JEDDAH — Etihad Etisalat (Mobily) said its Chairman Abdulaziz S. Al-Saghyir has resigned from his position due to health reasons, according to the company's filing on Tadawul. Al Saghyir has submitted a request to resign on Sunday (Feb. 22), to be effective as of Monday (Feb. 23). Al Saghyir's membership in the board will continue. The board accepted the resignation and appointed Suliman bin Abdulrahman Al-Gwaiz, governor of the General Organization for Social Insurance, as Chairman for the remaining period of the current term, from Feb. 23 (Monday). Al-Gwaiz is also chairman of Banque Saudi Fransi and governor of state-owned fund the General Organization for Social Insurance, the statement said. The telecom operator reported a surprise fourth-quarter loss of SR2.28 billion ($607.9 million), while in November it also cut its profits for 2013 and the first half of 2014 by a combined SR1.43 billion. An accounting scandal at Mobily is set to constrain dividend payouts from the former stock market darling for the next few years and make investors more picky about companies in the kingdom. Analysts who met acting Mobily Chief Executive Serkan Okandan a month ago came away with the impression that the company would not pay a dividend this year and make only modest payouts from 2016. “Mobily needs to determine its dividend policy based on both operating free cash flows and net profit -- this is a usual practice in telcos,” Okandan told Reuters by email this month. Problems at Mobily came to a head last November when the company restated profits for 2013 and the first half of 2014, cutting them by 1.43 billion riyals ($381 million) combined. In January, it posted a shock fourth-quarter loss of 2.28 billion riyals. The timing is sensitive as Riyadh is preparing to open its stock market, the largest Arab bourse, to direct investment by foreigners this year. The Saudi market has a reputation among fund managers as one of the best regulated in the Middle East, on a par with many emerging markets around the world. But Mobily is the sort of company that would have been expected to attract a sizeable chunk of foreign money. So its fall from grace may give foreign investors pause for thought. “The earnings restatement will weigh heavily on investor sentiment towards all Saudi companies because Mobily was considered a blue chip,” said Daniel Broby, chief executive of British-based Gemfonds, an emerging market fund specialist. “Restatements happen, but the number of accounting areas that were addressed is where the cause for concern lies.” Mobily's rise was remarkable. It turned profitable in 2006, a year after launching operations, and annual profits soared 854 percent between then and 2013. Dividends jumped by a similar margin, propelling its shares to an eight-year high of 98.25 riyals last May. But the bumper payouts masked balance sheet weakness – receivables swelled to $2.7 billion by last June as Mobily struggled to collect revenues which it had booked. — SG/Reuters
