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

Good afternoon, and Ramadan Kareem. My name is Andreas Goldau. Welcome to the Ooredoo Financial Results Call. Let me Ooredoo Group colleagues. The main spokesperson today are, Aziz Aluthman Fakhroo, who is joining us from Paris; and we have our Group CFO, Abdulla Al Zaman, who is based here in Doha. We have 2 more people joining for the Q&A part. So Sheikh Mohammed Al Thani, Deputy CEO of the Ooredoo Group and CEO of Ooredoo Qatar; Rene Werner, also joining us on Zoom, our Chief Strategy Officer; and Ahmad Al Neama, Group Regional CEO; and Eyas Assaf, Deputy CFO. You might remember Ahmad and Eyas from previous calls in Indonesia in their roles as CEOs and CFOs, respectively. The presentation begins with our strategy vision followed by key financial highlights and consolidated results presented by our Group CEO, Aziz, and the opco section will be covered by our Group CFO, Abdulla. We do keep the presentation brief to allow sufficient time for your questions. The presentation is available on our website at ooredoo.com as well as on this webcast. Coding and transcription of the session have started already. And by attending this meeting, you consent to being included. Please do note the usual disclaimer on Slide #2. And on that, I hand over to our Group CEO, Aziz.

Good morning, everyone. Thank you for joining, and Ramadan Kareem for those who are fasting. It was a great pleasure that we're welcoming you today for this investor call, the first quarter of the year. We have a lot of changes in this presentation and also a lot of changes in the Group. As you know, on January 4, we actually closed the transaction. We actually closed our merger with Indosat, which derived some changing in accounting. So you will see through the presentation some changes in the way we present our numbers. As now Indosat is no more accounted as a subsidiary, but as a joint venture, and therefore, is deconsolidated. We've also taken your feedback over the past few months and we revised the way we're presenting our data and our numbers. Hopefully, you will appreciate a bit more granularity, a bit more transparency in our operational numbers. On the first slide here are the 5 strategic pillars. Today, we'll just go over them extremely quickly. But at our Capital Markets Day, we will go and deep dive in each one of them. And going forward after that, we'll always update you on key changes. So our 5 key strategic pillars is one is value creating in our portfolio. This is symbolized, as I just mentioned, by the Ooredoo Indosat CK Hutchison merger where we consolidated our position as the #2. It's also our drive to become an asset-light company with the carve-out of our towers. This is ongoing, and we'll give you an update a bit later in the year as well as efforts on the data center side. The second big pillar is excellence in customer experience. Historically, Ooredoo has always been a very technology-driven company. We're starting to shift our focus extensively to be a customer experience first company, and we hope that this will bring better appreciation in the markets. Of course, what has been going on for 1 year now is our transformation effort, which is strengthening our core, driving operational efficiency across our core operations to drive better profitability, but also top-line value creation, as you'll see in our number. Evolving the core. So this is developing all the adjacency around our core where we can see future growth. Today, we're taking an example is Mobile Financial Services. We've had a mobile financial service platform available in 5 markets for a few years now. We're operating in Qatar, Oman, Tunisia, Myanmar and Maldives. The bulk of the customers are in Qatar, Tunisia and Myanmar. We've derived in 2021, $5 billion of transactions. Just to put this in perspective, the [ GS&A ] estimated total mobile financial transactions for 2021 in our geographic footprint; so EMEA at close to $14 billion. So we are taking a lion's share of that market. We do believe that it's an area of significant growth. Our numbers show it. We've grown 31% quarter-on-quarter from Q1 2020 to '21 and 36% from 2021 Q1 to 2022. This is driven by enhancing all the partnerships. As you've seen, we've developed good partnerships with Visa, MasterCard, MoneyGram, Paytm, Mpesa, GCash for the remittance corridor. We believe we have an exceptional platform for MFS. If you look at our footprint, they're divided basically in 2 blocks. You have the GCC countries; Qatar, Oman