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

[Foreign Language] Hello and welcome. This is Ahmed Al Khuzairi speaking from Ooredoo Oman Investor Relations department. We would like to thank you all for joining us today to discuss our performance for the Full-Year 2022. First of all, I would like to welcome Mr. Bassam Al-Ibrahim, our new CEO. He is joining us from Doha. Here with me on the same room, Mr. Dr. Ahmed Al Abri our CTIO; and Mr. Nasser Al Yaarubi, our acting CFO. So today, before we start, I would like to refer you to Slide #2 from this presentation, which is about some disclaimer statement. In the today course of discussion, we may discuss about some forward-looking statements depending on the data that we have as of now. In future, we are not committed to have the same opinion, if any, macroeconomics or any changes happening. Therefore, we would fare you to our filing -- public filing in the MSX website or in our own website. To begin, I will hand now to Nasser to start the presentation. I'll hand it to Mr. Bassam to start the presentation.

Yes. Thank you. Thank you. Good morning, and good afternoon, everybody. First of all, thank you, everyone, for being here today. First of all, before I begin, and I take this opportunity to thank the most important people in the organization, those being the employees. The management that you see before you now. And of course, the previous year, thanking them for the great offers they did for the year, which I'll be presenting to you at this moment. Because they really went through a lot of tough times and for them to come out on a successful situation is also very, very good. So a big thank you to all of them and appreciate their support throughout 2022. So just some general statements overall, and if there's any key questions directly to myself or to the acting CFO, Nasser, and we can, of course, handle those as they come along. So overall, Ooredoo Oman successfully managed to close the year with the year-to-date revenue higher than last year by about 5.1%. The growth was supported majority-wise by mobile postpaid, wholesale and handset sales. The customer base also grew as of Q4 2022, crossing almost OMR 3 million, increasing almost by 6% versus the year before 2021. Additionally, IoT run rates have grew by almost 64%. This increase, of course, from B2B and a lot of the initiatives that's been happening in the B2B space. Our CSAT, our customer satisfaction scores for Ooredoo Oman as of Q4 2022 has shown positive results and almost 0.6% versus the competition. Wholesale still continues to be a major contributor to our growth within Ooredoo Oman's total revenue, and that has been a tough and strong area for the team and for the entire organization to grow. You can clearly here see in front of you where the revenue has grown by 5.1%, OMR 245 million to OMR 258 million. The EBITDA likewise growing by a positive 5.2%, OMR 128 million to OMR 134 million. And of course, net profit jumping a fantastic 51.2% from OMR 12.7 million to OMR 19.2 million. Strong performance in the areas that I mentioned earlier. And of course, the companies have a strong initiative and drive to make sure that we manage costs, help actually -- one of the key initiatives that we looked at in 2021 and 2022, and it will continue to be a strong driver for us going forward, that we maintain our strength within the EBITDA space. Customer base, as you can see here, the market share in front of you, total base for Oman -- Ooredoo Oman grew by the 6% cost in the OMR 3 million mark, also a fantastic achievement by the team to be able to achieve that. At the same time by having a third entrant come into the market, so strong potential for growth in that area also. This will also stagnate at some time because it will be a tougher market to push between a few players in the market. But this is part of our strategy to make sure that we continue to stay on top to continue, to be paid on market shares, to continue to grow in the areas where we are extremely, extremely strong. Market share split here. You can see in front of you from '21 to '22, postpaid market has grown from the 606 to 751 prepaid likewise has grown. In total, that was a 6.8% jump in growth. Our MBB and HBB customers have also grown by 2.9%, showing strong growth in that area. The team were heavily pushed to grow in the postpaid customer base, and this is also driven by new acquisitions. And as part of our strategy to grow our postpaid customer base and migrating customers from prepaid to postpaid. 5G has always been our key differentiator in all our markets, not just necessarily Ooredoo Oman. The 5G population coverage has grown by about 35%, and the technology teams strived and pushed throughout 2022 to make sure that we achieve that target, it was well achieved. By the end of Q2 2022, we had 952 sites of 5G on air. Likewise, we have also finalized certifications with the key players in the market to make sure all of these devices work successfully, utilizing the 5G capability. Not to take that lightly, by the way, getting these certifications is very, very difficult. So well done to the team for getting those in time as well. We continue to boost in our fixed area as well, improve customer wireless home broadband experiences, as part of our CSAT strategy, as part of our customer satisfaction strategy as well. While some broadband has been available in access, increasing the speed levels that likewise, that's going to improve customer satisfaction. And the site coverage has also helped us in driving our HBB and home broadband delivery to the customer. We continue to work with OBB to expand the FTTH experience in the Sultanate, and this will be a relationship that we are building and growing with OBB as we grow in 2023 also. Without going -- there are extreme amount of -- there was an extreme amount of awards that were given to the Oman and the Oman team. Great, thank you to all of them for their efforts during this time, obtaining the best digital customer experience award. We've been achieving 2 ISO certificates for the year. Innovation Technology Solutions Award, and of course leading Corporate Customer Investor Relations, on the TV screen in front of you now, so big congratulations to them for achieving those awards in 2022. For the financials. I gave an overview pretty much earlier. If there are any key questions here that can be given to myself or to the CFO. Pretty much overview. You can see our revenue has grown from 245 in 2021 to 258 in 2022. Big strength in growth in the postpaid area, big strength in growth in prepaid, fixed -- slight decline in fixed, but that's the part of our strategy that we're planning to improve in 2023. And of course, one of the drivers and the push, as mentioned before, is the postpaid revenue increase. We had higher national gaming because by the relationship that we have with Vodafone. And of course, our handset delivery and sales has helped us achieve these targets.

