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TELECOMMUNICATIONEtihad Etisalat CoAlso known asMobilyPriceSR36.4Pricing / Valuation as on May 27, 2009Mkt capSR25.5bn ($6,803.7mn)Sh. outstanding700.0mnKey statistics52 week range H/L (SR) 45.8/21.9Avg daily turnover (mn) SR US$3m 32.35 8.6412m 42.42 11.33Raw Beta 6m 3yr0.75 1.00Reuters7020.SEBloombergEEC ABPrice perform (%) 1M 3M 12MAbsolute (%) (4) 5 (16)Market (%) 6 32 (39)Sector (%) 4 20 (27)Website: www.mobily.com.saValuation multiples2006 2007 2008P/E (x) 37.1 26.6 10.4P/B (x) 5.7 6.2 2.2P/Sales (x) 4.2 4.4 2.0Div yield (%) 0.0 0.7 2.4Etihad Etisalat Company (Mobily), the second largest mobile operator in SaudiArabia in terms of market value, was established in 2004 by UAE-based EmiratesTelecommunications Corporation (Etisalat). The company commenced operationsin 2005, providing public wireless telecommunication services.Company financials2005 2006 2007 2008YoY(%)CAGR(%)(05-08)Net Revenues SRmn 1,662 6,183 8,440 10,795 27.9 86.6EBITDA SRmn (60) 2,125 3,239 3,794 17.2 NMNet Income SRmn (1,167) 700 1,380 2,092 51.6 NMAssets SRmn 16,204 17,689 19,881 27,192 36.8 18.8Equity SRmn 3,833 4,533 5,913 9,754 65.0 36.5Total Debt SRmn 8,948 9,440 8,923 9,790 9.7 3.0Cash & Equiv SRmn 185 548 703 1,264 79.7 89.7EBITDA Mgn % (3.6) 34.4 38.4 35.1 - -Net Mgn % (70.3) 11.3 16.3 19.4 - -ROE % (30.5) 16.7 26.4 26.7 - -ROA % (7.2) 4.1 7.3 8.9 - -Div Payout % - - 18.1 25.1 - -EPS SR (2.1) 1.4 2.8 3.0 NM NMBVPS SR 7.70 9.10 11.80 13.9 NM NMSource: Company, NCBC ResearchSegment-wise business analysisProduct segment 2008 Geographic 2008%Rev % Net Inc Breakup %Rev % Net IncWireless Telecommunication 100.0 100.0 Saudi Arabia 100.0 100.0Weightage (%)TASI (free float weight) 3.33MSCI Saudi (domestic – large cap) 1.35Free float (%)Free float 58.48Relative share price perf.11,0009,0007,0005,0003,000M ay-08 Aug-08 Nov-08 Feb-09 M ay-09TASITop 5 shareholders (%)5040302010-M obily (RHS)Etisalat - UAE 27.4General Organization for Social 11.2Insurance - Saudi ArabiaSource: NCBC ResearchSource: Company, NCBC Research• Business brief: Mobily offers Global System for Mobile communications (GSM), 3Gsystem, and 3.5G technology (services such as video calling, live television,video/audio on demand, high speed Internet and multiplayer gaming). The company’sservices and products also include voice service, mobile internet, billing and payment,credit transfer, Kalemni, Mobily Hawwel, Mobily Al Hilal (news) and Mobily Ranan.Mobily markets its products via four functional lines—channel distribution, corporate &VIP sales, flagship stores, and commercial support. Currently, it has a subscriberbase of 11.1mn, representing around 39% of KSA’s mobile market.• Financials: Mobily’s revenues grew 27.9% year-on-year (y-o-y) to SR10.8bn in FY08mainly due to rise in demand for mobile broadband services and expanding customerbase. The net profits for FY08 amounted to SR2.1bn, a y-o-y rise of 51.6%.Improvement in net margin was also helped by lower interest expenses.• Recent developments: Mobily’s net profit for 1Q-09 increased 47% y-o-y to SR480mn on the back of rising demand in broadband and wholesale sales. In April2009, Mobily commenced a branch in Hail with an investment of SR250mn. In March2009, Mobily announced the allocation of SR1bn for developing its 3.75G networkand signed a SR435mn contract with Motorola for enhancing its GSM coverage inSaudi. In January 2009, Mobily signed a SR200mn deal with Etihad Atheeb Telecomto enhance the latter’s data transmission capacity.JUNE 2009 ETIHAD ETISALAT CO 179