital said in a recent report.

Mobily booked net losses of SAR 182 million in Q4 2017, compared to the firm’s estimates of SAR 161 million and market consensus of SAR 167 million.

The Saudi telco widened net losses by 159 percent year-on-year (YoY) in Q4, mainly on an increase in selling expenses, higher financial charges, and topline remaining weak.

Revenues declined by 2.8 percent YoY to reach SAR 2.8 billion during the quarter.

As a result, gross margins declined by 500 basis points to reach 55 percent with a gross profit of SAR 1.6 billion, down 7 percent both on a YoY and quarter-on-quarter basis, primarily due to higher selling costs.

“We believe that the whole sector is facing pressure due to VoIP and economic slowdown which has resulted in market contraction,” the research firm said, adding that Mobily is facing pressure on fierce competition, lower margins and declining subscriber base.

The telecom operator needs to boost gross margins beyond 64 percent in order to be able to post a positive bottom line at the current level of operating costs, the report said.

Riyad Capital maintained its ‘Neutral’ stance on Mobily with a target price of SAR 18.