I believe, Nasser, you can continue on the financial highlights. And later on, we will open a Q&A session.

Thank you. yes, Nasser, please proceed with the rest of the financial highlights. Thank you.

[Foreign Language] So it's not only also the high -- or the topline, which has been shown actually a great improvement. Ooredoo Oman has continued actually to seek all efficiency opportunities and ensure that actually, we are running our operation in the most effective and efficient way. We have seen actually a significant improvement in our financial results. And we have -- as you have -- as have been presented, by Bassam. And there have been some increases in expenses, maybe in the area of staff costs, which is in line with the performance of the organization. Our operating expenses has been always under control and the organization will always continue to seek opportunities for ensuring that the operation of Ooredoo Oman is managed in the most efficient and effective way. This has reflected also in the EBITDA results, which have been highlighted earlier by Bassam. It has improved by more than 5%. As you can see, it has improved from OMR 93 million to OMR 97 million. Thanks to the strong performance of revenue as well as actually control of our operating expenses. When it comes to the capital expenditure, Ooredoo Oman is committed to investing and modernizing its network as well as actually ensuring that we are having the best technology available for our customers. We saw actually the improvement in the 5G network. And this is actually a translation of our commitment and our strengthening -- and our actually goal to strengthen our network and our technology solutions. On the cash flow, the operating cash flow, we saw actually an improvement in the operating cash flow supported by the revenue and also actually the well management of our expenses, which has resulted in a significant improvement of our operating cash flow, reaching almost OMR 100 million compared to OMR 87.2 million in prior year. On the net debt situation and the strength of balance sheet, Ooredoo Oman had a very strong -- one of probably best balance sheet in the country with actually very low gearing. Our actually net debt position has almost reached actually 0 towards the end of 2022. Bassam, over to you if you want actually to have a quick conclusions or concluding statements for the presentation.

