Oman Telecommunications Company SAOG ($OTEL)

Okay. Good afternoon, everyone. And thank you for joining us today for Omantel's Q1 2026 Results Conference Call. We will allow another minute for additional participants to join us. All right. I think we are ready to begin. First of all, thank you again for joining us as we present mantel's performance for the first quarter ended 31st of March for 2026. I'm Aisha Balushi, I'm Omantel's Investor Relations Officer. And I'm joined today by our CFO, Mr. Ghassan Hashar, who will walk us through our quarterly highlights and strategic progress and group results. And we're also joined by our members of our senior finance management team; Mr. Amal Al Ojaily, General Manager, Strategic Finance; and Mr. Wahbi Al-Riyami, the General Manager of Treasury; and Mr. Sudhakar, General Manager of Financial Control. We will keep -- we will try to keep the presentation brief to allow ample time for your questions. And you may also use the Q&A function or the raise hand facility. And given the time constraints, we kindly ask each analyst to limit themselves to one question and one follow-up so that everyone has a fair opportunity to participate. The presentation deck is available on our website and was distributed earlier this morning. And please note that today's session is being recorded and [indiscernible]. As usual, today's presentation may include forward-looking statements, and we ask investors to exercise appropriate caution when interpreting these in relation to future performance, the presentation has been shared as well on our Investor Relations website. With that, I'll now hand over to our CFO, Mr. Ghassan Al Hashar to take us through the quarter -- to the new highlights of the quarter. Mr. Ghassan, over to you.

Thank you, Aisha. Good afternoon, and thank you all for joining. I am pleased to share that Omantel has delivered a strong start to 2026 with the broad-based growth across the group. Group revenue rose 6.1% to OMR 856.7 million with increases across all our operating markets. And group EBITDA grew 4.9% to OMR 268.5 million. Group net profit after tax rose 52.2% to OMR 107.9 million, driven by positive EBITDA performance and higher contribution from Zain Group. With net profit attributable to shareholders increasing 22.9% to OMR 20.9 million and earnings per share improving from 23 basis to 28 basis for Q1 2026. At the domestic level, revenues grew by 8.5% to OMR 178 million. This was achieved by a strong performance across the core telecom business. which delivered double-digit absolute growth of OMR 13 million across mobile, fixed devices and wholesale. This was complemented by OMR 1 million of incremental revenue from ICT and new tech reflecting steady progress executing our Techco strategy. Domestic EBITDA remained broadly stable at OMR 41.7 million, while normalized net profit attributable to shareholders stood at OMR 30.6 million versus OMR 33.5 million last year. The claim is primarily reflecting higher depreciation and amortization tied to our robust capital investments in core telecom and emerging technologies. The quarter was shaped by 2 key dynamics. The first is the continuing strength of our core term business, which continues to anchor the company's performance in addition to a meaningful step forward in our long-term digital transformation through the launch of OTC. Our unified technology platform, which is OTC, bringing together Oman data park, [indiscernible] and the group's wider technology assets across data centers, sovereign cloud, cybersecurity, AI, IOE and system integration. Aisha will continue to walk us through the presentation with more details and then the floor will be open for any questions after the presentation. Aisha, you may take it from here.

