Revenue – SAR2,932mn, -21% Y-o-Y, -11% Q-o-Q; -13% vs. EFGe EBITDA margin – 27.6%, +5.4pp Y-o-Y; -6.7pp Q-o-Q, -5.7pp vs. EFGe Net loss – SAR168mn, -6% Y-o-Y; vs 2Q16 net profit of SAR19mn; vs. EFGe net profit of SAR23mn   Mobily’s 3Q16 bottom-line was disappointing, showing a loss of SAR168mn vs. our net profit estimate of SAR23mn. This was the result of weaker-than-expected operating performance, with revenue and margins all missing our estimates. Revenue missed our estimate by 13% at SAR2.9bn, weakening 21% Y-o-Y and 11% Q-o-Q; Mobily attributed this weakness to: i) the impact of the fingerprint verification process and the disconnection of unregistered lines; and ii) lower interconnection rates. EBITDA missed our estimate by 28% and fell 28% Q-o-Q, with EBITDA margin dropping to 27.6% after three quarters of a margin above the 30% mark. Given the recent mobile termination rate (MTR) cut, the gross profit margin should have improved this quarter, but it is not clear to us why this is not the case. Moreover, we are concerned about the weakening top-line, particularly considering that 3Q should have been supported by seasonality effects, as it coincides with the pilgrimage season, but usage levels appear to have been affected negatively by the annual decline in pilgrims, in our view.   The results come as a disappointment to us and will likely disappoint the market; hence, we expect continued pressure on the stock in the short to medium term. We remain of the view that the fundamentals of the telecom sector in KSA are weakening gradually as a result of a difficult macro environment. Having said that, we believe Mobily’s profitability remains at risk and its recovery hinges on i) further cost efficiency; ii) a potential tower sale, but this is unlikely before 2H17, in our view; and iii) top-line growth through the data segment. The company said that 9M16 FTTH revenue jumped 32% Y-o-Y, and jumped 42% Y-o-Y in 2Q16 and 21% Y-o-Y in 3Q16. Mobily also highlighted that 3Q16 data revenue contribution grew to 32% of total revenue vs. 31% in 3Q15. (Earnings release, Omar Maher)   Mobily: SAR18.18 as of 19 October 2016, Rating: Neutral, FV: SAR24.53 per share, MCap: USD3,733mn, EEC AB / 7020.SE