Thank you, Nasser for the financial updates. So in conclusion, everybody -- I mean, postpaid revenue has continued to grow and the attractive offers that have been submitted by the commercial team to the customer has shown that they have been very beneficial. The offerings of moving customer base from a prepaid to a postpaid market to ensure longevity, to ensure stickiness of the customer and of course, to allow them to utilize the great initiatives that we are working on for the year, which is providing them with all the digital services, all the digital content that they want, utilizing data at the fastest speed on 5G, and this has been a very successful strategy that team has done, and therefore, has been very successful in moving the customer base over from prepaid to postpaid. Revenue for the year in '22 has increased compared to 2021. And as I mentioned multiple times and with the help of Nasser also, mobile postpaid has been the kick starter for the year for the entire '22 as well. Higher wholesale and device sales has been very beneficial for us. The commercial operational of Ooredoo represents 72% of our total revenues. As I mentioned, data, 5G, our MBB rollout, our fixed wireless access rollout utilizing the opportunities of our excellent infrastructure is showing the -- and we are reaping the rewards of the infrastructure that we have built by allowing the customer to use data more. Our continue to focus on the technology, leadership, B2B and consumer offerings, and that will continue to be our strategy to be the #1 in offering the latest technology, being the leader when it comes to B2B offerings and consumer offerings. It will continue to expand its ICT portfolio. They want are the #1 hyperconnectivity within the region, not necessarily just in Oman, and that's strongly given by our broadband strategy as well. Ooredoo Oman will always be committed to driving the best digital transformation in the country. That is part of our strategy. It's part of the 2040 Vision of Oman, and it's a key requirement. It's actually part of our DNA going forward on how we can ensure that Oman delivers the 2040 Vision when it comes to digital transformation, as this will lie on the shoulders of the telecom providers in the country and we being one of the top leaders in this will continue to drive this and be #1, if that's what's required of it. So that's, in closing, what we have for you for the end of the closure. For '23, of course, we will continue to boost our requirement. There is a growth in the population of Oman. We continue to see that there is going to be improvements, of course, in the economy. A lot of the countries in the world are now coming out of COVID. Life is going back to normal. We see this strongly in Oman as well, not only with the Oman's 2040 Vision to improve and attract more investment in the country, to ensure that they now leapfrog into the future is a key strategy of the country, and we play a major role in ensuring that, that actually helps. So we want to continue being a strong performer in the mobile and fixed market. We want to be the leader in cutting-edge technologies. We want to be the leader in 5G and that will continue happening only with the fact that we will continue to build the infrastructure of the country, continue to build the infrastructure to make sure that we provide the latest and the greatest to our customer base so that they are extremely satisfied by our services.

Thank you, Bassam and also for the presentation.[Operator Instructions] The first question is coming from the line of Faris Alotaibi.

[Foreign Language] Thank you all for this informative highlights of the performance. Can you please shed some light on the -- process of the tower sale, please.

I'll just throw in a couple of comments here and then Nasser, if you want to add also with regards to this. The situation here is that this is more of an explorative situation when it comes to the tower sale discussions. We are exploring what is possible in the market. There is no further discussions with regards to that. We just want to explore the situation of what we see our assets are, what they are with regards to the market, the availability of having these assets and their worth in the market. So we are continuing to look at it from an explorative discussion. Once we have further information on what we're trying to do with our sites and assets, then we will, of course, get back to you. Nasser, any comments from yourself? Doctor?

That covers -- yes, that covers everything, Bassam. Yes, we are in an exploration phase to see the assets and to see the way forward as well.

Could you please elaborate more on what do you mean by exploration, please?

What I'm trying to say here, Faris, is that we have an asset. We're exploring its value, we are exploring what it's worth. We're exploring even to the point of looking into -- sort of it's a split between us looking at our assets and looking at the technologies that we have built on these towers. So it is an internal discussion that we're looking at. It's an external discussions to see the value of the assets that we have. So it's just purely an exploration process at this time, before we even look at the process of sale or anything of such discussion.

Okay. Can you possibly give us a timeline on when the management will reach a decision on these towers?

No such timeline in place because as I've mentioned, because it's exploration, this can take a couple of weeks, it can take months, it can take years, it all depends on how we see it as a key strategy for the business. Right now, we're looking at what we mentioned previously, which is trying to build our infrastructure, trying to improve our 5G rollout, trying to improve our customer experience for the customer by providing them the latest technologies. This is part of our business as usual that we want to look at. It's not going to be the driver for us for 2023.

The second question coming from the line of Abbas.

