Omani Qatari Telecommunications Company SAOG (ORDS) Earnings Call Transcript & Summary

Yes. Thank you. Thank you for joining us today to discuss our full year results performance for the year 2021. Today, with me on the discussion, the main speakers, Ms. Noor Sulaiti, our CEO; and Mr. Abdul Razzaq Al Balushi, our CFO. Before we start, I would like to refer you to Slide #2, which is about disclaimer. In today's course of discussion, we may discuss some forward-looking statements. In the future, if our views change, we are not committed to notify you. Hence, we'll refer you to our public filing in our website or in MSX website. So to start, I would like Noor to take the start. Thank you.

Hello, everyone. So if we can start with the performance, the year 2021 was a challenging year for Ooredoo Oman and also for the market. So the revenue has dropped year-on-year by minus 7.4%, the EBITDA at minus 9.6% and then the net profit at minus 40%. This was mainly driven by the decline that has been seen in the prepaid, which impacts the net profit more aggressively than any other revenue stream. However, the postpaid revenue has grown by 28%, surpassing the growth of the competition, which is assisting us in ensuring we are ready for the third MNO. And then also Ooredoo Oman continues to focus on its optimization and efficiency to improve its profitability. Ooredoo Oman, in the last quarter, has reported the first growth when it comes to market share. We grew in the last quarter from 38.4% to 39.7%. This is due to the massive efforts of transformation that was pushed in the last 6 months of the year towards improving our market positioning. Also, another sort of issue that we've had is on the total number of customers quarter-on-quarter. However, this is offset by the growth that we've achieved in Q4, which gives us the confidence that we are moving towards the right trajectory. Also, the unlocking of the restrictions that's due to COVID and then the increased tourism in the Sultanate has shown a bit of improvement in the overall market, which we are quite optimistic about. However, on the overall market share in -- between 2020 and then 2021, the drop was at minus 4.9%, driven by prepaid. However, it's offset by an exponential growth in postpaid. And on the fixed, as mentioned, Ooredoo Oman, there has been a decline of minus 7%. But that is offset by HBB growth of plus 0.8%. 5G continues to be our focus as a business, where our current coverage covers about 25% of the population. By Q4, we have launched 659 sites that were on air. And then 76 sites were added in just in the last quarter. Huawei and Apple devices have been certified on our network. And then our LTE population coverage has increased by 90% to 97.9%. On the fixed, we cover about 87.8% of the overall households in 4G and 46% -- 46.8% in the 5G. However, despite the fact that we only cover around 50% of the 5G HBB households, we also have grown with market share of 5G connected devices -- sorry? Someone, I think, needs to mute. Yes, okay. All right. Next, Ooredoo Oman has won several awards last year. First of all, the World Business Outlook award for the Best Telecom Company in Oman in 2021. Ranked -- we were also ranked in the Top Global 100 Companies. Ooredoo, Most Outstanding Telecom Company of the Year, this is driven by our growth in customer satisfaction. And then the International Finance Awards of 2021. On the financials, over to financials, okay?

Hi, everyone. So 2021 was an exceptionally challenging year. Therefore, you can evidence that the revenue declined overall. Even in quarter 4, we had a decline in the revenue, which has mainly impacted -- the biggest impact came from the prepaid revenues. The operating expenses were -- was though well managed. We have decreased compared to the quarter-to-quarter mainly due to lower interconnect cost impacted by the lower rates, which give us some balance in the cost. 2021 network interconnect and other operating costs and expenses remained low due to decrease in equipment costs as well. EBITDA, adjusted EBITDA impacted by the lower revenue mainly, partially which was offset by our expenditures. The CapEx, the CapEx remained under control as well. It was decreased in 2021 compared to 2022 -- 2020. This includes also actually the mobile renewal cost as well. Operating cash flow is lower in 2021 due to lower income. Net debt versus EBITDA also well managed. And we had unutilized funds of OMR 67.0 million.

Okay. So just as a summary, we continue to grow in postpaid. That engine is a very healthy engine for us. It's helping us mitigate the risks moving forward. And then the main impact that we've had, as Ooredoo Oman, was coming from the prepaid segment due to the economic challenges within Oman. On the commercial, the operational data represents 72% of our overall revenue. On the wholesale front, we successfully signed a deal with Vodafone, which was a 3-year deal as a wholesale revenue. This is vital for the business as it's offsetting basically risks of revenue, but also it's helping us with -- of creating a new revenue stream for the business. We also launched the mobile international money transfer service is growing at double digits. And then we continue to invest heavily in the mobile network for both mobile and fixed. And then we are completely focused on supporting Oman in its digital economy quest. And then we continue to drive for operational excellence and efficiency. On the year 2022, as you're aware, the market is becoming more competitive in Oman with the launch of the third MNO. But this is helping us to stay focused on innovating and creating new revenue streams as well as Ooredoo Oman is positioning itself very well within the market to drive sort of future growth. And also, we continue to support all the -- basically, the social responsibility quest that we support as a business. So that's the summary of 2022.

Yes. Thank you, Noor and Abdul Razzaq. Now we will open the Q&A session. [Operator Instructions]

Yes. So the first question, coming from the line of Joice Mathew.

A very basic question, what's the growth outlook that you are looking at the postpaid ARPU? What -- and what's the growth outlook that we should be looking at in terms of customer net additions during 2022? Are we still looking at customer negative net additions? Or are we looking at positive momentum coming back into big customer additions?

