Saudi fingerprinting scheme weighs on STC, Mobily

DUBAI / Reuters

Saudi Arabia’s two biggest telecom operators reported weaker third-quarter earnings on Wednesday, as the cost of implementing a government initiative to register fingerprints with phone numbers weighed on both providers.
A 7.5 percent drop in profit at market leader Saudi Telecom Co’s (STC) represented a continuation of an earnings slump which has now seen it report falling profits in eight of the last nine quarters. Meanwhile, number two operator Etihad Etisalat’s (Mobily) recovery from an accounting scandal was halted as revenue and subscriber numbers tumbled in the three months to Sept. 30 due to the state scheme.
Under the Communications and Information Technology Commission rules announced last year, all SIM cards issued in Saudi Arabia must be linked to a fingerprint record held at the National Information Center, part of the Ministry of Interior.
Unregistered lines would begin to be disconnected from July 20, according to information on STC’s website. The initiative is aimed at stopping people obtaining mobile phones by using fraudulent identification cards, according to press reports. STC, which owns stakes in operators in the Gulf, Turkey and Asia, blamed a 1.16 billion riyal increase in service costs linked to the scheme for its disappointing earnings performance. It did not state the percentage which this gain represented.
Net profit slipped to 2.15 billion riyals ($573.2 million) in the three months to Sept. 30 from 2.32 billion riyals in the prior-year period, a bourse statement said. The earnings figure was in line with the average forecast of six analysts polled by Reuters.
The hike in costs overshadowed a 6 percent increase in consolidated revenues, which represented an improvement of 603 million riyals. No total figure was provided. For Mobily, the fingerprinting initiative helped cause a 20.8 percent year-on-year slump in third-quarter revenue to 2.93 billion riyals, as the costs of implementing the scheme combined with the reduction in subscriber numbers as unregistered lines were disconnected.
This resulted in a net loss for the affiliate of the United Arab Emirates’ Etisalat of 167.7 million riyals in the three months to Sept. 30, compared with a loss of 158.3 million riyals in the prior-year period, a bourse statement said.
Five analysts polled by Reuters had forecast Mobily would make a quarterly net profit of 15.06 million riyals. Mobily had made three straight quarterly profits prior to the latest period as it recovered from a series of earnings restatements that in total cut 27 months of profits to March 31, 2015, by 3.63 billion riyals.
The third telecom operator, Zain Saudi Arabia, reported on Monday its subscriber base fell 9 percent to 10.7 million on the back of the fingerprinting scheme, although it attributed its widening net loss to cuts in termination rates. STC did not provide any detail on subscriber numbers in its earnings release.