Welcome to Ooredoo Oman, Bassam. I know you've got a very distinguished career with the Ooredoo Global but I guess this is your first sort of foray into the Omani market, I imagine, so welcome. Right of the bat, let me just ask you this question because I know the Omani market has been rather challenging over the last many years, and there's only so much Ooredoo as an operator in this sort of market dynamic can do. And hence, a lot of questions you may face today could be on the capital structure optimization. The tower sale, of course, I think, is falling up on Faris. That's definitely one thing that minority investors in Oman are looking out for because in a challenging environment as such that we faced over the last many years, how do we make -- what sort of -- how do we get shareholder value maximization rights? So I mean that is a focus area for us. So -- just -- I know you've already said it's an exploration phase because I'm just referring to the CEO, Mr. Fakhroo's comments a month ago, where he said you are in the final round of talks. So my question is, let's say, if you do decide to sell these towers, right, some sort of team is reached. What is the mechanism for transformation of money from Ooredoo Oman to Ooredoo Qatar? I'm only sort of relying on your very, very long career with Ooredoo and someone who has worked on these from more than I have seen them. So let's say this tower sale were to finalize, how would you transmit the money from Ooredoo Oman to Ooredoo Qatar? Would it be a onetime dividend? That's my first question. And talking about the capital structure, Mr. Nasser mentioned that you guys had low gearing. But is that necessarily a good thing. Could you have ample amount of opportunity to leverage your balance sheet and maybe increase payout ratios. Your CapEx to sales is around 20%, OMR 50 million has been your sort of CapEx outflow over the last couple of years. Do you, Bassam, see that, with you coming, there is going to be a little more focused on the balance sheet capital structure optimization? I mean, I'm asking questions from the place of a minority investor who is not seeing much in terms of growth when it comes to share prices, and these could be very, very important triggers for us. So how do you sort of see that? Is that part of your strategic sort of way to look at the company beyond what you already mentioned you're going to do on the operations side? Those are my 2 questions.

Yes. The first one -- go ahead, Nasser, do you want to take the second question?

Please go ahead. And then I comment after you -- in terms of the shareholder value creation.

I'll take the first question with regards to the discussion around the tower sale. As you know, Ooredoo Group as an organization has multiple facets. So they may be looking at certain specific areas with regards to investment, sale discussions, growth. In some of these markets, we also see that for specific things like this, it's going to be an exploration, as I mentioned before, an exploration phase. So for Ooredoo Oman, this is going to be an exploration phase. Once we cross the exploration phase, once we understand what we have in hand, then we can decide on what we plan to do next. At this point in time, there is no clear, defined way of looking at whether there's a sale in process, whether there is anything else going to happen because we still want to just analyze what we have. Let's analyze what we have, first, and then we can understand what we're going to do as a next step. So there is many aspects of what could potentially happen next. But at this point in time, what I can tell you is that we are clearly looking at what we have in our hand, what the value of these assets are, and then we'll take the next step going forward, and I'm sure at the time that we agree with the group on what we're trying to do, we will get back to you. Nasser?

Thanks, Bassam. And just I have actually a very quick comment on the shareholder value creation and assuring experienced investors that actually our ultimate objective is to maximize the total return to our shareholders and ensure that actually Ooredoo Oman continues to create the maximum value to our shareholders. Based on this fact and based on this, actually, ultimate objective, all decisions, including actually what is going to do with excess cash or source of cash available for us, Ooredoo Oman management is committed to ensure that actually whatever maximizes the value to our shareholders, it's actually the decision where we will be basically following. And this is also applicable to the -- our ratios or balance sheet structure, including gearing and also the leveraging whatever is actually financial market availability or actually opportunities. So having said this, our decisions are guided by the fact that we will be always trying to maximize the return to our shareholders when we decide, not on the tower sales or any sort of decisions, but also in our structure of the balance sheet.

And lastly, if I can just follow up on that. I mean, everyone knows the cost of debt is much cheaper than cost of equity. And with the strength of your sort of franchise to have no debt, does that make sense? I mean, I know what you're saying, but when I see the numbers, you definitely -- I mean cost of the debt is cheaper than cost of equity, is it not wise to sort of build up some sort of gearing?

We do have gearing. And actually, we are in the telecommunication industry here in Oman, which is characterized by a certain set of character of -- I can call it, liquidity cycles, where we need to ensure that actually, we are managing our cash in a certain way that minimizes also our cost and also our exposure to the interest rate fluctuations. All these sorts of strategic decisions are made in line with the -- our ultimate objective of ensuring that actually, we are having the lowest possible liquidity risk and also the cash availability is in our actually access. We do have actually a lot of agreements. We do have a lot of RCF, and we do have a lot of facilities that are sufficient to meet our commitments in terms of not only our working capital, but also long-term investments and also long-term capital expenditure. So rest assured that actually this particular matter is managed in a way that is actually achieved in the best interest of our investors.