and Kuwait, which are mainly big remittance corridor due to the predominance of expatriate workers in the country. And then we have countries like [ Iraq ], Tunisia and Algeria, which are countries with very low banking penetration. Therefore, having a unified mobile financial service portfolio for all these countries will generate significant growth in the years to come. But again, at the Capital Markets Day we'll give you a bit more insight and a bit more in-depth analysis of what's our effort there. I suggest we go to the next slide. So in terms of results, I won't dwell too much on this slide given that this is a quarter-for-quarter comparison between Q1 2022 and Q1 2021 as reported. As mentioned previously, on January 4, we actually closed the merger with Indosat and now are deconsolidating Indosat. And therefore, I suggest we go to the next slide where we'll be able to go through the numbers on a like-for-like comparison. So on that slide, what you're seeing, we've adjusted Q1 2021 numbers pro forma for a like-for-like comparison. So we removed Indosat at a consolidated basis. So what you're seeing is continued strong performance on the back of the transformation we engaged last year. Top-line, very healthy growth with 4% year-on-year. If we exclude the FX impact, it's grown by 7%. EBITDA margin, a very healthy 42% EBITDA margin was 1% growth year-on-year. Again, if we exclude FX impact, it's a growth of 4%. CapEx intensity has dropped minus 2 points at 7%, and this is highlighting our discipline in terms of CapEx. Transformation effort continuing to generate additional free cash flows. Our free cash flows just in Q1 have grown by 8% at QAR 2 billion. And of course, a very strong net profit, growing 241% year-on-year at QAR 659 million. Our net debt to EBITDA is constantly dropping. We're at 1.3x and our customer base is at 55 million. We'll go into more details for every of these sections. In terms of revenue, if you look, what you've seen is we've grown in every single market we operate with the exception of Algeria and Tunisia. But just Algeria and Tunisia, in local currency, we've also grown in these markets. A lot of our growth is also driven from data revenue. We've experienced a 10% data revenue growth across the portfolio, and that's excluding Myanmar -- that's including Myanmar where during the geopolitical situation we've had a significant drop in data revenue there due to blockage in the country of data access by the government. So in total -- I was just going to say, in total headline numbers, what you see is our revenue today stands at QAR 5.5 billion. Next slide, please. EBITDA, same story. What you're seeing is a strong improvement in EBITDA. So every single market due to a very -- our transformation efforts and a strong focus on cost and efficiency, what you're seeing is a growth in every single market in terms of EBITDA margin. What you will notice is actually at the Group level a drop of profitability at the Group level. This is led just by a couple of items. One is in Q1 2022, we have all the one-off charges due to the consultancy and the fees linked to the transaction in Indonesia. Another item is that in Q1 2021, we had a reversal of provisions for COVID, which we're not facing this year. So from an operational standpoint, if you look at every single market, we're actually having strong increase in profitability. Myanmar outstanding with the beginning of a recovery at 117%, but we're also noting really strong turnaround and performance in Kuwait, Algeria and Qatar. Next slide, please. In terms of net profit, our net profit has grown by 48% if we adjusted for the FX impact. It's actually a much larger growth if we include the FX impact of QAR 241 million. This is driven by quite a few items. One is top-line growth, focused on cost and CapEx, but also, as you remember, last year, we took full write-down of our Myanmar operation, and that has given some relief on depreciation and amortization from that asset. Next slide, please. CapEx. So we're remaining in the guidance of CapEx of reducing our CapEx by 10% for the year. What you'll see is a slight -- we've broken down the CapEx by country, so you have a better visibility. You have 4 countries where you have a bit more CapEx intensity in Q1. That's Algeria, Palestine, Iraq and Qatar. Algeria, the big bulk was delays in CapEx from last year due to custom clearance issues. So these are caught up in Q1. Iraq, we're seeing still some CapEx intensity due to the introduction of 4G. Qatar is mainly a