Thank you very much, Mr. Ghassan. Before getting into the details of the Q1 2026 performance, I would like to give a brief recap of how amount that is positioned today as a reach of connectivity and a technology powerhouse supported by our 3 key verticals, which are the core telecom and ICT and the new technology. And of course, then being the partner of growth. Now on core telecom, where we continue to deliver a resilient performance in both retail and wholesale despite the high competitive market environment, our domestic subscriber base stands around 3.7 million subscribers with a fixed broadband subscriber market share of 4.5% and mobile sub cyber market share standing at 39.3%. On the wholesale side, our business supported by a robust network infrastructure with more than 20 subsea cables and 7 landing station connecting the west of the East and making Muscat and Samala among the most connected cities in region. Of course, this is in partnership with Equinix on the data center side. [indiscernible] International continues to scale as the #1 wholesale provider in the Middle East and now managing the combined wholesale business of Omantel and Zain. And under the ICT and new technologies, we continue to demonstrate a solid growth, mainly driven [indiscernible] by the Clouded hosting solution. Our ICT portfolio now is consolidated under -- as the CFO mentioned that [indiscernible] Otech, a brand which brings together Oman DataPark and to do alongside the broader company technology assets. This is further when it comes to ICT. Of course, this is further strength by an expanding set of partnerships, including ZainTECH and the Region 11 and Infoline at the domestic level with additional pipeline of additional partnerships expected to be announced over the coming quarters. Within the digital portfolio, we continue to scale our fintech app on [indiscernible], the marketplace platform and our ad tech business and Omantel supported by a clear road map to progressively monetize our active base over the time. Lastly, on Zain, as a partner of growth, Zain continues to be a very strategic element of Omantel evolution. We are leveraging in 7 markets footprint with around 1.2 million subscribers as well as Zain's expertise around the tech side with ZainTECH and on the FinTech side with ZainCash and as well on TASC. To drive future synergies and cooperations with our ICT and new tech verticals. Now as the CFO mentioned, the group has shown a really strong revenue growth from both Omantel domestic and Zain Group revenue has increased by 6.1% to reach OMR 853.7 million, mainly led by [indiscernible]. The group EBITDA has increased by 4.9% to almost OMR 268.5 million, driven by a stronger same group performance with growth with also -- sorry, with growth led by Sudan and Iraq and stable contribution from domestic operation. And the group net profit has also reached around OMR 107.9 million, which is almost an increase of 52.2% and net profit attributable to Omantel shareholders stood at 20 -- sorry, OMR 20.9 million, which is an increase of 22.9%, while the total subscribers stood at OMR 54.8 million, up 1% year-on-year, and this is mainly coming from Zain subscribers showing by around 500,000, driven mainly by the prepaid growth in Sudan. And our domestic subscriber base remained broadly stable with a small decline in prepaid, which was offset by growth in postpaid M2M and fixed broadband. Now moving to Omantel domestic performance. This slide also will be followed by more slides taking each KPI into more detail. First, with the domestic revenue, which grew almost OMR 13.9 million year-on-year, driven by growth in core telco for around OMR 13 million across all the segments in the core telecom and new technology has grown around OMR 1 million. EBITDA was maintained at around OMR 41.7 million on account of an increase gross margin and the net profit decreased around by OMR 3.4 million with a decline attributed an increase in depreciation, reflecting the higher investments we have been making across both the core telecom and the [indiscernible] initiatives. Now moving to the next slide where we are zooming in on Omantel domestic revenue. Our core telecom revenues, which include the mobile fixed device and wholesale has increased by approximately as mentioned earlier, OMR 13 million with the growth coming across all of the subsegments which you can see the mobile contributed around OMR 500,000. The fixed around OMR 2.1 million with device sales around OMR 3.1 million and wholesale around OMR 7.2 million while under the ICT and the new technology contributed an additional of OMR 1 million with growth coming mainly from Infrastructure as a Service and the Oracle Cloud. Looking at the profitability. The gross profit from the core operation year-on-year has increased mainly on account of growth in fixed broadband, enterprise connectivity revenues and higher device sales. And while the core telecom EBITDA has increased on account of higher