And I just have 1 last question, and that's on the royalty side. The market has been challenging. There's another operator that's come in. Is there any way that you, Omantel and Vodafone can work together and probably speak to the regulator to see if the royalties can be reduced? I mean is that something you guys are already working on, speaking a one voice. That -- do you see any potential for that?

We are working closely with the regulators and other stakeholders in the industry to ensure that actually whatever benefits the industry and the sustainability of the telecommunication landscape in the country. So there are actually a lot of discussions and a lot of engagement in different matters, including actually a royalty.

Just to add on to that from Nasser. I mean, the regulator is a partner that we work with just like we work with Vodafone. So they are extremely interested to hear what concerns we have, and we appreciate the fact that the year goes and take those into key considerations to ensure that there is an improvement to the telecom market, as mentioned by Nasser. So it's a hand-in-hand discussion that -- and again, I consider that to be purely business as usual that we have that relationship with the regulators. So they are fully aware of what the telecom market is like.

And could you sort of tell us what you're looking for in terms of royalty reduction, if at all? Or is it -- you can't talk about that? Like is there a number you have in mind?

There are multiple topics that we're having with the regulator. Throwing a number won't necessarily help you in this situation because there are key requirements and key discussions that we're having with the regulator that are extremely important to the growth of the telecom market in Oman, that will allow for better availability, better relationship building between us and the competition as well for the greater good of Oman and the vision that they plan to have for 2040. These are the type of discussions that we're having with the regulator this time, and they're being very cooperative working with us to make sure that this is the strategy for them, and this is the strategy for us. So there's a hand-in-hand collaboration that we're seeing from the regulator.

The second question -- the other question is coming from the line of Ziad.

So just a couple of questions from our end. First, can you, a bit, elaborate on the competitive landscape in the market -- if I remember it correctly, Vodafone was supposed to launch the postpaid packages beginning of the year. But so far, we don't see these. And specifically on this topic also, can you shed some light on the wholesale agreement with Vodafone, specifically if they -- I remember they have a mandate to develop their own passive infrastructure. Would we expect the wholesale revenues that you're generating from Vodafone to decline as they develop their own infrastructure? And the second question is on tower sales. Again, I know you commented on this previously, but 2 quarters ago, there was a commentary by management saying that we expect that our sales to conclude within a year timeframe, basically. So I'm just wondering what changed. Now we are back to the exploration phase. And this was a public comment made by Ooredoo management.

Yes. So on the competition landscape, we know it's actually a very crowded market. And with Vodafone entering in the mobile and being actually the third operator. There are actually challenges. They have started actually in prepaid. They are still in prepaid. They have not actually launched any postpaid services. When it comes actually to the expected revenue or actually our agreement with Vodafone, we have -- we do have actually a 3 years agreement as we have announced to the public when we signed the contract with Vodafone. Yes, they do actually roll out their own network. And as they continue to roll out their network and carving out actually more locations from Ooredoo Oman. This will naturally actually mean the revenue from this particular contract will go down. Having said this, there are actually -- as generally speaking, in the wholesale opportunities, Ooredoo Oman is actually -- is very active in the wholesale. And we are actually having a lot of -- exploring a lot of opportunities in the wholesale arena.

I think that's an important point that Nasser mentioned now is that regardless of the fact that we have the relationship with Vodafone, it does not mean that it's the main driver for our wholesale activities. The wholesale team, wholesale from Ooredoo Oman is a big initiative. As clearly mentioned by Nasser, we are looking at multiple alternatives, and it was never a driver for us to just purely looking at Vodafone as a wholesale driver for us. That was just a B2B customer that we brought into our network and working with the wholesale team. What we do plan to do is to have an extensive push to look at massive other opportunities when it comes to wholesale, regardless of the situation of the decline, as mentioned by Nasser, we will continue to try to push in the wholesale area.

