The performance of a company can be measured in different ways among them; the feedback received from customers, the performance of its shares in the local and global markets, the enjoyable monopoly, the performance of its new products in the market as well as the rate of growth in the reserves and distributable dividends. Thus, to come up with a comprehensive and dependable analysis of the performance of any company, all of the above items must be put into consideration. The availably of such data is the first step in financial analysis.
This paper looks at the performance of Mobily Company a telecommunication company in Saudi Arabia. In this analysis, the paper puts more emphasis on; the telecommunication industry in Saudi Arabia, the performance of Mobily shares, the ownership of the company, the profits, and dividends of the company. The main aim of this study is to find out the performance of Mobily Company and its reflection of the shareholders’ dividends. All the information contained in this paper is retrieved from the company’s official website.
There is no company or group of companies that can claim to enjoy the majority of shares of Mobily. However, a United Arab Emirates firm leads the consortium. The firm- Etisalat- enjoys a 27% shareholding of the company. There are other major partakers in the governorship of Mobily who share among themselves47 % of the shares. The rest of the shareholding is held by the public. This was after an initial public offer that was oversubscribed. The shares are listed in the sticks exchange.
This implies that there is no section of ownership that can be able to make some decisions about the company without the support of the other sections. However, the main decision is made by Etisalat by whose name the company is also known. In the distribution of dividends, all of the shareholders are treated as ordinary shareholders and thus only one rate of dividend is given in the financial records of the company.
The trend in Mobily is unique since most of the telecommunication companies that enjoy such monopoly in other countries have either a government backing or the government has shares. The company thus can be able to pride itself as one among the few that are liberal in its operations in the industry.
This partly explains the oversubscription that was witnessed at the initial public offer of its shares. Many of the companies that have government backing have a tendency of having low subscriptions at their initial public offer.
The company has been operating in the Middle East and the northern part of Africa. This has been accredited mostly to its own which can be traced to Arab countries. The countries in which Mobily operates are mostly Arab-speaking countries. By the end of 2005, the company was about to hit its target of five million subscribers. The rise in 2007 was however the highest in its time pf operation with a one million rise in the number of subscribers. In the same year, the number of 3G users hit a half a million high.
The operation of Mobily has been mainly on four main levels. The most productive of all is Fully Branded Outlets which was initiated by the company in the country in 2004. However, the company also operates co-branded outlets across the gulf region. Mobily also uses kiosks as well as dealers in Saudi Arabia. The vibrant sales team that is coordinated from Dubai has been commended by the shareholders for its work. The expansion in the market size that has been witnessed in the last three years can be directly and indirectly attributed to this department.
The shares of Mobily have been major contributors to Saudi Arabia’s stock market. On average the shares have been moving a million shares daily in the markets since the month of March 2011. This has lead to raising value of the shares in the same market. By mid-may 2011 the shares were trading at an average of 53 Saudi Arabia riyal.
The performance of the company in the past three years has been on the rise. The shares were trading at less than thirty Saudi Arabia riyals at the close of 2008. By then the shares of Mobily could hardly move six hundred thousand shares in the stock exchange market.
The company targets both the shares value and the traded shares to rise in the next three years. According to the estimates, the company expects a twenty-five percent rises in the value of shares to sixty sis Saudi Arabia riyal and a ten percent rise in the traded shares to one million and one hundred thousand shares being traded daily at the Saudi’s stock exchange.
The first quarter performance 2011
Every company makes its forecasts at the beginning of the year. In most companies, the financial year is dividend into four quarters. Each quarter has three months. The financial year of Mobily is similar to the calendar year. The performance of Mobily has been outstanding if the results that are published are to be relied on. The profits of the company were above the approximations that had been made by the start of the year. According to the company’s budget, the company expected just over seven hundred million Saudi Arabia riyals. Contrary to this, the company received close to a million riyals as profits in the first quarter. To be precise the company reported 998 million profits according to the financial report that was released on 18th April 2011.
This impacted positively to the shareholder with a rise in the proposed dividends. The proposed dividends at the same period 2010 were 1.02 riyals while in 2011 a 1.43 Saudi riyal was proposed for distribution. The rise means that the shares are expected to trade at even higher rates in the stock market exchange in the future. The introduction of new products in the year could see the share value even doubling.
The highest prediction for the company had been made by Bahraini bank which estimated a 1.1 Billion net profit for the first quarter, while credit Suisse had the least approximations of nine hundred and ninety million riyals net profits. The unprecedented rise in the profit resulted into a rise into the revenue of the company by 25 %. This saw the company reaches the 4.5 billion mark in its revenue. While most of the approximations are received from financial organizations such as banks, the official information is received from the company’s budget. It is assumed that financial institutions can underestimate or over estimate the value and expected profits of a company intention due to the expectation that the financial institutions have in the industry.
Even though the performance of the company was above expectations, this was way below the company’s performance at the same time in 2010. the first quarter results showed a 25% fall of the profits from 2010. the company however had accepted this as Haj season took place at the year end and also the cyclical rise in communication had been witnessed. Compared to the last quarter of 2010 Mobily saw the turnover from smartphones and tablets increase. These two do not have high margins. The interconnection costs were also on the rise.
This scenario is common for most of the companies in the Gulf region. The Haj event sees many of the companies report a fall in turnover. In this period, most of the companies opt either to cut the proposed dividends or to refrain from giving dividends altogether. Thus the company’s proposal may have not been expected by many.
The performance of Mobily Company has been on the rise. The above analysis is clear evidence that the future of the company is even promising. The rate of growth in the company can partly be attributed to the monopoly that the company enjoys. The shareholders of the multi-national are thus expected to enjoy even better. Compared with other multinational companies, the company cannot be termed to be performing poorly. The magnitude of its area of operation and the rate of growth are thus expected to draw even more shareholders into the company.
As we have seen in our analysis, Mobily bases most of its operations in North America and middle east. However, the company should also target expanding its market base to other destinations. The product of mobily are not religion based and thus the marketing team should not fear entering in other markets. As we have witnessed in the report most of the current customers are in Arab speaking nations. The participation in these markets should see the share value as well as the profits of the rising.
Secondly, the company should see to it that the fall that is witnessed every time Haj is held is catered for. The company should introduce products that are consumable by Haj pilgrims so that the loss that may be witnessed by the low communication turnover can be substituted by these products. This should also see the company also producing products to be used by other religions at this time.
The targets that have been set for subscribers are commendable. However, the company should expand its targets to those of other major telecommunication multinational like Vodafone.
The Company runs the full branded outlets in the Middle East only. The same outlets are commendable for other markers that the company has especially in the north of Africa. According the results, the company realizes more turnovers from the region where the full branded outlets are situated. The low performance recorded at the kiosks can thus be rectified. Even though the cost of running the outlets could be high the long term benefits are worth the costs.