Yes. So on the postpaid front, we are actually continuing to grow. We have certainly achieved a huge growth last year, which we are expecting to continue to grow. So it's positive net adds and a successful story in the postpaid. Postpaid becomes a very critical vehicle for us, especially in a very crowded market. We have now three MNOs, three MVNOs, so a six-players market. So the prepaid segment becomes more challenging. However, we are leveraging our strength on the postpaid, which is, as I said, continues to grow at a double-digit market -- double-digit growth.

The second question, coming from the line of [ Hani Zantout ].

I just have a quick question on tower sales. Can you please provide us with an update on that?

It's on track as a big initiative from the group. We are at full gear of the tower sale. This is expected to happen in the next, let's say, 18 months. So it is in progress.

Joice, again, you have a follow-up question?

Yes. Just a follow-up on the tower sales. Are you looking at Oman as a single portfolio? Or is it at the group level with tower sales plan?

Sorry, your question is not clear.

The tower sales plan, is it -- Oman -- are you considering Oman as a single market and looking at selling the towers in Oman? Or is it at the group level, Ooredoo Group level that you are planning to sell the towers?

[indiscernible] the current assessment, and we are doing a thorough assessment to evaluate each and every option.

No, I want to check if it's at the group level, are you considering it? What level are you looking at it?

That's what we're telling you. Yes, that's what we're saying, that both options either at the Oman level or at the group level is being evaluated right now. And the best deal is going to be successful. So both options are being evaluated.

The second -- the next question is coming from the line of Ziad from CI Capital.

Ziad from Arqaam. Just a question from our end. With regards to the postpaid segment, you're recording very strong growth. Does the reported figures for postpaid include bundling? Does this also include device sales? Or is it only service revenues?

So no devices. We are, in Oman, are no longer a subsidy market. So if there is devices, it will be on installment outside of the postpaid revenue line.

Okay. That's very clear. And also in terms of pricing in the market, we're looking at the pricing -- prices of Vodafone specifically. It seems to be at a very steep discount versus Ooredoo as well as Omantel. What are you seeing so far in terms of subscriber base, specifically on the prepaid segment, which might be a bit more vulnerable? Is the churn rate -- how would you describe the churn rate?

Okay. So Vodafone launched beginning of January at a very aggressive price that they even they, themselves, cannot sustain. So they launched a OMR 9 offer with 77 GB with a validity of 3 months, which they -- of course, they managed to acquire customer base, however, at the expense of impacting even their current dimensioning. So they are -- they actually pulled out some of these aggressive offers. However, that is a total market disruption. The regulator allows them a 3 months, let's say, leeway of a launch offer. Hopefully, I think the whole market, including the regulatory realize that, that's not a sustainable one. They are selling below cost at a huge percentage. And we see that they actually pulled out some of these aggressive offers, although its validity should be until, for example, the end of this month. Hopefully, that is a sign of rationalization. We hope that they are going to be more careful and the regulator in Oman will take a strong stand not to destroy value within the telecom market. We are pushing really hard from Ooredoo side. And we will continue to put the pressure on all entities to protect the market for all.

Makes sense. And you also mentioned you signed a 3-year national roaming agreement with Vodafone. So does that mean you will benefit in a way if they grow their top line if they gain traction in the market? What is the structure of the agreement? Is it cost-plus? Is it -- I mean, can you give us some details on this agreement?

Sure. So the way national roaming works, it's exactly what we did as Ooredoo Oman at the time of notice, when we launched in 2006, and we were on Omantel's network until we built our network. So during that time, it's regulated by what we call the RAIO. On the RAIO, it's a published RAIO that you can actually see, which is a retail minus. Yes, Ooredoo Oman is gaining immensely from this deal as we are earning money on each and every subscriber that Vodafone makes. And if they continue to sell below cost, it means whatever they are getting from their customer, we actually get more. So that's a very -- I mean, it's a good thing for us, but it's not a good thing for the market. We hope that they will stop this practice of selling below cost because it's not sustainable at all from Vodafone side but also for all the players.

Perfect. That's very clear. And one last question from our end. Has the royalty increase on the fixed segment come into effect already in Q1 this year?

No, it hasn't. We are still waiting for the final decision and we are hoping for a very positive surprise when it comes to fixed royalty. But we cannot comment on it until it actually happens.

There is a question coming on the chat from the line of Ayisha Zia. She is asking about the projection for the 2022. Do you think you will see a volume growth? Or can you please share some of the light on the CapEx? So Noor, for you.

It's difficult to comment on projections within this session. However, we are overall positive that we have positioned the business in the right place. I don't understand your second question related to CapEx spell. I don't understand. Almost -- our investment in CapEx is at par like last year. So it's not like that we have a CapEx. Oh, yes, another point that -- but sorry, on the CapEx, there is one point that finance would like to clarify. Go ahead.

Yes. So as our CEO stated, we don't have any major anticipated CapEx at this point. The drop is mainly because of the license fees. It is going down as well.

Any more questions? Okay. So it seems we have no more questions from the participants. At the end of the presentation, we would like to thank you all for joining us, and we would like also to refer you always to our public filing in our website and in the Muscat exchange website as well. Thank you, and have a good day. Bye.