Yes. Just to add on the wholesale part. Also, we are building 3 big data centers and landing station. One in Salalah, one in Barka, and one also in Sohar. This is added to the agreement we had regarding the sea cable to Africa. So we are moving aggressively into this part of the sea cable and the landing station. We are expecting this landing station to be ready by mid this year, and to have the sea cable also connected to Africa also this year.

On the tower sales, if I can comment quickly. The tower sales have been highlighted by Bassam earlier. We've been always actually -- we are not an exception in the market that there is actually -- we saw Omantel selling their towers. So for us, actually, it's very important that we assess all our options and we assess all possible options we have in our hands, which will maximize the return to our shareholders in line with our strategy. Since the last public discussion, there's nothing actually more or there's no new information that we do have to announce to the public. And when there is actually a new information or something which is material, we will definitely make it public to our investors and to the people who are interested in this matter.

Great. That's very clear. And you mentioned the data centers. Can you comment on the capacity and CapEx requirements, specifically for these and the timeline where we can expect them to start generating revenues to be complete, basically?

Nasser, do you want to add?

We have Salalah data center, and we have Barka also landing station and data center and we have in Sohar. We are expecting all of them to be up and running by Q3 2023.

And what's the additional capacity that this carry in megawatts, roughly?

It's around 3 megawatts.

[Operator Instructions] Incoming from the line of Bhasin.

Just a couple of questions to start with. You've spoken about sort of how deleveraged your balance sheet is and how clean it is. My question is with regards to your payout ratio. We've observed at least, for 2022, I believe a few years ago, I know it's in the past, the management has sort of indicated a high payout patio somewhere in the range of late 80s and early 90s. And if I look at the payout ratio, this year specifically, I think it's around 68%. Now given how confident you are with regards to your cash flows and the debt situation...

Your voice is not clear. We can't hear the question, yes. yes. Can you please just keep yourself close to the...

Repeat the question.

Yes, I will repeat the question. Yes. Can you hear me better now?

Much better.

Okay, great. Yes. The question was with regards to your dividend payout ratio, if I'm not mistaken, the payout ratio for 2022 was 68%, and it's the lowest we've seen in the last 5 years. In fact, a few years ago, the management, back then, had indicated a payout ratio in the late 80s, and we've replaced a payout ratio of 68% this year. So could you just give us your thoughts on that? And sort of what is the guidance on a payout ratio, if I may ask so, going ahead?

Yes, I can take this question. Yes, it is lower. The dividend payout ratio is lower than last year. It's higher in terms of absolute value in line with our actually achievement. A lot of consideration is taken when it comes actually to dividend payout, including actually the cash and liquidity of the organization as well as actually ensuring there is lowest possible financing costs for our organization, until we know or actually until the interest rate or the finance market, which is expected actually to go upward. The management of the organization with the Board, they made actually a decision that the optimum payout ratio is whatever we have announced to the public at around 69%.

Okay. And would that sort of be a percentage or a ratio that the management would sort of stick to going forward as well?

You saw there is actually a clear fluctuation in the dividend payout ratio in the last 10 years. What we are committing to our investors and to our shareholders is that actually, we give them the maximum total shareholder return. So -- at the end of the day, our ultimate objective is maximizing the shareholder value. And based on this overall umbrella or strategic actually direction, we made decisions on what is the best level dividend or the best level of investments that will generate capital gain for our investors.

Sorry, with you expect -- I'd like to just give my 2 cents over there, as a minority investor, the only returns we get sort of -- is your dividend on a capital appreciation now, given the business, given where the industry is, given Vodafone's growing market share, limitations on prepaid revenues, given your debt-free balance sheet, one would imagine that a basic sort of back of the envelope calculation of weighted average cost of capital leaning towards debt reducing the overall structure, would actually lead to a higher payout. Or, in general, leads towards the higher payout. And because you just mentioned that the number is fluctuating over the years. As minority investor, we also do not know what number to sort of pick or have in mind when at least sort of doing a modeling or doing sort of valuation or, in general, just investing in the stock. So I mean that's where I was coming from. And then I completely respect your sort of insight from that. Second question would be with regards to sort of CapEx guidance, if you could give us something in terms of CapEx to sales lets say that you think of the usual levels? Do you have something else in mind? Could you just give us some thoughts on that?