bit of additional CapEx due to our data center exercise with Google and Microsoft. In all of the other markets, what you're seeing is a drop into CapEx. This is mainly due to a couple of things; better cost on the general procurement of all the items, but also, in Oman and Kuwait, a reduction in their 5G investment as the bulk of it has been done in the last 18 months. So we should see continued CapEx efficiencies for the year with a target of being 10% lower for the year at the end of the year. Next slide, free cash flows. As you can imagine, better top-line, better EBITDA and lower CapEx translates in very strong free cash flows accretion. What we're seeing is 8% growth, as I mentioned, close to QAR 2 billion of free cash flow in Q1 for the year. We note also a very strong performance in Kuwait and Oman. As mentioned before, this is mainly due to lower CapEx intensity due to 5G and a slight increase -- a slight decrease in free cash flow from Iraq and Algeria because they're still rolling out 4G in Iraq and the delay of CapEx in Q4 for last year for Algeria. We're also seeing the 118 that we've mentioned previously, which are mainly consultancy costs linked to the transaction in Indosat. Customer. If you see our customer base for the whole portfolio has increased in every single market except for the exception of Myanmar. Myanmar introduced a SIM tax this year, which has limited the addition of new customer and actually caused some attrition in the customer base. We've also seen a slight drop in customers in Oman. This is driven by the new entrant Vodafone that's just entered the market. We're actually very happy with how we were able to contain the entrance of Vodafone. Last is our full year guidance. We retained the same full year guidance with revenue growth, even if we're ahead of currently our guidance, we retained the same guidance as there are different factors that could affect the performance for the year. One is the general inflation we're seeing across the world, which could have an impact on energy cost and also the impact in certain markets, especially North African markets, which are quite hit by the Russia-Ukraine conflict given inflation in energy, but at the same time, in also cost of food as most of their grains were imported by Russia and Ukraine. Currently, we're not seeing any of these effects. Actually, we're seeing benefits from most of our oil-producing markets where we're seeing an uplift in GDP. So guidance remains the same, revenue with between minus 2% to 2% for the year, EBITDA growth between 3% -- minus 3% to 1% and a CapEx between QAR 275 billion to QAR 325 billion. That's a 10% increase over last year on a pro forma basis. I'll just spend a minute talking about Indosat. Well, it's today called Indosat Ooredoo Hutchison, we still call it Indosat internally, which is our joint venture and give you an update on the integration process. Actually, the integration process is going extremely smoothly and slightly better than anticipated. We're seeing some better results into synergy, nearly 20% of initiatives are already completed. And that has driven a slightly better profitability for Q1 versus our initial merger plan. So we're extremely happy with the integration process. We're also really happy that we've spent a lot of time during the transaction hiring out the governance between Ooredoo and Hutchison, and that makes for a very smooth integration exercise within Indosat. What you're also seeing is our subscriber base due to the merger has grown by nearly 35 million subscribers. And now Indosat has went from 60 million to 95 million subscribers. And that gives us the scale and the size to really push Indosat as a very strong #2, but also give it the scale to develop the market further. Last slide, I think this is quite straightforward. As you can see, we're enjoying with the strong free cash flows plus the effect of the deconsolidation of Indosat extremely strong liquidity and a very healthy net debt to EBITDA rate. We're actually below the guidance at 1.3%. We have very good schedule of repayment, which is scattered over the next 5 years. The bulk of the debt source is from bonds and most of it is hold in Qatar and at the Group level. If you remember, before we had quite a bit of debt at Indosat, all -- most of the other opco is quite hard to source local financing at competitive costs and retain our stable outlook at A- for S&P and A2 stable for Moody's. With this, I thank you, and I'll hand over to Abdulla Zaman for the operational review.

