Zain Saudi Rejects Mobily’s $586m Claim

Saudi Arabia’s second-biggest telecom operator Mobily said on Tuesday it was seeking arbitration to obtain SAR2.2 billion ($586.28 million) owed it by Zain Saudi, a claim its smaller rival subsequently said was unfounded.

A dispute has arisen between the two companies over the application of a 2008 contract under which Mobily would provide services including domestic roaming and site sharing to Zain Saudi, which began commercial operations that year.

Mobily, which last month cut its profits for 2013 and the first half of 2014 by a combined SAR1.43 billion citing accounting errors, claims that Zain Saudi owed it SAR2.2 billion as of Nov. 30, 2013.

“Mobily could not reach an amicable settlement with Zain Saudi,” Mobily said in a bourse statement. “Accordingly, and for the purpose to protect Mobily rights, Mobily decided to revert back to arbitration as per the Arbitration Rules and Regulations and in accordance with the said Service Agreement.”

But Zain Saudi, an affiliate of Kuwait’s Zain, subsequently rejected Mobily’s claim in a statement to Riyadh’s bourse, stating it only owed around SAR13 million.

“We have been asking Mobily to provide documentation that could justify this claim and so far they have failed to do so – these claims are not valid,” Hassan Kabbani, Zain Saudi’s chief executive, told Reuters.

“It’s something very serious – there’s no way this amount is feasible or reasonable.”

Kabbani said Mobily had provided national roaming services for Zain Saudi until August 2013 when his firm switched to former monopoly Saudi Telecom Co.

“Zain used national roaming to provide nationwide coverage when it launched, but as the company expanded the coverage and capacity of its own network it needs to rely less on national roaming,” said Kabbani.

Mobily’s claims contradict the decisions of the telecom regulator, Zain Saudi said, adding Mobily was also seeking SAR58.7 million in damages. Mobily said it had received irregular payments from Zain Saudi.

National roaming now accounts for less than one per cent of Zain Saudi’s costs, Kabbani added.

Mobily is also known as Etihad Etisalat and is 27.5 per cent owned by Abu Dhabi-listed Etisalat.

Saudi Arabia’s three operators share tower infrastructure in some locations, as is normal practice in telecoms.

The market regulator suspended trading in the two Saudi operators’ shares before Riyadh’s bourse opened on Tuesday.