Oman Telecommunications Company SAOG (OTEL) Earnings Call Transcript & Summary

Good afternoon, everyone, and thank you for joining us for today's call. We will be presenting the first half performance for the 6 months ended on the 30th of June 2026. Today, we have with us Mr. Ghassan Hashar [indiscernible] CFO, alongside with the senior management of the finance team. Today, we have Mr. Sudhakar, General Manager of Financial Control team; and also Chief Strategist, Mr. Dermeer, alongside with me, [indiscernible], Senior Manager and Treasury. Before handing over to Mr. Ghassan, I would like to remind the investors and analysts, any forward-looking statements should be taken with caution. [Operator Instructions] Now I would like to hand over to Mr. Ghassan Hashar.

Thank you, Aisha. Hello, and welcome to our earnings update meeting call for the second quarter of 2026. We will walk you through our financial performance and key development -- Aisha, if you can move to the slides. and key developments for the first half of 2026. To begin with, of course, from the results, as you can see, to start with the subscribers for the whole group, we have witnessed a growth of 1.9%, arriving at 55.6 million subscribers. At the revenue level, we have witnessed a growth of 5.7% at OMR 1,705.8 million. And at the EBITDA level, we have seen a growth of 3.9%, arriving at OMR 1 million. At the net profit level, of course, the growth rate is exceptional at 73.5%, arriving at OMR 292.8 million for the whole group. And with excluding minority interest attributable to the shareholders of Omantel, the net profit is at OMR 58.6 million, up by 60.1% against restated first half results of the year 2025. We will go through the details on what led to this growth. But moving also to the domestic. The number of subscribers, we have witnessed a growth of 1.7%, arriving at 3.7 million domestic subscribers. If we look at the revenue, an exceptional growth of 11.2% when it comes to the domestic revenue arriving to OMR 357.2 million. At the EBITDA level, there is a drop by 4.8%, arriving at OMR 80.6 million for the 6 months. Net profit, there is also a drop of 9.5%, arriving at OMR 31.7 million for the domestic consolidated results. Excluding minority interest, we are at OMR 31.8 million. And we'll come to the details in the following slides. Now to highlight the key developments during the first half of the year, as you have seen earlier, the total group net profit attributable to Omantel grew by 60%. This was mainly driven by higher Zain Group EBITDA and investment income. And one point which Omantel disclosed to the market and Zain Group as well is the announcement of the exceptional interim dividend from Zain of an additional OMR 8.2 million. So the expected interim dividend income reached to OMR 220 million for the second half of this year compared to about OMR 1 million to OME 11.5 million last year. On the core telecom revenue, of course, we -- you have seen that Omantel was up by OMR 25.1 million. Growth has been posted in all segments. On the ICT and New Tech revenues, it was up by OMR 10.7 million, supporting the Techco strategy. In OTC, of course, there are further expansions in ICT segments through continuous expansion in our strategic partnerships. From now, Aisha will walk you through the coming slides as we go further in more details in our financial performance. Aisha, please.

