Ooredoo Q.P.S.C. (ORDS) Earnings Call Transcript & Summary

Good afternoon, everyone. Welcome to Ooredoo Group's financial results call for the first half of 2026. My name is Ali Serdar, Head of Group Treasury and Investor Relations. Thank you for your attendance today. I'm joined by our group CEO, Aziz Aluthman Fakhroo, who will start with highlights of the first half, strategic progress and then group results. After that, our Deputy Group CFO, Fadi Abdellatif, will walk you through the performance of our operations. We will keep the presentation short, so we can leave enough time for your questions. You can submit your questions at any time using the Q&A function. The presentation is available on our website and on this platform. Please note that this session is being recorded and transcribed. And finally, please refer to the disclaimer on Slide 2. With that, I will now hand over to Aziz.

Good afternoon, everyone, and welcome to our H1 2026 results call. Let me start with a brief overview of the first half before turning on to our strategic process and group performance in detail. The first half of 2026 was another period of solid execution for Ooredoo. We delivered higher revenue, EBITDA and normalized net profit supported by resilient demand across our markets and disciplined execution across the group. Revenue growth was led by Algeria to [indiscernible] and Iraq, while our core markets remain resilient in terms of service revenue despite a more challenging operating environment. Profitability continued to improve, with EBITDA margin expanding year-on-year, reflecting operating leverage, revenue mix changes in select markets and ongoing cost discipline. We also made tangible progress on strategic priorities, including the launch of Alabras, continued expansion of Syntys and further development in our fintech platform. Combined with a strong balance sheet and a healthy cash generation, this positions us well for the second half of the year. Let me continue with Syntys, our dedicated data center platform. Syntys continued to make good progress during the first half, supported by the acquisition of Q Data in Qatar and continued demand from hyperscaler customers. The acquisition expanded our capacity footprint and strengthened the platform position in supporting cloud, AI and digital infrastructure requirements across the region. During the first half, Syntys generated QAR 112 million of revenue and QAR 46 million of EBITDA. We remain focused on scaling the platform in a disciplined manner aligned with customer demand and long-term value creation. Turning to fintech. Our fintech continue to scale across our footprint, supported by growing customer adoption and increasing remittance activity. Qatar remained the largest market, while Oman continued to build momentum following its launch last year. During the first half, the platform processed almost QAR 6 billion of international remittances and serve more than 500,000 users. We also continue to progress our expansion plans with go live in Tunisia and Iraq moving through the development phase and licensing discussion, advancing in additional markets. Fintechs remains an attractive long-term growth opportunity for the group with continued focus on disciplined execution and sustainable growth. Turning to the group's performance. We delivered a solid first half despite a more complex regional backdrop. Revenue increased by almost 5% to QAR 12.5 billion. EBITDA grew by 7% with margin improving by 1.2 percentage points to 44.4%, while reported net profit was preliminarily impacted by a one-off legal provision in Algeria, normalized net profit increased by around 4%. Free cash flow also increased by almost 8%, highlighting the strength of our operational model and capital discipline. Looking specifically at the second quarter, revenue increased by over 3% and supported by continued demand across the portfolio. EBITDA increased by 8%, significantly ahead of revenue growth, reflecting stronger profitability and operating leverage. EBITDA margin improved by 2 percentage points to 45%. Free cash flow increased by nearly 11%, while leverage remained low at just 0.6x net debt to EBITDA. Overall, revenue growth translated into stronger profitability, improved cash generation and continued financial flexibility. Turning to revenue for the first half of the year. Group revenue increased by nearly 5% to QAR 12.5 billion. Growth was driven by Algeria, Tunisia and Iraq supported by customer addition and continued demand for data services. Across our core markets, revenue remained resilient. Device related revenues were weaker in some markets due to regional logic constraints impacting our equipment sales during the period. Overall, demand for connectivity service remains solid [indiscernible]. Turning to EBITDA for the first half. EBITDA increased by over 7%, QAR 5.5 billion. EBITDA margin improved to 44.4%, continuing this positive trend seen in recent quarter. Margin expansion was supported by operating leverage, disciplined cost management and changes in revenue mix across select markets. For the first half, reported net profit declined by nearly 5%, mainly reflecting a one-off legal provision recorded in Algeria. On a normalized basis, net profit increased by around QAR 0.04 to almost QAR 2 billion. They demonstrate the resilience of the business and continued improvement in operational performance across the portfolio. Second quarter net profit also decreased due to the one-off legal provision in Algeria. Excluding this, another one-off item, normalized net profit increased by around 2% year-on-year. This reflects the strength of the underlying operating performance across the group. We ended QAR 1.6 billion during the first half. Capital expenditures remain focused on network expansion, capacity enhancement and supporting future growth initiatives. Investments were concentrated in markets such as Algeria, Qatar and Tunisia. We also maintain flexibility in timing and discretionary investment where appropriate. Free cash flow increased by around 8% in the first half to QAR 3.9 billion. The improvement was preliminarily driven by [indiscernible] EBITDA and disciplined capital allocation. This continues to reinforce the financial strength of the group and provide flexibility to support [indiscernible] personalities. Our customer base increased by over 4% year-on-year to QAR 54 million. Growth was driven primarily by Algeria, Iraq and Tunisia. Including IOH, our total customer base reached QAR 147.5 million. These results demonstrate continued demand for our services and the strength of our proposition across markets. Finally, a quick look at the balance sheet. Our financial position remains very strong with net debt to EBITDA at 0.6x, well below board guidance. Liquidity remains healthy, supported by almost QAR 11 billion of cash and a further QAR 6.4 billion of undrawn committed facilities. Our debt profile remains conservative with loan maturities and limited interest rate risk. We also continue to maintain investment grade rating from both Moody's and S&P. Based on the performance delivered during the first half, we are maintaining our full year guidance, while the regional backdrop remains dynamic, demand for connectivity service remains resilient, and we continue to see good momentum across the business. We remain focused on disciplined execution, operational efficiency and advancing our strategic priorities. With that, I'll hand over to Fadi to take you through the operational review. Thank you.

