Annual Report 2017 Financial Highlights
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To access the digital version, please visit our Annual Report microsite at: http://mobily.im/annualreport-en Rising to the Challenge Annual Report 2017 Financial Highlights Operational Cash Flow (EBITDA–CAPEX) Deleveraging (Net Debt and Net Debt / EBITDA) (SAR million) (SAR million) +60.8% -9.3% 2,000 14,000 13,993 12,687 12,000 12,527 1,378 10,000 1,000 857 8,000 6,000 3.5x 3.5x 0 4.26x 4,000 (543) 2,000 -1,000 0 2015* 2016 2017 2015* 2016 2017 Net Debt Net Debt/EBITDA This year was an important turning point for Mobily, in which the Revenues EBITDA and EBITDA Margin Company developed and articulated a new corporate strategy for growth (SAR million) (SAR million) to 2019 and beyond. -9.7% -10.4% 15,000 5,000 14,424 4,000 12,569 4,069 10,000 11,351 3,000 3,646 32% 2,941 2,000 32% 5,000 1,000 20% 0 0 2015* 2016 2017 2015* 2016 2017 EBITDA EBITDA Margin Net Income/(Loss) (SAR million) 0 -200 (214) -400 -600 (709) -800 -1,000 (1,093) -1,200 2015* 2016 2017 *FY 2015 figures are not IFRS. 2017 at A Glance Table of Contents Company Profile 2x5 MHz 01 04 Governance new spectrum acquisition About Mobily 08 Board of Directors 48 Vision and Values 09 Executive Management 58 Chairman’s Statement 10 Related Party Transactions 60 Rising to the Challenge 12 Compensation and Remuneration 61 Geographic Footprint 14 About Mobily 62 Achievements and Awards 16 Important Events 65 Shareholder Information and Key Forward-looking Statements 66 18 Announcements Social Responsibility 67 46 Shareholders 68 Mobily Elite fourth-batch recruits Dividend Policy 70 28 Saudi women, 18 Saudi men Risks 71 Accounting Standards Applied in Financial Strategic Review 73 02 Statements CEO’s Message 24 Summary of Assets, Liabilities and Business 75 Strategy and KPIs 26 Results CFO’s Review 28 Loans 77 Marketplace 30 Statutory Payments 82 Business Model 32 Lawsuits and Penalties 83 Innovation and Technology 34 Annual Review of the Effectiveness of Internal 274.38% SAR 7.9 bn 84 improvement in refinancing Service Excellence 36 Control Procedures Free Cash Flow package Investing in Human Capital 38 Corporate Governance Compliance 86 Social Responsibility 40 Declarations of the Board of Directors 87 Interconnection termination rates cut by 03 Financial Review 05 Financial Statements Financial Review 44 Auditors’ Report 90 SAR 0.045 Balance Sheet 45 Consolidated Statement of Financial Position 97 Income Statement 45 Consolidated Statement of Profit or Loss 98 Cash Flow Statement 45 Consolidated Statement of Comprehensive 99 Income Authorization of Consolidated Statement of Changes in Equity 100 Consolidated Statement of Cash Flows 101 limits for Notes to the Consolidated Financial Statements 102 2non-Saudi SIM subscribers servicesVoIP by CITC 01 Company Profile 01. Company Profile Annual Report 2017 About Mobily Vision and Values Etihad Etisalat (Mobily) was established in 2004 by that year, it acquired an absolute majority stake in Zajil, a consortium led by Etisalat, the UAE-based telecom the leading Saudi internet service provider. Mobily owns conglomerate. The Company’s major shareholders 66% of the Saudi National Fiber Network (SNFN), one of are Etisalat Emirates Group (27.99%) and the General the world’s largest fiber-optic networks. This enables the Organization for Social Insurance (11.85%). The remaining Company to rely on strong backhauling capacity, allowing Vision shares are owned by institutional and retail investors. it to offer its customers comprehensive communication, mobile and broadband services. As the winning bidder for Saudi Arabia’s second GSM To be one of the most license in 2004, Mobily ended a monopoly in the wireless Mobily’s network is composed of its own infrastructure admired Saudi companies, industry to provide mobile telcom services nationwide. After as well as those of Bayanat al-Oula and SNFN. This is creating superior value for our a six-month preparatory phase, it launched commercially the Kingdom’s newest fiber-optic network, with access to stakeholders in May 2005, acquiring over 1 million subscribers in its first all major cities and more than 32,000 km of roads. The 90 days of operation. In 2006, the GSM Association named network has been expanded to connect to neighboring Mobily the fastest-growing mobile operator in the Middle countries including Yemen, the United Arab Emirates, East and North Africa. The same year, it launched 3.5G Bahrain, Qatar, Kuwait and Jordan. services, with 4G services introduced in 2011. Mobily has been listed on Saudi Arabia’s Tadawul stock Values Mobily’s growth has been characterized by a series of exchange since 2004. It has a share capital of SAR 7,700 significant strategic acquisitions. In 2008, it obtained million, comprising 770 million shares of SAR 10.00 each, approval from the Communication and Information paid in full as at 31 December 2017. Total equity as at Technology Commission (CITC) to acquire Bayanat al-Oula, 31 December 2017 was SAR 14.25 