gross margin, which also partially was offset by an increase in OpEx. Now the gross margin on ICT also has increased supported by growth in cloud and colocation services. Now looking at the core telecom financials, revenue has increased around 1.1% year-on-year, reaching to OMR 167.5 million. The gross profit has increased by 3.1%, reaching to OMR 85.3 million, and EBITDA was broadly stable at around OMR 41.6 million. Now we maintained our market leadership in a really highly competitive market. We've seen growth in postpaid mobile revenue, which was offset by a decline in prepaid revenue and the fixed revenue has increased, mainly driven by an increase in fixed broadband revenue, which grew at a year-on-year rate of around 5%. Now looking at the core telecom statistics on the mobile side, the total mobile subscribers has increased marginally to around 3.8 million to be [indiscernible] that this number includes as well the resellers with increase mainly coming from and postpaid additions. Excluding the M2M or subscriber base grew from [ 750,000 ] to 774,000 M2M grew from 1.66 million to 1, 118,000 of an increase of 4.1%. Prepaid subscribers has declined around 5.4%, which this was in line with the broader market trend. And also part of this decrease is also attributable to the ongoing migration of the prepaid customers to the postpaid with almost in line terms of last year's of almost more than 20,000 customers have been migrated from prepaid to postpaid. Now on the blended ARPU was broadly stable around of [indiscernible] per month. And the ARPU postpaid has shown also a marginal improvement from [ 17.2 to 17.5 ] while the prepaid has declined from OMR 3.1 to OMR 2.7 mainly due to higher VAS and DCP revenue recognized in the comparable period of 2025. Now on the fixed side, the fixed broadband subscribers and ARPU both increased subscribers from 321,000 to 327,000 and broadband ARPU from OMR 28.5 million to OMR 29.9 million which is an increase of 4.7%. The growth continues to be driven by the migration of customers to higher value plans and alongside to stay the net additions. Now moving to the ICT and [indiscernible]. On the domestic side, the revenue has increased by 10.5%, mainly to OMR 10.5 million as well with growth mainly driven around OMR 1 million in Cloud and Hosting Solutions. The gross profit has increased by 25.6% to OMR 4.9 million, while the gross margin varies business segments, the margin increase supported by, as mentioned earlier, the growth from the communication and the infrastructure as service and the Oracle Cloud and EBITDA maintained stable supported by the cloud performance, and it was partially offset by the losses from our fintech and marketplace businesses, which are currently still in their build and launch phase. Moving to CapEx. Avantel has invested around 30 -- sorry, OMR 19.3 million in capital expenditure during the first quarter of 2026 compared to [indiscernible] in Q1 2025. The majority of CapEx was directed towards 5G network deployment and the expansion of digital sorry, digital infrastructure. And going forward, Omantel remains focused on disciplined growth-oriented investments and prioritizing critical projects that advances advanced 5G rollout and scale ICT capabilities and accelerate digital transformation across the business. Now moving to the cash flow slide. The first quarter is typically seasonally heavier period for cash flow, mainly due to key factors. The operating cash flow, which declined by OMR 5 million, primarily driven by an increase in enterprise receivables. Similarly, the cash outflows from investing activities reduced by mainly reflecting lower CapEx related cash outflow during the period. And despite this, the free cash flow improved compared to last year and is expected to strengthen further over the coming quarters as working capital normalizes. Lastly on the balance sheet. This slide provides a snapshot of our current gross debt composition and our repayment profile, including a borrowing sponsors Sukuk and lease liabilities and other obligations, and leverage stood at 3.1 as of 31st of December and excluding the impact of the additional interim dividend from Zain Group of almost OMR 29.8 million, including this effect, the leverage Including this effect, the leverage improves to 2.67%, reflecting the underlying strength of our balance sheet. Now the gross debt increase is slightly during the period, primarily driven by the higher utilization of the revolving credit facility that we've drawn this quarter, around OMR 35 million compared to the OMR 10 million in the prior period mainly reflecting the timing differences in funding requirements and working capital needs. And we continue to maintain our investment-grade rating from Fitch rating -- sorry, Fitch ratings, underscoring the resilience of our financial profile and disciplined approach to the capital management. Now this brings us to the end of the presentation, and we will open the floor for the Q&A.

