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UPDATE 1-Saudi telco Mobily swings to Q1 net profit on cost-cutting

* Q1 profit 16.6 mln riyals vs loss of 44.5 mln riyals yr ago

* Cost-cutting cited for swing to profit

* In “advanced” talks with remaining banks on loan reset (Adds detail, context)

DUBAI, April 19 (Reuters) - Saudi Arabia’s Etihad Etisalat (Mobily), which has already cut 27 months of previously-reported earnings by nearly $1 billion, said on Tuesday that cost-cutting had helped it swing to a first-quarter profit.

Mobily, an affiliate of the United Arab Emirates’ Etisalat , has been trying to recover after being rocked by accounting errors linked to the premature booking of revenue from wholesale broadband leases and mobile promotional campaigns.

Mobily made a net profit of 16.6 million riyals ($4.43 million) in the three months to March 31. This compares with a loss of 44.5 million riyals in the prior-year period, according to a bourse statement.

NCB Capital had forecast a net profit of 201.1 million riyals for the period, while EFG Hermes expected a net loss of 4.59 million riyals.

Mobily, which competes with Saudi Telecom Co and Zain Saudi, said the profit reflected “continuous efforts by the company to optimise its cost base”, including managing an increase in network costs and containing general expenditure. It did not quantify the cost savings in the filing.

The cost-cutting helped offset a 6 percent year-on-year drop in quarterly revenue to 3.44 billion riyals, which the operator blamed on factors including lower interconnection revenue and handset sales.

COVENANTS

Mobily added it was in “an advanced stage of negotiations” with the rest of its lenders about resetting covenants on its debt pile. It did not elaborate on the state of talks or any timetable for their completion.

The operator said in December it had reached agreement with most of its banks on the changes, which were needed after its massive earnings restatement meant it breached a requirement for a minimum level of earnings before interest, tax, depreciation and amortisation (EBITDA) against its debt pile.

Talks have been slow-going though -- Mobily initially predicted a deal by June 2015 for the covenant reset, before revising that to the end of last year.

In July, Mobily made the last in a series of earnings restatements that in total cut 27 months of profits to March 31, 2015, by 3.63 billion riyals.

These adjustments were made to fix accounting errors. In December, Saudi’s market regulator referred a number of suspects to the Bureau of Investigation and Public Prosecution over the affair.

As well as revising its booking of revenue, Mobily has made further changes to the way it accounts for some contracts and the depreciation of property and equipment.

$1 = 3.7502 riyals Reporting by Katie Paul and Matt Smith; Editing by David French and David Evans

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