Thank you, Aziz. Good afternoon, everyone. I will take you through the group's year-on-year operational performance for the first half. Starting with our home market, Qatar. Qatar delivered resilient profitability despite device-related revenue pressure. Revenue was broadly stable as healthy service revenue trends were offset by lower devices. EBITDA increased by well over 1% and EBITDA margin expanded by 1 percentage point to around 53%, supported by a change in revenue mix and cost discipline. Customer base expanded by over 1%, nearly 3 million customers, supported by continued postpaid growth and affected customer value management. Moving to Kuwait. Service revenue remains resilient while the supply was impacted by logistics. Revenue declined by around 2%, mainly due to lower device sales, partly offset by steady growth in service revenues. EBITDA increased by over 5%, while EBITDA margin improved by over 2 percentage points to just above 36%, mainly driven by a change in revenue mix. Customer base stood at 2.8 million, down over 3% as limited device availability and the original conflict with the gross weight on gross additions. Nonprofitability improved despite continued competitive pressure. Revenue marginally declined around 1% with broadly stable mobile revenues and continued fixed growth, offsetting pressure in wholesale and equipment, increased by around 5%, while EBITDA margin improved by almost 3 percentage points to above 47%. This reflected disciplined cost management and the benefit of the restructuring program that was implemented late in 2025. Customer base stood at 2.9 million and down around 6%. I had competition in mobile while the fixed customer base continued to grow. Turning to Iraq, where we see another solid performance. ASL sustained growth momentum supported by growth in customers and rising data usage. Revenue increased by over 3%, driven by customer expansion, higher data usage and the introduction of handsets as a new revenue stream. EBITDA increased by over 3%, with EBITDA margin stable at or above 45%. Customer base grew by 4% to just over QAR 20 million, supported by solid prepaid net additions. Moving to Algeria, one of the group's strongest growth markets Algeria sustained robust double-digit growth, supported by the demand, the voice revenues, digital services and strong customer acquisition. Revenue increased by 16%. EBITDA increased by over 15%, while EBITDA margin was rated to around 44% due to incremental costs related to 5G frequency customer base expanded to -- or by 10% to nearly QAR 16 million, led by sustained growth in the prepaid segment. Next to Tunisia, another growth market. Tunisia delivered a broad base growth across fixed and mobile services, supported by continued fiber and 5G fixed wire access momentum. Revenue increased by 14%, driven by strong fixed growth and positive contribution from mobile services. EBITDA increased by over 15%, while EBITDA margin improved by 0.3 percentage points to 42%, supported by operating leverage. Customer base expanded by around 4% to about 7 million reflected continued demand for fixed services and 5G FWA offerings. Turning to Maldives. The business maintained resilient profitability despite softer tourism related activity. Revenue was broadly stable with the fixed and mobile growth largely offsetting lower wholesale revenues. EBITDA increased by over 1% and EBITDA margin improved by 0.8 percentage points to about 56% supported by cost optimization initiatives. Customer base grew by 3%, while growth across mobile segments and continued expansion in fixed broadband. Moving to Palestine. Ooredoo Palestine delivered strong growth despite market headwinds. Revenue increased by 18%, driven by a stabilizing market environment, improved underlying performance and positive currency EBITDA increased by 25% and EBITDA margin improved by over 2 percentage points to 42%. This reflects healthy operating leverage and efficiency in cost management. Customer base saw a modest decline, remaining above 1.5 million. And finally, we move to our equity accounted joint venture. IOH continued to deliver strong growth and improved profitability, supported by consistent execution. In local currency terms, revenue increased by 13% and EBITDA grew by 14%, while EBITDA margin improved by 0.4 percentage points to around 48%. Net profit increased by 76%, reflecting strong operational performance. Customer base declined 2% to just over 93 million, reflecting ongoing market consolidation while underlying customer demand remains resilient. This concludes our operational performance review for today. And now back to you to Ali. Thank you very much.