Good morning, and thank you for being here on the session today. I'll be covering the operation and the performance of the 9 opco in both local currency and QR. The first opco I'll covering is Qatar. High revenue mainly due to growth in mobile, fixed and ICT revenue. Year-on-year growth is approximately 6%. Also, we have a higher EBITDA, 2% growth year-on-year. EBITDA margin is slightly below previous year, mainly due to increase of sponsorship activity. The economy is very healthy and benefiting from high gas prices and oil prices. Populations is also up by 7% year-on-year. And internally also, we are considering FIFA 2022, FIFA Clubs and also we have revenue from TASMU Data Center and ICT revenue are higher than year-to-year. Kuwait. Kuwait, strong performance and up by 14% year-on-year on revenue, driven by COVID-19 recovery, improved overall economy and reversal of population decrease and a positive MNB trend. EBITDA increased by 17% also year-on-year. EBITDA margin increased to 29% in Q1 2022 to higher revenue and lower OpEx driven by lower manpower costs, marketing and advertisement costs. Customer base reached 2.6 million, 6% higher year-on-year, mainly driven also by segmentation of the prepaid, mostly the increase coming from prepaid. Launch of MVNO version expected to be soon in Kuwait. And this will lead to more pressure on the market pricing. Algeria. Algeria has a great revenue or increased revenue year-on-year by 5% in local currency. Reported revenue year-on-year decreased in category. This is due to currency depreciation by approximately 6%. Also, there is a new year-to-year EBITDA increase by 11% due to higher revenue and lower costs. EBITDA margin improved also by 38% year-on-year. Customer number increased to approximately 12.9 million, 2% year-on-year driven by mobile postpaid and prepaid. Tunisia, despite the higher inflation rate and the unemployment rate in Tunisia in addition to the Russian and Ukraine war which is impacting, let's say, the fuel price and tourism in Tunisia, in local currency, we see a revenue increase by 3% year-on-year due to higher mobile revenue data, both in voice and data, both in consumer and B2B segment. Year-on-year revenue decreased in QR due to the FX depreciation by 6%, also the same condition as we have within Algeria. Year-to-year EBITDA increased in local currency due to higher revenue. Higher EBITDA margin despite the increase in energy prices, customer number increased by 135,000, reaching 7 million and very strong performance and B2B growth due to our fiber strategy, allowing us to win a major fixed project, particularly in the private sectors. Iraq, revenue increased by 5% year-on-year in local currency, 4% in Qatar riyal terms, driven by strong data revenues on the back of the 4G launch. Compared to previous quarter, revenue is slightly lower due to lower voice revenue. EBITDA year-on-year increased by 1% despite the high energy cost and EBITDA margin slightly decreased due to lease fiber capacities. 40% of the network has been upgraded with enhanced data speed of 4G plus. Overall, stable with the economy situation, good growth in B2B segment, which is probably represent 39%. [ Amman ], slight improvement on the revenue to QAR 630 million. Growth in the wholesale. EBITDA and EBITDA margin increased as a result of revenue growth. Customer number decreased due to third entrant. Overall economy outlook improved due to higher oil prices and fixed royalty increased to 10% from 7% effective January 2022. Myanmar, revenue year-on-year increased by 8%, driven by mobile revenue on data and voice. Revenue sequentially down versus the previous quarter or previous quarter which is quarter 4 2021. This is due to restrictions, just slightly down. EBITDA is higher by 117% year-on-year, which is I would say, an amazing growth. EBITDA margin at 44%. Customer number dropped due to the SIM card tax and the political situations in Myanmar. Maldives, revenue increased also 9% year-on-year due to core services. EBITDA increased by 10% year-on-year to QAR 63 million. EBITDA margin increased to 55% due to revenue increase and lower commissions. Customer base increased to 370,000, 3% year-on-year increase. And February 2, also we have appointed a new CEO, Mr. Khalid Hamadi as a Chief Executive Officer in Maldives. Lastly, last is Palestine. Revenue year-on-year increased by approximately 5% due to higher mobile data. EBITDA margin increased to 38% due to higher revenue and lower cost of sales. Customer number 1.4 million, driven by prepaid and postpaid mobile. And overall, as Aziz has shown you earlier in the presentation, the performance of the 9 opcos has been for the first quarter very good and very promising. And hopefully, we can continue the momentum like that. Thank you very much.

