Mobily’s Q1 earnings miss estimates, says NCB Capital

Etihad Etisalat Co. (Mobily) reported a net loss of SAR 163 million for Q1 2017, coming in significantly lower than NCB Capital’s (NCBC) estimated loss of SAR 50 million, the brokerage firm said in an earnings review on Monday.

Q1 earnings were also below the consensus estimate of a loss of SAR 69.4 million, it added.

This was Mobily’s third consecutive quarterly loss, which was driven by weak sales, higher-than-expected depreciation and financing charges, NCBC said.

The telco’s revenues, which were down 16.7 percent year-on-year (YoY) at SAR 2.87 billion, were in-line the brokerage firm’s estimates.

“We believe the YoY decline is due to the impact of the finger print initiative, higher competition and lower MTR (mobile termination rate) charges,” NCBC report said.

Gross margins expanded 215 basis points (bps) YoY and 65 bps quarter-on-quarter to 58.1 percent – the highest Q1 margin on record – due to growth in the high margin data segment.

Gross profits were on par with NCBC estimates. SG&A expenses declined 7.8 percent YoY, also in-line with expectations, reflecting Mobily’s effort to optimize its costs, the report said.

NCBC has recommended “neutral” rating on the telecom operator, with a target price of SR25.

“The ongoing losses combined with the strong decline in sales are the key concerns. Progress in tower sale MoU with STC will be a key catalyst going forward,” it added.