billion. a licensed data service provider, for SAR 1.5 billion. Later Progressive Passionate • Self-assured and forward-looking • Relentless pursuit of excellence • Experienced and dynamic • Warm and engaging • Driving toward Saudi Arabia’s future • A positive attitude to go the extra mile Caring • Focused on you and your needs • Takes the long-term view and builds a great relationship • Clear and accountable 8 9 01. Company Profile Annual Report 2017 Chairman’s Statement It is my pleasure to introduce Mobily’s Annual Report for Mobily was awarded a Unified License by the the year ended 31 December 2017. It provides a summary Communications and Information Technology Commission of our performance and activities in a year that was (CITC). The license runs until 2043 and will be important characterized by the introduction of our new corporate for our positioning as an operator providing a broader range strategy – RISE – which is explained in detail on the of IT and telecom services. The Company completed its following pages. transition to International Financial Reporting Standards (IFRS), a process that began in 2016. Our financial results Our economic environment for Q1 2017 were prepared in accordance with IFRS and The macroeconomic environment remained challenging, achieved full compliance. with sustained low oil prices putting continued pressure on the GCC’s economies. Oil prices did, however, stabilize at a A busy year also saw the acquisition of additional network higher level than in 2016 and there was positive news that spectrum from CITC. This 2x5 MHz block in the 1,800 MHz OPEC’s production cuts will remain in place in 2018. Deficit band will be paid for over a ten-year period. Available from reduction measures in Saudi Arabia have already borne fruit 2018, the additional spectrum will increase our network and the outlook is promising. capacity, improve customer experience and help limit future Capex. In addition, we completed a series of three-year For now, we remain in a period of transition, with framework agreements with Nokia, Huawei and Ericsson. considerable pressure on consumer spending driven by These will see Mobily renew a major portion of its mobile reduced subsidies and the departure of a large number of infrastructure, providing an advanced technology platform expatriate workers from the market. Mobily is confident that will enable us to handle growing subscriber demand, that the Saudi Government’s National Transformation Plan while optimizing operating costs. (NTP 2020) and Vision 2030 will create growth and we Our commitment to society With thanks are pleased to be playing our part in the Kingdom’s exciting At the end of the year, we were pleased to announce the During the year, we continued to recognize the important I would like to express my personal gratitude to the Board social and economic development. appointment of Engr. Abdullah Mohammed Al-Issa as Vice role we play in the lives of our subscribers, employees of Directors for the robust and constructive support they Chairman of the Board. Engr. Al-Issa will hold this position and wider Saudi society. As a leading local corporate, we continue to provide to Mobily. On behalf of the Board, Highlights in 2017 until the Board’s current term ends in December 2018 and provided a wide range of professional opportunities to I would like to place on record our gratitude to the Milestone events in 2017 included the appointment of a we look forward to benefiting from his wise counsel and young and motivated Saudi nationals, thereby contributing Company’s senior management for the innovation and new Chief Executive Officer (CEO) at the start of the year. guidance. directly to the Kingdom’s socioeconomic growth. We also determination that they have shown in embarking on our Engr. Ahmed Abdelsalam AbouDoma has more than 24 played a prominent part in a variety of charitable and new strategic pathway. I would, lastly, like to thank our years’ international ICT and telecom experience and is a philanthropic programs, with a strong focus on orphan care shareholders for their ongoing trust and loyalty. We look most welcome addition to the Mobily team. and health issues. We are proud of the commitment shown ahead to 2018 with the confidence that we will achieve by staff to our CSR initiatives and will continue to make fundamental growth – and the aim of exceeding our active and positive social contributions in 2018. stakeholders’ expectations. Suliman Al Gwaiz During the year, we continued to recognize Chairman of the Board the important role we play in the lives of our subscribers, employees and wider Saudi society. 10 11 01. Company Profile Annual Report 2017 Rising to the Challenge REGAIN IGNITE CUSTOMER STRIVE TO GAIN ENABLE COMMERCIAL EXPERIENCE AND AGILITY AND WORLD-CLASS STRENGTH DIGITAL EXCELLENCE EFFICIENCY EXECUTION R I S E Mobily aims to become a strong and clearly Mobily will deliver an enhanced and Mobily’s simplified and agile IT systems Mobily’s leading corporate culture and differentiated brand.