Thank you, Aisha. Yes, Abhishek, please go ahead.

So I have 2 questions, one on mobile revenue. So mobile revenue for domestic has been growing by 1.1 percentage [indiscernible] a very competitive market. There is a lot of passion on ARPU. But just wanted to know whether the reason for this muted growth is just because of competition, lower usage, subscriber mix or ARPU decline? And how should we think about going ahead for rest of 2026? So should I ask a second question or...

Yes, please ask the second question.

The second question is based on fixed revenue. So it has been increased by 5% I guess. So could you please share whether this was driven more by broadband subscriber addition ARPU improvement or any interface [indiscernible] demand and whether there is any meaningful room for fixed broadband penetration growth in Oman. That's it.

Thank you, Abhishek. Well, we'll be able to answer -- give you more sort of clarity on mobile revenue growth and fixed revenue growth. But how would that be towards the end of the year -- we are very careful in giving any forward-looking views at this stage. So Sudhakar, at least, if you can take this and answer on the mobile revenue and then the fixed revenue growth separately. And what are the attributes for this growth?

So see, on the mobile, as we have seen previously, postpaid, we continue to grow both in terms of subscribers and in terms of ARPU also where there was a marginal growth. So on postpaid, there has been a good growth. The challenge is particularly on the prepaid side. On the prepaid side, the market is quite competitive, but the point worth noting is that in the first quarter, although you see a dip in ARPU, that was primarily because of a significant value-added services renew last year. But if we adjust for that value-added services revenue, in fact, prepaid ARPU we were able to maintain. Now the ARPU numbers, what you see in the presentation, if we adjust as revenue out, it was -- it's around OMR 2.4, ARPU, which is almost a similar level of ARPU, which was maintained last year which [indiscernible] to the fact that even in prepaid, a significant chunk of high-value subscribers are still maintained by Oman. So in terms of value, the value still lies with Omantel, although you are seeing a subscriber drop, which is mainly on the low-value segment. So mobile, net-net, postpaid, we continue to grow. And on prepaid, we have been able to maintain our ARPU levels with a little bit of dip at -- on the VAS segment and in terms of the low-value subscriber base. Now your next question is on the fixed side. On the fixed side, it's a combination of 2 factors. Yes, one on the fixed broadband, we have grown year-on-year by close to 5%, particularly on the consumer side, in the fiber side, we continue to grow. Even on wireless, we have maintained our base. And at the same time, we have been able to grow on the wireless side also. Besides this, on the enterprise connectivity side also, we have been able to maintain our market share and grow marginally on the data connectivity side. So enterprise, pretty much we have maintained our market share. Our numbers have shown a marginal increase on the connectivity side, while fixed broadband continues to drive the growth. Now in terms of fixed broadband penetration, I think it's closer to around 83% to 84%. So we still believe there is room for organic growth over here, although even in this market, it's quite competitive. Now considering the other players also are continuing to come out with a lot of competitive offers.

Thank you, Abhishek. Yes, Dan.

Yes, I mean -- the -- I mean -- I think [indiscernible] to answer this question just now, but the mobile dynamics across the piece looked actually quite constructive. I thought -- just looking at the competitive landscape, are there any signs of stabilization competitively? You've obviously had the new entrant a while ago and quite aggressive competition for price market share and particularly in prepaid. Are there any signs that, that might be stabilizing? Or do you expect it to remain as competitive as it has been recently?

Thank you, Dan. Well, looking at the mobile dynamics, as you clearly said, I mean, the third operator has been there for quite some time now, a number of years. And the good thing about Omantel is that being the incumbent operator. We always have the higher ARPU customers already part of our network. And the majority of our revenue from the mobile is coming from, of course and the postpaid is coming from the higher ARPU. That's something that we had for years now. In addition, in the past 3 years, we were just to counter this competition. We had a clear policy of migrating our high-value customers from prepaid to postpaid and that serves us very well in maintaining our stickiness. The competition is still there, but we are still seeing ourselves better positioned as compared to other operators in this area. So we continue in Omantel seeing that offering value is more important than offering price reductions. And that's what we are committed to deliver to our customers as we move forward.

And I have one follow-up. And just looking at the ICT side, you've obviously established OTC over the quarter. And you talked about some sort of initiatives on the emerging tech that are coming through. Just looking at the growth rate, it's moderated a bit. Equally, it's an earlier-stage business and it's less linear than telco. But are there any particular initiatives coming through or particular contracts, et cetera, that you expect to come through in the rest of the year that might accelerate that growth?

Well, looking at the ICT segment, I believe it's still a little bit early to judge right from the first quarter. What is the sort of the level of expectations of growth going to look like. But all in all, I just wanted to highlight that consolidating the sort of powerhouses that we have. One is the data centers and cloud services and the other is on the Internet of Things and smart cities. That's certainly going to be a big addition. And that only took place this quarter. So in terms of talking about contracts and potential contracts coming in, the possibility is always there and the potential to grow is always there. Bringing these 2, of course, companies together will definitely give us clear synergies for growth and cost optimization as we move forward. And at the end, of course, giving us a competitive edge when it comes to serving our enterprise customers. compared to the competition around this. If we look at the emerging tech, which moves on, I believe it was clear that it's attributed to our sort of increase in depreciation and amortization for this time because, as you know, technology will always require investment to be met. However, we still believe that all these elements within our complete ecosystem of Omantel will continue to complement each other and deliver growth in the coming quarters, hopefully. Thank you, Dan. We move again Abhishek. I'll just hold on. We have another question here from Shaoor.

If anyone is facing any technical issues, you can type your question in the chat box. I think we can go to Abhishek.

So [indiscernible] revenue has been grown by around 15%, which is...

I'm sorry, can you repeat again, Abhishek, please?

So wholesale revenue has been grown by around 15% Y-o-Y, which appears to be one of the strongest domestic growth drivers. So whether this is coming from any international capacity, carrier business, data center connectivity or just one-off project revenues? And how this is sustainable going forward?

Thank you, Abhishek. Sudhakar, you can take this.

