Mobinil's Q2 results hit by new tax regime

Mobinil posts a net loss of LE108.5 million ($18.2m) as political turmoil continues to overshadow the company's business activity

Egyptian mobile phone operator Mobinil has reported a second-quarter net loss as its improvement in revenues was offset by sizeable one-off levies due to a change in tax regime.
The net loss of LE108.5 million ($18.2m) compares to net profits of LE378.7m for the same period in 2010. This translates to total first half losses of LE86m, a 111 per cent plunge on H12010 figures.
Mobinil has been struggling in 2011, its first quarter income declining 93.6 per cent compared to the previous year, following a shutdown of telecommunications service across Egypt.
While revenues for 2Q2011 were up 3.5 per cent on 2Q2010, reaching LE2.6 billion, reported earnings before interest, tax and depreciation (EBITDA) hit LE952 million, a 13 per cent decline on last year, indicating unusual growth in operating expenses.
The increase in revenues was partially driven by broadband revenues which climbed 7.6 per cent in 1H2011 over 1H2010. Mobile services revenues slumped 4.4 per cent over the same period.
Net income before tax reached LE80 million, which slipped into a net loss of LE108.5 million after applying the new 25 per cent corporate tax rate.
Beltone Financial, a leading Cairo based investment bank, explained that the negative impact of the new tax regime would only be apparent in 2Q2011 with the effect booked as a one-off.
Beltone said that Mobinil's EBITDA was lower than forecast due to higher than expected operating expenses, while net income also come in lower on the back of higher than expected interest, depreciation and amortization charges.
Mobinil's management placed blame for the disappointing results on Egypt's ongoing political turmoil as well as the new tax regime.
"Mobinil has been actively seeking to reduce the impact of the exceptional first quarter and to cope with the continuous unstable political and economic environment," CEO Hassan Kabbani said in the company' earnings statement on Tuesday.
Mobinil said its subscriber base grew 0.6 per cent from the preceding quarter to 30.54 million subscribers.
"Commercial activity started to pick up after a difficult first quarter," the company said.
Earlier this month, UBS cut its price target on Mobinil shares by 24 per cent, citing reduced business activity for the company due to the country's political turmoil.
Mobinil's earnings before interest, taxes, depreciation and amortization fell 13.1 per cent LE952.6m in the second quarter from the year-earlier period.
Blended Average Revenue Per User (ARPU) dropped 15.6 per cent year-on-year to LE27.