By Matt Smith
DUBAI (Reuters) - Mobily (SE:7020), Saudi Arabia's second-biggest telecom operator, has suspended chief executive Khalid al-Kaf and put his deputy Serkan Okandan in charge pending an investigation into accounting errors, it said on Sunday.
The company issued restated accounts this month, which it blamed on accounting errors, wiping out 1.43 billion riyals ($381 million) of previously reported profit and sending its share price tumbling.
Kaf will be suspended until Mobily's audit committee completes its investigation into the errors, the company said in a statement.
The Gulf's longest-serving telecoms CEO took the helm at Mobily in 2005 after 19 years at United Arab Emirates' Etisalat (AD:ETEL), which owns 27.5 percent of Mobily.
On Nov. 5 Etisalat cut its own profits by 162 million dirhams after Mobily's results restatement.
"Etisalat will also support the Mobily board taking corrective action, wherever and whenever appropriate, to avoid this from happening again," an Etisalat statement said on Sunday, adding that the audit committee's investigation should be thorough and proceed unhindered.
Okandan, Etisalat's chief financial officer, was appointed as Mobily's deputy CEO in October, while Etisalat Chief Executive Ahmad Julfar is also a director of Mobily and chairman of its risk management committee. Another senior Etisalat executive, Essa Al-Haddad, also sits on the Mobily board, according to Etisalat's 2013 annual report.
Mobily's share price has fallen 36 percent since late October, when rumours began to circulate that something was amiss with the company's results, wiping out 6.56 billion riyals from the value of Etisalat's stake, according to Reuters calculations.
Mobily began operations in 2005, ending Saudi Telecom Co's (SE:7010)(STC) monopoly, and turned profitable the following year. Its annual profit more than quadrupled from 2006 to 2009 to reach 3 billion riyals that year, Reuters data shows.
The company reported a record annual profit in 2013 of 6.68 billion riyals, up 11 percent from the previous year, though that figure has now been cut in the restated results.
Mobily shares fell 0.4 percent in Riyadh and Etisalat's stock dropped by the same margin in Abu Dhabi, underperforming the benchmark indices of both bourses.
($1 = 3.7516 Saudi riyals)
(Editing by David French and David Goodman)