Yes. Wholesale, I think from a revenue stream perspective, I think one reason for this major increase in revenue is coming from the international transit voice revenue. Now that grew year-on-year by close to 26%. This, from a margin perspective, is closer to around 4%. So in -- while in terms of top line, it contributes heavily -- in terms of margin, it's lower compared to the other segments of business. Now coming to asset sales. This quarter, our revenues was close to around OMR 7.2 million, pretty much similar to what we have last year. Now capacity sales as, again, 2 components. One, usually, the recurring capacity sales month-on-month versus one-off capacity sales. Now during this quarter, the one-off capacity sales is lower compared to last year. But we believe that going forward, with completion of one of the major cable system and with certain orders in the pipeline. We believe that even these one-off capacity sales revenue with its associated impact on the margin is expected to go up in the subsequent quarters. Besides this, I think one more important point to mention is that wholesale also manages our local reseller revenue, which at a domestic level, it has grown by close to 19% compared to last quarter. So that's one good area where our wholesale revenues have increased. So collectively, these 3 factors which are contributing for the wholesale growth with major growth in top line coming from our transit voice business.

Thank you, Sudhakar. We have one question here from Faham Al-Amri. For CapEx investment, what's the strategy for Omantel this year, CapEx ratio will keep same with last year? Question as Q1 cash flow is worse than last year, any idea to reduce investment? Well, going to the cash flow, I would probably correct the perception. This is, as Aisha mentioned, this is a seasonality effect. As you know, Q1 is always starting with the payments towards loyalty and towards other payments besides the first quarter, as the team mentioned, the collections, the enterprise collections were not at the same level as it was last year Q1. So this will pick up and seasonality. And I -- as I answered the previous question, Q1 is a little bit difficult to judge where the rest of the year is going to be, especially in elements that are impacted by seasonality. So looking at this and how would it lead into sort of our CapEx investments moving forward. Again, with the CapEx seasonality, you will always see Q1, it's in the low teens figure revenue. However, we are expecting it to go beyond the mid- to high teens as a percentage of revenue towards the end of the year. In Omantel, we believe -- we still -- we are committed to deliver best-in-class services and investment in newer technologies whether it's in the telecom segment or in the growth segments in general. So to answer your question in totality, we are going to continue to invest our CapEx for this year. Nothing has to do with the Q1 cash flows. Moving to the next point, Shaoor. Could you please highlight the difference between profit attributable to the company on the group level versus the domestic lab? Well, on the group level, if we go at the group level, of course, is including Zain and other subsidiaries in total, and it's removing the minority interest, which is, of course, the other shareholders and Zain and other subsidiaries. So we are getting, in total, the total -- the net income attributable to the shareholders of Omantel from the group, including they moved up from OMR 17 million to OMR 20.9 million. This is usually the reported share of it, which is coming from Omantel's group, including Zain. In the domestic side of it, this is excluding Zain and therefore, we are reporting Omantel and its domestic subsidiaries after minority interests because there are some subsidiaries of Omantel that has other shareholders also with ownership of a minority interest in nature. So I hope I answered the question of what's the difference between domestic and group attributable to the shareholders of the company. Any more questions? You have both the options, either raise your hand or post it in the chat box. Excluding the minority interest, the difference in profitability is OMR 9.7 million -- can you go Aisha to [indiscernible]. I'm sorry, Shaoor, can you give us example, Sudhakar?

Yes, sure. I'm not sure how your OMR 9.7 million number is done. But if you see the slide over here, year-on-year, the profit attributable to the shareholders of the group, that grew from OMR 17 million to OMR 20.9 million. Now as we mentioned earlier, one of the reason is the Zain's contribution to our profit increased which year-on-year went up from OMR 14.1 million to OMR 21.8 million.

Sorry, what is causing this difference after the minority?

I think [indiscernible] Sudhakar already. We will open the chance for other questions. Otherwise, if we do not have any questions, we may conclude the meeting for today. Thank you very much all for participating and being here today, and I'll take it back to Aisha now to close -- for the closing.

Thank you very much, Ghassan and the rest of the senior management from finance team. And also thank you very much to all the participants who joined us today. And we look really forward to having you again in the next update for the half -- the first half of 2026. And also if you have any additional questions that you were not able to raise it today for any technical or nontechnical issues. Our e-mails, my e-mail here is the Investor Relation e-mails here. And also you have the website with the AI chatbot, the facilities of getting the answers are really available for you in different formats. And that really brings us to the end of the session. And again, thank you very much for joining us today.