In terms of actually our future capital expenditure, as I have highlighted that we are committing actually to ensure our network is expanded and ensure that actually we are delivering the best technology and digital experience to our customers. We will be investing more or less in the same level of 2022. But this is actually for -- we'll be always looking into opportunities, and we will be always looking into any sorts of investment areas that generate value. And at the end of the day, we will be ensuring our CapEx envelope is in line with the development that is happening in the industry and in telecommunication market here in Oman.

Now we have a question from Joice.

And I have a follow-up question on the wholesale revenue growth trajectory that you have mentioned. And one of the points that you have mentioned is about the data centers. But currently, you have a majority stake in one of the data centers. And I'm seeing that you're continuously taking impairment losses on this company, and it's not doing good at all. So it would be much appreciated if you can give us some strategy as to how do you see the data center business going forward? And what are the reasons for this company not doing well, currently? And how do you plan to revive this business?

The year of 2022, we saw a recovery in the D2C performance and the return to profitability. The provision that was made in 2021 is actually as a result of issues in the accumulated losses. However, actually, D2C remains one of our strategic pillar when it comes actually to clouding solutions. So we have seen actually a great improvement in the results in 2022. And we have been working closely with them and they have managed actually to get very big contracts with the key industries here in Oman last year. So they have -- their performance has improved significantly, and they are actually -- the good news is that they are continuing in the growth path. When it comes actually to our own -- to Ooredoo Oman data centers, D2C is mainly in the clouding solution, but Ooredoo Oman plans is far bigger than providing clouding solutions.

So the 3 megawatt capacity that you mentioned, is that only for Duqm or for all these data centers that are currently under process?

It's mainly for Ooredoo Oman.

Ooredoo Oman is different, the Salalah buildings, which you have, you've already worked on or is it the Duqm one?

Yes. Actually, Ooredoo Oman is investing in the wholesale area, as has been highlighted by my colleagues. We are exploring all sets of opportunities in this area, including actually being the hosting partner called the 2Africa landing. With that actually D2C continues actually to support us in ICT area and the growth of actually clouding solutions and providing full telecommunication solutions to our customers where we know now actually, there are some changes, and there are actually some developments in our B2B customers' requirements. So D2C is a key component in our recipe, if I can call it, for success in ICT area.

Okay. The next question that I have is on your revenue market share, especially on the mobile segment. We are seeing a major decline in the market share. Market share has literally gone down by to 230 bps. So what -- where do you see the market share settling in? And what's your experience from the other markets, which -- where you have been operating from a duopoly to a competitive market. And what's your strategy for defending the market share erosion going forward? So now just to get an idea of how the market is evolving and what are your thoughts on this market evolution over the long-term period?

I mean, we, as an operations group, Ooredoo Group, we have worked in markets where there has been, as you said duopoly, and there is competition in the market. Clearly, even in our home base, and half of this happened with competition coming in, where we are -- monopoly and then the Vodafone came into the market. So we have the -- this has been tried and tested. This has been happening in other markets as well, it's a tried and tested experience for us as a group. So we're fully aware. Any new entrants into the market will capture some of the market share listed by default. But over a period of time, it starts to stagnate. This is where we are now taking the time to look at how we can spearhead this and make sure that we outpace the competition through the products and services that we are providing to the customers. So our strategy is to continuously improve, even though utilizing -- understanding the fact that there is going to be some market share gains from Vodafone because this is a standard procedure. They will always take some of your market share. They will take it from you, and they will also take from Omantel. So we know that this is going to happen. But our strategy is in us giving the customer the best experience, and the customer will come to us because of the fact that we are differentiating in that act, providing quality technology, providing quality service, providing the best customer experience that they can ever get.

Got it. The next is on EBITDA margin erosion. You have been seeing on sequential basis, over the quarters, your reported EBITDA has been declining from 42% in the first quarter. It increased 50% in the last quarter. So -- but -- at the same time, we have been now trying to optimize the cost structure and everything, but still there's a lot of pressure from the cost side. It looks like there's a lot of pressure from the cost side to -- where do we see the EBITDA margin? What's the comfort level for your EBITDA margin on a medium- to long-term basis? And how are you planning to achieve this? Should we be expecting a further increase in EBITDA margin? Or will there be further erosion in the market that you are seeing?