Thank you very much, Abdulla. And I would like to highlight a few upcoming events. We have our Capital Markets Day scheduled for the 13th of September, and hopefully, welcoming you in Doha. It's going to be a hybrid event, so in-person as well as online. And we have a few conferences coming up, starting right after it with the Arqaam Virtual Conference, and then we have the Bank of America Merrill Lynch Conference beginning of June in the States and HSBC and Qatar Exchange are hosting us in London. I would also like to highlight that in the back of this presentation, you will find some additional new information, including some KPIs from our commercial and technology team. And now we are basically ready to start the Q&A part. So you can ask your questions on Zoom. [Operator Instructions] So with that, I would like to open the floor for any questions. [Operator Instructions] I see the first question now coming from Ziad Itani, and I'm just going to read it out. What is your plan regarding cash now that you are below your target net debt to EBITDA ratio?

So I'll take this one. We will have -- look, it's a good problem to have, but it's still a problem. We actually have very strong free cash flows and had a series of one-off events that generated quite a bit of additional cost, which is bringing our leverage below guidance. What we will see is during Capital Markets Day, we will bring a series of initiatives where we will highlight the use of these proceeds to deliver additional growth for the Group, some of which you already know. If you look at towerco, this is a strong value creation exercise that will require a bit of cash due to friction costs at the creation of the TowerCo. Another one is expansion of our data centers activities. And last but not least, as we've touched on, is the MFS business where we're reforming it as a one unified app across all opcos, and driving it through the different opcos will require some cash. We'll also -- we're also using part of the cash to transfer our core. And everywhere we see possible to strengthen our fiberization or potential small acquisition or in any of these segments; fiber, MFS or any adjacency you can strengthen each opcos in the relative markets. But again, I know you've been asking this question. We'll come back at the Investor Market Day with a full plan and you will have much more clarity from that.

Thank you, Aziz. We got one question at the chat function. First, you already covered this regarding to our debt situation. As a follow-up question, do you plan to expand in other markets internationally? And if yes, which markets would you consider exploring?

So currently we have no expansion plan as is. Of course, we remain opportunistic if any opportunities do arise. If these opportunities will be quite selective in the type of geographies, and these are the geographies where we currently see significant strengths and synergies with our current operations. So I would probably predominantly in EMEA, but currently, we don't see any acquisition opportunities at the time being.

Then we got a question from [ Tando Nicolvesi ]. He wants to know our run rate for D&A and our financing costs below EBITDA line margins basically.

Do you want to answer that question?

I can answer that question. The run rate for this year is a sustainable one. It's not a onetime adjustment. And it's in alignment with our CapEx guidance that we announced this year that our CapEx is going to be lower than last year by 10%. And this is, again, what also highlighted by Aziz and Abdulla that we are following a smart CapEx investment. Therefore, we are expecting the current debt, the current depreciation and amortization to keep moving the same CapEx for this year and beyond. And for finance, it's the same. The run rate is sustainable and we are expecting to go lower in the future in the next few years.

I'm going to standby the order of the questions of it, but since you've been talking about CapEx. [ Tando ] would like to know why is CapEx down? And what's going to be the future run rate?

Usually, we don't -- sorry.

For the first quarter, we cannot judge our performance in the first quarter. But as were the expectation of 3 plus 9, we're going to meet the outlook of our CapEx. But it's a first quarter, people giving a warm order to get engaged with the project, but we probably will meet our outlook. We don't see from the 3 plus 9, anything that will go beyond even the project or the budget.

Maybe a bit of the expansion. Looking forward, we are reducing our CapEx by around 10% and this is driven by many factors. One is better CapEx discipline. Two is cost optimization as we're seeing price of equipment currently still reducing and leveraging our Group procurement to enhance our procurement unit cost, but also what we've seen is in the core markets for the past years, we had quite a high CapEx intensity, which was Qatar, Oman and Kuwait for the 5G rollout. Now these rollouts are coming to an end and at a lower price point. So this should drive a lower CapEx intensity for the years to come.

Then there are some questions regarding the strong EBITDA and revenue performances. If we maybe start with the EBITDA performance, especially in Myanmar, Kuwait and Algeria. Is it post-COVID resurgent or something else?

It's driven by our strong performance on the revenue. And this is due to the transformation, the initiative that we have done last year and we have initiated. And we see today the output of all these initiatives and also the optimization when it comes to our OpEx. Therefore, we see a very good EBITDA level today.

And on the revenue, [ Tando ] is asking, if there's a softness in Tunisia and Nigeria?

In local currency, there is a very good -- as I said, when I showed it earlier, performance in the local currency is very good and it's meeting the budget and maybe exceeding in some of the elements. But due to currency depreciation, which is approximately 6%, is impacting overall 2Q. But to the local currency, I keep emphasizing, it's a very good progress.

And there's a question on Asia sale, the Iraqi market. What's the competition like? What's the side up times, especially considering the history with the security situation?

Well, Iraq is considered as one of the main contributor to our overall cost. Today, we see there is a stronger performance also from Iraq. I will not talk about the security performance, but we see there is a stability and a strong economy coming from Iraq which is contributing on our top-line.