Thank you very much, Mr. Ghassan. Now before getting into the financials, we would like to give the analysts and the investors a recap of the group overview before getting to the H1 2026 financial performance. we would like to give a recap on how Omantel Group is positioned today as a technology and a telecom powerhouse supported by key 3 verticals. We have the core telecom vertical and the ICT and the new technology or the emerging technology vertical. And one of the most important and strategic verticals for us is the Zain partner of growth. On the core telecom, we -- Omantel continues to have a leadership in both retail and wholesale business in the retail, Omantel continues to be the leading telecom with 3.7 million mobile subscribers and fixed -- sorry, both mobile and fixed around 3.7 million with a leading subscriber market share, both in fixed and mobile with 55.2% and 39.7% in the mobile subscriber market share as well further strengthened our wholesale arm, one of the top -- making one of the top connected countries in the region or in the Middle East, having more than 20 subsea cable system and around 7 landing stations connecting the East to the East as well. We have a key partnership in the region with Equinix having the first 2 neutral data centers in Muscat and Savana and as well one of our largest regional connectors, the joint venture between Zain and Omantel, Zain Omantel International being the #1 wholesale provider, managing both Omantel and Zain wholesale business. Looking at the ICT and the emerging tech or the new tech vertical, it has grown in revenue by 63.8%, as mentioned by Mr. Van the ICT and new technology continues to demonstrate growth -- solid growth across all the segments, supported by our ICT portfolio with the launch of [indiscernible], grouping Omantel Data Park and Ted and also partnering with Infoline and ZainTech. As well, we have our digital portfolio still that is scaling and monetizing Omantel's digital base. And lastly, we have Zain Partner of Growth, which enabled Omantel to expand in additional 7 markets having subscribers of almost 51.9 million also expanding in the ICT and emerging technologies through ZainTech and Zain Cash, enabling Omantel to partner with these verticals of growth. Now moving to the next slide, which will be on the financial updates on the group level. Omantel Group performance, as mentioned by Ghassan, the group has shown a strong growth, both from the domestic performance and on a group level. The revenue has shown a growth of 5.7%, reaching to QAR 1.7 billion, supported by domestic growth and solid contribution from the Zain operations and growth verticals. On the EBITDA level increased by 3.9% to reach QAR 551.1 million, which also reflects a solid operational performance across major Zain markets. Lastly, on the net income, the net profit attributable to Omantel has increased to 60.1% to reach around OMR 58.6 million, primarily reflecting a higher contribution from Zain, including the strategic investment gains. Now moving to the domestic performance. The domestic performance revenue has grown almost by 11.2%, mainly supported by the growth seen in the telecom revenue of OMR 25.1 million and the ICT and Emerging Tech has grown up to OMR 10.7 million. The EBITDA has witnessed a decrease mainly due to higher impairment provisions related to enterprise receivables in H1 2026, and it's expected to improve in the second half. On the net profit declined by CHF 2.9 million, primarily reflecting higher depreciation from ongoing investments and lower -- now moving to Mantel domestic revenue, zooming a little bit on the revenue components. We can see how the core telecom revenue has increased. We can see across all subsegments in the core telecom, mobile, fixed EUR 6.8 million, gross devices around EUR 600,000, the wholesale around EUR 17.2 million and the ICT around 10. Moving at the profitability. Looking at the gross profit from core operation year-on-year has increased mainly on the back of the growth seen in revenue from fixed broadband and the enterprise connectivity revenues and as well the wholesale revenues. The gross margin on ICT as well has increased on account of Infrastructure as a Service and security as a service and the Oracle Cloud services. On the core telecom EBITDA, we can see that it has decreased and it's mainly, as mentioned earlier, it's on the back of the increase in impairment provisions, primarily in enterprise unit receivables that is also expected to improve in the second -- on the core telecom financials, we can see that -- and as earlier addressed, most of the -- all the subsegments under core telecom has shown growth. The wholesale revenue has increased by OMR 17.2 million. The fixed revenue has grew by OMR 6.8 million, supported by continued growth in fixed broadband and enterprise data circuits as well as the mobility revenue grew by 900,000 with the postpaid growth more than offsetting the decline in prepaid revenue. And as mentioned earlier, the EBITDA impact is coming because of the impairment provisions in enterprise receivables. On the key core telecom statistics, we can see that the total subscriber has increased by almost 65,000 year-on-year, driven primarily by a strong growth in the M2M by 62,000 subscribers, reflecting our continued growth in the IoT and enterprise connectivity services. As well, we have seen growth in the postpaid the key -- or the key services of the postpaid service from 7470 to 784 as well as sustaining our competitive position and net subscriber growth despite the intensified price market dynamics supported by strong retention and successful upselling. Moving to the fixed. The fixed subscribers has also posted a growth of 1.5%, both on the subscribers and the ARPU as well, has increased from 28.6% to 29.8, mainly to be driven by the migration of customers to higher plans and net leaderships. The last segment of the revenue we have on the ICT. The growth in ICT is primarily coming from the OTC business attributed to increase coming from Morocco and Security as a Service and Infrastructure as a Service. While gross margin varies across the business segment, the margin increase is supported by growth coming from increase in revenue from OTC business and the influence call center as well as the increase in the EBITDA coming from higher gross margin supported by stable OpEx costs. Moving to the CapEx. Omantel as invested around EUR 61 million in CapEx compared to EUR 59 million in 2025. And the revenue -- CapEx to revenue ratio has stood at 12% comparing to 16.3%. The CapEx continue to be -- a majority of the CapEx continues to be directed to 5G network deployment and the expansion of the digital infrastructure. Going forward, Omantel remains to be focused on disciplined and growth-oriented investments, prioritizing critical projects that advances 5G rollout and scaling ICT capabilities and accelerate the digital transformation across the business. Moving to the cash flow slides. The first half is typically influenced by working capital movement and the timing of investments and financing activities. The operating cash flow has increased around OMR 19.7 million on account of reduced cash outflow on payables by OMR 19.7 million, which was partially offset by the increase in receivables by OMR 8.6 million. Similarly, the cash outflows from investing activities has increased by OMR 6.2 million, mainly reflecting the impact of the additional interim dividends from ZM received in the prior year, which was partially offset by the higher -- which was partially offset by the higher investments associated in subsidiaries. Despite that, the free cash flow improved by OMR 13.6 million year-on-year and remains supportive of our ongoing investment Lastly, on the balance sheet. This slide provides a snapshot of our current position in terms of gross debt composition and our repayment profiles, including bank borrowings and bonds and associated interest obligation. The leverage stood at 3.3 as of 30th of June 2026 compared to 3.2 last time reported in the 31st of December 2025, reflecting the continued investments in growth while maintaining a resilient balance sheet. We maintain -- we continue to maintain a strong liquidity position of approximately around OMR 236 million in liquidity, including OMR 62 million in cash and cash equivalents. And we continue to maintain our credit ratings of Ba1 with a stable outlook from Moody's and BBB with a stable outlook from Fitch Ratings, underscoring the resilience of our financial profile and disciplined approach to capital management. This brings us to the end of our presentation for the H1 performance. And now we can -- we will allow to open the session for the Q&A. [Operator Instructions]

