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

[Foreign Language] This is [ Younis Annabi ] from Investor Relations department. First, I would like to thank you all for attending Ooredoo Oman Q2 ‘22 financial results. As part todays discussion, I’m pleased to introduce Noor Sulaiti, our CEO; Abdul Razzaq Al Balushi, our CFO; Nasser Al-Yarubi Yarubi, Director of Business Control Planning and Reporting. First, our will take us through the presentation and then CFO. And then finally, we'll open the Q&A session. But before we start, a few necessary disclaimer points, if you refer to Slide #2. In the course of today's discussion, we may make some forward-looking statements. These will be based on the information available to us as of today. And you should not assume that in the future, we will continue to hold these views. Also, we do not commit to notify you if our views got changed. We, therefore, refer you to our public filings for some factors that may cause forward-looking statements to differ from actual future events or results. And so now we will start the presentation. I will hand it over to Noor.

Hello, everyone, and thank you for being with us today. We're very happy again to be sharing a very strong quarter performance. H1 for us if we go to the first slide. Okay. H1 for 2022 showed continued and very solid growth across all of our KPIs, be it revenue, EBITDA, net profit, specifically on the revenue, we have grown at 2.1%. This is mainly driven by postpaid very solid postpaid growth, wholesale and device sales as well as new revenue streams that we will discuss today, be it ICT and so on. So this has delivered strong -- which by effect is providing us with a very healthy EBITDA growth at 5.2%. Finally, the most critical KPI for us was our net profit, where we focused on our cost structure, which allowed us to achieve a double-digit growth figure of 21.3% and the net profit of the organization versus last year the same period. Now this is achieved without -- not without a challenge. As the market dynamics have been quite challenging in Oman, where we've seen aggressive, let's say, movements from the third entrant Vodafone and also from the wholesalers, this has impacted not just Ooredoo but also Omantel market share from Q1 to Q2, which we see a slight decline with a higher sort of growth in market share with the MVNOs and Vodafone. And if we go next. So -- when it comes to our customer base, gladly, we're growing very well in the postpaid base where we see our base continuing to grow, and that is also reflected in the revenue in the postpaid, while prepaid as we mentioned, remains to be a challenge. Another area that has been a challenge is the price war that is ranging in the fixed area, especially driven [ by offer ] very aggressive offers, and which has impacted the customer base and the revenue. Overall, our 5G population, mobile coverage continues to grow with our continuous investment. We're covering 25% of the overall population. We're expecting to have 662 5G sites by end of the year. While basically, the devices are continuing -- the certified devices are continuing to grow in our base. But still, it is not -- I mean, it is a very important note to mention that the overall 5G devices in Oman still remains to be a small or let's say, number than expected. So device penetration is yet to happen across all of Oman for 5G to have follow-on penetration. Next, on the mobile. Sorry, on the fixed, our situation on the fixed is that we're continuing to improve our customer experience. Our 4G fixed penetration is at 87.8%. And with our 5G investment, we are currently covering 48.8% of the households in Oman with 5G. Our focus for the customer experience, which continues to give us a competitive advantage is recognized by the industry, where we continuously as Ooredoo Oman, we received awards for our innovation, our digital advancement and also our brand and customer engagement and customer experience. So as you see, there is like a wide range of awards that we continue to receive as an organization. And our responsibility towards the society continues to be a critical pillar for us, which has been recognized in the country. Now I'll pass it to our CFO, Abdul Razzaq to take us through the financials.

Thank you, Noor. So strong performance in Q2 2022, mainly driven by wholesale and Postpaid. Postpaid was increased by 8%. Overall increase is 3.6% in the revenue. Also, device and ICT contributed to this growth, almost double of the revenue. The increase of the wholesale is mainly coming from the Vodafone agreement we have for 3 years. Next. Network, interconnect and other operating expenses well maintained and controlled, which down by 2%. The main factor also because of the interconnect rates, which reduced from [ 6 base to 4 base]. We continue to work on the optimization and rationalization of our expenses, which dropped us to the better operating expenses. Next. The CapEx spend was slightly lower than the -- compared to the 2021. However, we are going to catch up in the remaining half of the 2022. This was mainly due to some challenges in some projects were delayed due to some issues. Higher EBITDA is mainly supported by the revenue growth and optimization of the expenses. Next, operating cash flow as well as supported by strong revenue growth and working capital management. Next. We continue to maintain a healthy cash position with lower gearing. We're able to manage actively the liquidity and the credit facility which we maintain to ensure the cash optimization and the financing costs are maintained in the acceptable levels. Summary?

As a summary for us and Ooredoo Oman and for the market, for us, postpaid continues to grow both in customer base and revenue. This is our strategy to ring-fence our revenues with customers that are dedicated and loyal, so creating and increasing the loyal base within our revenue composition is a critical strategy for us, which we've been delivering against. And while in the meantime, we have an intensive competition from both the prepaid and the fixed driven by the third entrant and also Awasr. This has created an intensive competitive environment which is impacting us. Data represents 70% of the overall revenue in line with the global trends. We have ensured that we pushed ourselves to increase our -- not only our revenue but also our net profit despite the fact that we are accruing for higher fixed royalty as a company, the net profit growth has been achieved. And then finally, our commitment to our customers and the customer experience and delivering a seamless digital experience to our customers is a big pillar for Ooredoo Oman and our focus in the incoming months. So this is as an overall our situation in Ooredoo Oman. And thank you so much.

[Operator Instructions] [ Bishan ].

And firstly, congratulations on a great quarter. I had a few questions. The first one is, we saw among the other contributors, which is higher revenue, et cetera, we saw a reversal in your provisions. And in fact, I mean, collections have been very healthy. And that's the trend we saw in Omantel as well. Could you comment on that? Is that a trend that you see going forward as well on the reversal of provisions? I'd like to start with that.

Yes. As I said, this is a reversal actually.

Correct.

You said it correctly.

Yes. Is that a one-off? Is it a trend that you're seeing collection.

Yes, it's a one-off.

It’s a one-off.

Yes. One-off reversal.

Next question is you had mentioned this even in the last call that the rising interest rates would have an impact going forward currently where we see the interest rates in the U.S. and even in Oman, how do you see that impacting your finance costs? If you can give us some monetary numbers, if it’s possible or what impact do you see on that for this year's results?

Are you talking about the interest rates?

Yes, interest rate. You had mentioned there would be an impact of interest costs on the on the company. Could you comment on that?

Yes. Actually, we maintain and I know there is a [indiscernible] and continue to increase the interest rate. But I think our facilities in Israel Omani and we have some different structure. And we also have [ some hedge ] of natural hedge as well in our books. So I think we will be able to manage this cost.