Then there's a question about the 5G licenses. And we -- I'll just answer that directly in the interest of time. So we were the first country to launch 5G globally in May 2018 in Qatar, followed by Kuwait, Oman, the Maldives, and we are running 5G on a few sites in Indonesia as well. For the other markets, there's no 5G license yet. So that covers the question from [ Mr. Tando ]. And there's a follow-up question from Arqaam from Ziad. What's your view on Myanmar? Are you fully committed to this market in the long-term? Would you consider an exit if the situation doesn't improve? And can you repatriate cash out of Myanmar?

Today, we are fully committed as a shareholder to this operation, I would say. And we can see today the operation in Myanmar is improving, but we are always open for any opportunity.

Maybe another word on Myanmar. We've been -- Myanmar has been -- we've been pushing Myanmar to be as much as possible self-funding, and it's a negative as we achieved. We actually managed to renegotiate some of our tower leases there at a lower rate and especially converting it to local currency. As you highlighted, there is pressure on foreign currency in Myanmar. And we're trying to keep CapEx and OpEx to the minimum possible in Myanmar for the time being.

There is a question on Oman. How do you recognize wholesale revenue? Will this grow with the competition with -- if Vodafone gains market share? And what are typical margins?

Well, it's a market. I would say, Vodafone, they have the right to earn a share of the market. But today, we have a 3 years contract on the wholesale. And based on the competition in market, of course, we are positioning ourselves and we expect that Vodafone will take some shares, but it does not mean that we are going to let go our top-line easily, no. We are also finding other source of revenue that we are emphasizing on in order to offset any drop of our…

And then there's a question regarding Algeria. We noticed a jump in terms of EBITDA and the drop in revenue. What has this to do with?

So Algeria, as mentioned, the revenue has increased in local currency. So there is no marked drop. It's just driven by FX impact and EBITDA profitability is driven by stringent review of our OpEx.

Mustafa Ammar would like to know, are there any new developments with regards to tower sales like you've done in Indonesia? And a follow-up question. Any management guidance to mitigate FX impact on the U.S. dollar compared to other countries' currencies?

So for the towerco, we'll give you a full update probably in a quarter or so and especially at the Capital Investor Day. We're currently finalizing our exercise internally to carve out all our towers as a wholly-owned subsidiary. And then we will look at what is the best monetization strategy, partial retain of control or minority stake and country-by-country or as a block. This is still being reviewed and assessed and we'll come back to you with more detail on this as the process evolves. When it comes to foreign exchange impact, a lot of the countries we operate in, it's extremely hard to hedge the foreign exchange. The benefit we are seeing right now is if you look at Algeria, Iraq, Qatar, Oman, Kuwait, these are all commodity and oil-driven countries. Therefore, their foreign currency is actually performing quite well.

Then there's a question on the Iraqi ARPU. Why is Iraq's Asia sales ARPU under pressure, down 10% year-on-year despite the 4G launch and improved mobility? Wasn't there a gradual price pickup after the 20% currency devaluation in December 2020? And you also mentioned 100% of the sites are 4G-ready, can we expect that CapEx will drop in future? Any changes in royalties?

We have no update on the royalty in Qatar or there will be any change. But CapEx, as Aziz just has mentioned, we are optimizing our CapEx on the futures. In terms of ARPU, I'm not sure. This is a good competition. Yes, our cost of sales is going up, and this is probably also will impact certain…

You're right, we have seen the return of unlimited data packages. A question from Qatar. [ Akber Khan ] is asking about the coverage of the football stadiums. Is the network infrastructure exclusively for Ooredoo or are you sharing with other operators?

Sheikh Mohammed is the CEO of Qatar. Can you may be answer that question?

We are the main strategic partner and [ consortia ] provider for the stadiums that's pursuing the games. However, in these stadiums we offer infrastructure, and that's where the whole customers can benefit from both the providers.

Then there's a question from an analyst, Ziad from Arqaam. she's covering Asiacell, and she is referring to the same Q1 presentation and they mentioned the tower deal with Asiacell expected to be completed within 2022. Can you comment on this?

Aziz, you want to take that question?

Look, we can't comment on the transaction, which is led by one of our competitors. We are aware of following the market. We actually see it as a good thing. If we then concludes a transaction in Iraq, it will set a precedent and facilitate all regulatory approvals for us.

Then there is another question from Ziad from Arqaam. It seems in the B2B and ICT segment, you are registering very strong growth across the board. The same goes for mobile money? Are there any plans to carve out and IPO these in the future?