Nasser, can you take this?

Yes, please. So basically, it's -- you are right, actually the EBITDA margin might be fluctuating, but what is driving it, is actually what matters. Now we are, in our portfolio, having multiple products that are contributing to our revenue mix, some of them are high margins, some of them are lower margin. And there is also the elements of handset sales following the iPhone launch that has actually, to a great extent, kind of impacting the percentage which you are referring to. So the handsets have typically of lower margin compared to normal mobile and fixed services. In terms of EBITDA and in terms of actually of our strategy, we will always be trying actually to defend our EBITDA and defend the profitability of the organization, seeking opportunities in terms of revenue, as have been highlighted by our CEO and our CTIO when they talked about actually data centers and other areas of opportunities. With that, we are also looking into efficiency and ensuring that actually, we are running our operation in most efficient and effective way. So we are exploring all possible opportunities to optimize our operations and prepare the organization actually for the new reality of the telecommunication that we are now -- multiple operators that they are operating with Vodafone being actually full fledge, full mobile network operator. So efficiency, I cannot stress its importance, and we are focusing on this area and ensuring that actually our EBITDA margin is healthy and remains healthy.

So any thoughts on where is it heading to, over the medium term, maybe -- and where should we see it settling down?

We are hoping it will settle down, and we are hoping that it remains very high and very healthy, and we are working towards achieving that.

Okay. And further follow-up on the royalty, we have discussed about the royalty as well, but this year, 2022. So the fixed line royalty increasing to 10%. And there were -- earlier there were some discussions regarding whether this might be reversed or something like that. And so is there any update on the fixed line side? Or are we -- are you discussing with the regulators on a policy basis?

I can assure you that actually, there are a lot of discussions with the regulators, and we are working closely with all stakeholders in this industry in terms of actually ensuring its attractiveness and its actually sustainability. We are hoping we get actually a positive outcome. And of course, once actually, we have something to announce, we'll definitely make it public.

We have a question from the chat now from Shahin. I will direct it to Nasser or Bassam. The question is e&, which is on Etisalat, formally, has increased its stake in Vodafone as a competitor. Does this concern you? This coming from a line of Shahin.

Shahin, thank you for the question. Not really. I think this is e&'s strategy to invest in foreign operations. From us being in Ooredoo Oman, I would state that -- I mean, there is no concern from our end. That is clearly an investment that they are taking care of. Our key requirement for Ooredoo Oman is to ensure that we stabilize the growth from Vodafone because they will be growing in that space, as clearly mentioned before, they are capturing some market share. And at some point, very, very soon, and we have seen this in Ooredoo and Vodafone, Vodafone Qatar and Ooredoo Qatar, where it's stagnated very early on, throughout the year when they first launched in Qatar. And we believe -- and we can see that this will happen sooner rather than later when it comes to Vodafone's growth in the Omani market. Again, it goes back to the point that we want to differentiate ourselves based on the fact that there's competition. We wanted to differentiate ourselves based on the fact that we are providing the customer with a quality product, and they will see that we are providing them with a quality product that they can utilize, they can benefit from, at the right price. And at the same time, in the end, it's a benefiting outcome for you as an investor. So that's how we see it. We don't see it as an issue because of the fact that they're investing in Vodafone.

Thank you, Bassam. Also, there is a follow-up question from Shahin. She is asking any guidance on the data to revenue guidance, post the data center expansion in 2023. So she is looking for the guidance on the data to revenue.

Can you take this, Nasser?

Yes, not for the time being. No.

And to answer this question, yes, you're absolutely right. I think for Vodafone Oman they're here as a partner market.

So as we are not seeing any more questions coming from the participants, we would like to thank you all for joining us today on this conference. And for any updates, we will actually contacted you through our channels in the MSX website or our own website. Thank you so much and have a good day, all of you.

In closing, I'd just like to thank the team for all the efforts they have done. Thank you all. Thank you, and well done for the rewards that you've been getting because of this. Thank you to the Ooredoo Oman team, and I wish all of us the best success in '23.

Thank you very much.

Thank you so much, Bassam.

Thank you.

Thanks.