Thank you, Aziz and Fadi. [Operator Instructions] And our first question comes from Thando from UBS.

Great. And I guess I could say congratulations for the results, given this situation. I'll start off with 3 questions, please. Just the first one, I wanted to just get a sense of how the recovery in Qatar, Oman, Kuwait, has been on a month-to-month basis. So if you were to compare to live versus April, May and June, just in terms of the equipment sales. And I wonder if you could just quantify what the impact was from the ongoing conflict, please? Second question is just I wonder if you could give some sort of outlook in Iraq, please, just for the remainder of this year and what management is expecting in terms of for the second half of the year and how things are looking right now. Yes, let me just ask those 2. I'll come back in line again this space.

Thando, thanks. As usual, you're the first. So you had 2 questions. One was on Iraq color Kuwait. Look, as of today, we still have some impact from devices. We have created alternative roots sporter device sales, which mainly feed our top line. But as you know, that's a extremely low margin business. It's a business we do more as an enabler. The revenue line, we actually device sales profit margin usually range depending on the bottles from 2% to 15% in the best case. As long as that impact affects statically all players in the market, which is the case, we're not that concerned with it. If we were the only ones, which weren't able to after device, then it would be quite problematic. We have set up alternative routes. We have devices coming in, not at the same pace as usual, but much better than the beginning of the conflict and we're hoping for the general situation to normalize so that we can go back to business as usual. In Iraq, we're confident and as general -- our guidance for the -- all of our markets on the group are -- remains the same. It is hard to forecast in the region given the events Iraq has been in ways impacted by the conflict, as you know, there's been some disruptions in government salary payments, which has impacted slightly the market. It's a bit of on and off. But overall -- and this is valid for all the markets which were directly impacted, including multi because Maldives is impacted by the conflict. What you have seen in our results is despite all of this, we've been able to increase our EBITDA margin and grow our EBITDA because we've built in this reflex within Ooredoo of immediate discipline and trying to substitute when we see weakness with alternative program, whether on the revenue side or on the cost savings side, and that is methodically applied by all the management team across the whole footprint. So I think that's a testament to the discipline of the group.

The second question comes from Maddy Singh from HSBC.

Congrats as well on performing well during this troubling times. My question is -- the first question is actually on Iraq. I see the revenue growth is about 3%. Do you think that is the satisfactory run rate for you in Iraq. This is despite probably not having a proper third operator functioning there to the full capacity. So any views on Iraq growth trends? And then the second question is on your tower. So we know that you created the OpCo now. So how long do you think before we see the impact on the numbers in terms of booking those tower sales? And is there any change in your view on the potential comment you expect from Zain or is it still a $500 million the equal addition payment, if that were to be the case? And then I understand that the final question, I understand that the revenue growth trend in Kuwait and Qatar are due to diverse sales. So if you could talk about the service revenue growth trends in these markets? And are you happy with those trends?

To answer your last question before going to the 2 first. And as an overall arching statement is despite the whole situation across a number of our countries, I think the performance we have delivered shows a certain level of resilience and how solid is our market footprint. And the strategy in a number of markets being the premium provider, you tend to have much less elasticity on the market share. when destructions arise. In terms of Iraq, going to the third operator, which I guess you're referring to Korek. This has been a situation which has been ongoing for close to 24 months. So most of the gains that were achievable, have already been achieved. The remainder of the games apart from a full stop of activity of Korek and their stronghold. I don't think you will see marginal incremental gains. Are we satisfied with the 3% revenue growth in Iraq when we were used to more double-digit growth, and we were targeting very high single-digit growth for this year. Obviously not. But I don't think that's a reflection on our operation, especially it's just a reflection of the context. And as mentioned, Iraq has been hit militarily but also revenue-wise as a general country quite hard. Iraq is not as lucky as a number of the other countries such as [indiscernible] Romano, Kuwait, which has significant revenue reserve at the state level there has been some disruptions in terms of salary payments for government employees, which, of course, given the size of the government employment within the country has some impact in terms of growth. But despite all of that, we're still able to grow 3%, which in any normal telecom market is already an achievement. So are we happy with it? No. Are we proud of our achievement? Definitely, yes. and we're hoping for it to -- the situation to resolve the ASAP so we can go back to a more stabilized run rate of business. What was the third question?

TowerCo.

Look, TowerCo, as you know, we've established our branch. We're finalizing final paperwork. It's the first time you'll probably hear me say this, I will say was a high degree of confidence that by next investor call, we should have closed -- helped on the first close of the transaction.