So again, I'll ask you guys to be a bit patient and we'll come back to you closer during the strategic -- not the strategic, the Capital Investor Day where we'll give you a very clear roadmap of what our intention is for towers, mobile financial services, data centers, all these core businesses and how we will optimize the capital structure.

I think we covered all the questions that I see on the screen here at the moment. There's another question on Indonesia coming in now. Indosat remains profitable despite merger and integration costs. Can we axe profits to increase as synergies are kicking in and further support to EBITDA?

With Indonesia, we're very happy we're a bit ahead of the plan. So as you've seen, there is profitability in Q1. At the same time, we have significant integration costs, which we've mentioned. We're still sticking to our guideline that we're looking to a run rate between $300 million to $400 million of sustained synergies on an annual run rate starting from year 3 to year 5.

Now we got a live question from the HSBC and that is from Maddy Singh.

So a couple of questions from my side. Firstly, given such a strong performance in Q1, I'm a bit surprised that you haven't changed, upgraded your guidance for the year. So that's the first one. Secondly, I heard and read in your release as well about the impact of fuel costs on the margins. So if you could quantify that, firstly, how big is fuel costs generally in your markets? What's the range, like average and the range? And secondly, what kind of impact did you see from the fuel cost alone on the margins during the quarter?

I'll take this for the guidance, and you sort of answered your own question. Why we're not updating our guidance is as much as we are starting the year on a very strong foot -- strong footing, and operationally, we're very confident. There are quite a bit of unknowns right now at the beginning of this year, driven mainly by logistic issues around the world, inflation and also the impact and the repercussion in certain markets of the world, Russia and Ukraine, which is impacting energy costs, but also inflation in a lot of markets we're operating in. So this is why we're remaining conservative on our guidance. In terms of fuel costs, it's hard for us to give you a breakdown market-by-market. We have a sort of in our portfolio as semi hedge. So as I mentioned, a lot of the countries we operate in are also oil producers. So countries like Qatar, Oman and Kuwait, energy costs are not that volatile versus market cost. Countries like Iraq, Tunisia and Algeria has much more volatility and are much more sensitive to market needs.

So what's the range, if you could share that of fuel cost?

We have not quantified across our footprint, honestly. But I would say one of the major opco that's getting impacted from the fuel increase is Iraq. But we have not quantified being very micro impact.

That place is still going up and down, it's not stable and it's very difficult to quantify it for the time being.

Madhvendra, also just to note, in our footprint, we have several markets where diesel and fuel costs are subsidized, and we have basically price guarantees in the respective markets. Other markets are very different. And for us, obviously, the connection and powering our sites is the key activity. And that means we have to kind of have fuel where the energy grids are partially less stable than in other countries. And Iraq is one point where we have actually the need to run more sites on diesel as a backup to ensure that our customers have good experience in network reliability.

Some more questions coming in here. One from Akber Khan from Al Rayan. What is your sensitivity towards rising interest rates?

Yes, I need the Treasury to answer that.

We actually got some comments here.

As you know that our -- 85% of our debt is fixed rate. Therefore, our sensitivity is less because 85% of our debt is fixed.

And of course, cash balance is also benefiting the company from rising interest rates.

Then a question from Ziad. What's the update on the legal number range case in Kuwait? You're talking about QAR 500 million. When can we expect the final ruling? And what are the plans for the cash one-off dividend for Ooredoo Kuwait?

We have won 2 court cases, which is really strengthening our position, and that's quite positive in our numbers. However, there's still the final verdict to go and there's no specific time line for that issue.

And so the case can fairly go to the Kuwait Authorization. All right. Then I don't see any more raised hands nor questions in the Q&A or chat function. Then I would like to thank you very much for your participation. As I mentioned before, we have additional information towards the back of the deck, and we are very much looking forward to your feedback to the new format for the disclosure. I'd also like to refer you to our Investor Relations website for any future updates, and looking forward to your future participation. Our next update is probably happening with the first half results at the end of July. And with that, I thank you for your interest in Ooredoo, and wish you Eid Mubarak. All the best.

Thank you, everyone, and wishing you also Eid Mubarak. And maybe a last comment as we're revamping our presentation, I will try to keep it evolving. If you have any key comments, we're very happy to take them onboard.

Thank you very much.

Thank you.