Mobily restated its earnings and wiped $9B off its market cap in a single day

Mobily — the brand name of Etihad Etisalat, Saudi Arabia's second-largest telecom operator and a subsidiary of UAE's Etisalat — announced on 19 November 2014 that it was restating its financial results for the fiscal year 2013 and the first half of 2014. The restatement, caused by premature revenue recognition, reduced reported revenue by SAR 1.2 billion ($320 million). The market's reaction was brutal: Mobily's shares fell 40% in a single day, wiping approximately $9.1 billion off its market capitalisation.

The restatement revealed deeper problems. Mobily had been booking revenue before it was earned, inflating its financial performance across multiple periods. The company's auditor, Deloitte, had signed off on the original figures. When the restated numbers came out, Mobily swung from a profit to a full-year loss for 2014 and disclosed that it had breached its loan covenants, triggering renegotiations with its lenders.

Mobily's board suspended CEO Abdulrahman Al-Turki and launched an internal investigation. Saudi Arabia's Capital Market Authority (CMA) launched its own inquiry, later referring the case to the public prosecutor. Shareholders filed collective lawsuits. The scandal also dragged in parent company Etisalat, which had to take provisions on its Mobily investment and saw its own shares fall in response.

The company eventually recovered some lost ground, but the scandal was one of the largest corporate accounting failures in Saudi Arabian history. It exposed weak governance at a company controlled by one of the region's most established telecom groups, and showed that the rapid growth of Saudi telecoms had been built in part on numbers that did not hold up.