Any update on the payment amount? Sorry. The equalization payment from Zain, is that [indiscernible]

The equalization payment formula has still not changed. Quantum remain -- quantum remains similar. Just equalization payments happen market after market. So I think at the first close, we'll disclose what is the revised time line in terms of closing because we've shifted the orders of certain markets.

Next in line is [indiscernible]

I just have one question concerning the Ooredoo online. There's been buzz the last on say, 6 to 8 months about the potential tower sale done by Brookfield in [indiscernible]. I think seeing new -- or not the new sufficient moves, but the cause was mostly about the transaction being done in Q2, but again, for many other reasons, other than the geopolitical situation might have been pushed. I just wanted to clear up there and maybe get some insight on whether the transaction is still going through or if you want to share anything else.

Usually, I would say I wouldn't comment on number, but talking about the transaction going through when you actually referred as it as a buzz and we haven't done any material disclosing all that then answer to your question. There is no transaction right now on the table in Oman on towers.

Next in line is [indiscernible].

I had 2 questions. First, can you provide an update in terms of what are you seeing in terms of data center demand in your key markets? That's one. And then also on Oman, in terms of specifically infrastructure, digital infrastructure, et cetera, what type of discussions are you currently having?

So in terms of data centers, look, the first slide of our investor presentation is on [indiscernible]. What you see is we have already 7.5 megawatts under construction. We have an additional 10.4 megawatts of fully contracted new data center builds. And we have quite a sizable pipeline. We don't disclose the pipeline until contracts are committed. But if you take the what is under construction, 7.5% plus 10.4%. This is close to 60% of our installed capacity, which is in construction or in pipeline. So I think we're seeing this and this is despite the 10.4 megawatts contracts were signed in the last few months. So this is despite the current situation. So we're seeing still extremely healthy growth in terms of data center, and we are still ahead of our plan of reaching 120 megawatts of installed capacity by 2030, I think we'll probably get there 2 years ahead of plan. Given the pipeline and the strength of the demand we're seeing, again, we don't build data centers on an opportunistic basis, meaning -- we're not -- let's build the data tender and then see to who we can lease it. We only build to suit. So all the new builds are fully committed contracted on long lease high-quality investment-grade, hyperscaler diversified portfolio of a hyperscaler. So very happy with the mix and the growth trajectory of that business. What was the second question? Can you repeat it about Oman?

Oman is basically we're hearing that there's more focus like in other countries in terms of digital infrastructure and all that and what's happened to the [indiscernible] hopefully.

Look, Oman for us is one, the strategic market, the telco is also a strategic market for the infrastructure side given the geographic nature of Oman. This is where all the cables coming from Asia land, they land in Oman. And similarly all the cable, the traditional cables coming from Europe, also [indiscernible] Oman. It is the connectivity hub between Europe and Asia. So naturally, there is a strong focus on infrastructure in Oman. A number of our international connectivity projects emanate from Oman, whether it's solar cable or FICC, these are hard developments in Oman. In terms of towers, we have answered that question. We're not doing anything on the tower side, especially due to some regulatory issues we had in the past there. in terms of data centers. We have data centers in Oman, regulatorily regulatory approvals for us to build new data centers outside of Ooredoo Oman itself, but through Syntys as the core strategy is a process we're going in Oman. It's a lengthy process like all regulatory approval in Oman.

Now I'll turn to the questions. The first one from [indiscernible], can you shed some light on the one-off in Algeria? Any other expected one-offs during this year or in the medium term? Your other policy is based on normalized net income and shouldn't be affected by this. But should we expect Ooredoo Kuwait to also adopt a similar view on the dividend this year?

[indiscernible], as you said, our dividend policy is based on normalized income. That being said, even the impact on net income for quite de minimis. As a number of you analysts keep highlighting the amount of cash or the low leverage we have, I don't expect a one-off this nature to impact in any way, shape or form our dividend policy or dividend payout. And again, our dividend policy is based on normalized debt. As you know, dividend is recommended by the management that is a purview of the Board. The nature, this was an old court case in Algeria, I think dating from 2018 to 2019 with relation from the Central Bank the treatment of foreign currency for roaming. It's been an ongoing case under the advice of our auditors and as its standard practice, you have to fully provision the court case or you don't provision anything. And the determination on the provisioning of the court case or not is determined by outside counsel the likely outcome of winning or losing the case as the advice we had legal advice and not from one, but a number of low firms as this was a very strong case. And in any normal situation, we should have won. This is why we didn't provision it. Right now, we don't foresee any major on the one-off of this nature.

Next type question from [indiscernible]. In Kuwait, in spite of its overall population going up, the subscribers has seen quite a fall along with postpaid and wireless broadband on a quarter-over-quarter basis. So are there any strategies in place like aggressive marketing for improving the customer base.