Thank you, Aisha. So the floor is open. [Operator Instructions]

[Operator Instructions]

Yes. I think by they organize this, we see a question on the chat. Can you expect the number of subscribers shown as whether it is in active subscribers. Yes, the numbers what we are reporting are active subscribers as of June 2026. Just for you all to give a flavor and further explain what Aisha mentioned earlier. In case of mobility, our base stands at around 3.2 million and fixed is around 413. So let me give you a flavor first on the postpaid. On the postpaid compared to the previous period, we have grown by close to 15,000 subscriber base, and that is reflected in good growth in our postpaid revenue year-on-year. While the prepaid base has gone down, and that is reflected in the prepaid revenue. But a major part of that shortfall in the prepaid revenue is offset by the growth in the postpaid revenue.

I think we can have the questions on the chat box for the meantime. For some reason, the mic facility is not turning on. Could you please provide some color on the 3% quarter-on-quarter growth in postpaid question raised by Josh from United States.

Postpaid ARPU, yes. Sudhakar?

Yes. So postpaid ARPU actually for the first half, if you see that it stands at around 17. That's a marginal drop compared to last year, yes. But on a quarter-on-quarter basis, there has been a marginal growth in ARPU compared to the first quarter. And that growth is actually contributed by 2 things. One, growth in our net additions. Net additions are primarily concentrated towards plants where they were -- where we were able to get subscribers on the medium to high-end plans. That is one reason for the growth in the quarter-on-quarter ARPU. And in addition to that, the value-added services revenue also for the quarter is marginally higher compared to the previous quarter. So the growth in these 2 numbers actually ended up showing a marginal growth in our postpaid ARPU.

[Operator Instructions] Okay. Question from Dan. Could you help us understand the margin dynamics of the domestic business a bit better? You quantified the enterprise receivables impact, which is expected to reduce in H2. Were there are other factors at play? Example, you saw strong growth in wholesale, particularly hubbing and also investments in operations.

I believe, Dan, to look at the first point, when you mentioned the enterprise collections, yes, as Aisha clearly presented that this will be, of course, recovered during the second half of the year and the level of impairment was higher. Therefore, you have seen the domestic EBITDA and net profit impacted for the first half of this year. But we believe that the collections are going to be actively managed in the second half of the year. And we are expecting, of course, the levels of impairment will be much lower than the levels we are seeing at the moment. When it comes to the second part, I believe, Sudhakar, maybe the revenue mix. And of course, if you stay in that box, Aisha.

Yes. So to answer this question, let's focus on the revenue mix a bit. On the revenue on the fixed business side, we grew by close to 8.3%. This growth is primarily coming from fixed broadband revenue. Like all the previous quarters, we continue to have a strong growth momentum in the fixed broadband revenue. In case of mobility, as I was explaining earlier, there is a growth of close to 0.9%, mainly supported by growth coming from the postpaid revenue. It is important to note that in spite of the competitive pressure in the prepaid market, excluding value-added services revenue on a quarter-on-quarter basis, we have been able to maintain our prepaid revenue. So prepaid revenue is continuing. While it's competitive, it has shown signs of stability. in terms of revenues at least for Omantel. Now coming to the wholesale revenue. Wholesale revenue grew by close to 17.3%. Yes, a significant part of the growth has come from the hubbing revenues like what you have seen in the previous quarters. While hubbing revenue in terms of top line, it's a significant growth. In terms of its impact on the margin, that growth adds around 4% -- comes with a margin of -- a gross margin of 4%, but besides Sabin, the growth in wholesale revenue has come from the other segments also, namely capacity in terms of its contribution to the gross margin. And besides that, our growth coming from reseller revenues, whom we continue to support on -- from a network perspective. On that side, the resellers also have shown a growth in revenue, which has added to the wholesale number. That's on the revenue mix. And like [indiscernible] mentioned, the growth in revenue, while it was pretty positive on the gross margin side, on the gross margin side for the core telco, it went up by 2%, but then that positive impact didn't translate it into its full impact on EBITDA, primarily because of 2 key reasons: one, impairment provision, which was already explained. And that impairment provision has primarily come from the business segment. In the business segment, year-on-year, because of -- one, because of the increase in the size of billing, we also mentioned in revenue, we have grown in enterprise data circuits. That has also reflected as a higher increase in our receivables. But we believe this is a matter of timing, and this should even out in the second half, like this is the case which we have observed previously also last year where the collection rate tends to go up in the second half. So impairment provision has increased by close to OMR 3.3 million year-on-year. That's one reason why our EBITDA is higher. And our operating and maintenance cost also went up by close to OMR 2.8 million, primarily coming from increase in ID costs. So EBITDA decrease is primarily coming from some of these elements of increase in the OpEx cost.

Okay. I believe the unmute feature is now accessible, but we will go ahead and continue answering the questions in the chat box. [Operator Instructions] So we continue with the coming question. Can you [indiscernible].