Etisalat affiliate Mobily refinances loans to boost broadband

Mobily, the Saudi Arabian telecommunications operator, has refinanced a 10 billion riyal (Dh9.7bn) loan in a move it says will help to bolster its broadband business.

The Saudi telecommunications operator Mobily has refinanced a 10 billion riyal (Dh9.7bn) loan in a move it says will bolster its broadband business.

The company, an affiliate of the UAE's Etisalat, has signed an agreement with seven Saudi-based banks to refinance existing loans at more competitive rates.

Abdulaziz Al Saghyir, the chairman of Mobily, said the refinancing deal would allow Mobily "to grow revenues and to maintain, as well as entrench, its leadership position in the Saudi broadband market", according to a statement posted to the Saudi stock exchange.

The loans being refinanced include a 10.78bn riyal long-term obligation negotiated by the company in 2007, a 1.5bn riyal medium-term loan arranged in 2009, and a 1.2bn riyal short-term loan taken in 2010.

Mobily said it had taken advantage of better terms in renegotiating the loans, which are payable in four tranches over five to seven years.

The four tranches are payable at between 0.65 per cent and 0.70 per cent above the Saudi Interbank Offered Rate.

Ibrahim Masood, a director and senior investment officer for asset management at Mashreq, said the move represented "good balance-sheet management", adding that the loan terms were "pretty good" for Mobily.

"Mobily is in a bit of a sweet spot," he said. "This makes a lot of good financial sense."

The seven banks participating in the refinancing deal are Samba Financial Group, Banque Saudi Fransi, National Commercial Bank, Riyad Bank, Saudi British Bank, Al Rajhi Bank and Saudi Hollandi Bank.

The loans taken by Mobily, Saudi Arabia's second-largest telecoms operator by market capitalisation, are Sharia-compliant, according to a Reuters report.

Mobily last month reported fourth-quarter net profit of 1.7bn riyals, a 16 per cent increase on the same period in the previous year, ahead of analysts' expectations.

The gains are partly attributable to growth in internet and data services, which now account for 22 per cent of Mobily's total revenue, up from 18 per cent in 2010.

Despite rising demand for data services in the kingdom, prices for services are expected to decline because of greater competition among rivals such as Mobily and STC.

Mr Masood said this presented a future challenge for Mobily.

"The price competition is hotting up a bit," he said.

Shares in Mobily, which are listed on the Tadawul All-Share Index, on Sunday closed up 2.13 per cent at 60 riyals.

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