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

I'm in charge of Investor Relations. Let me introduce my colleagues. Our main spokespersons today are is Aziz Aluthman Fakhroo, Managing Director and CEO of Ooredoo Group; and Abdulla Al Zaman, Group CEO. We are also joined by Rene Werner, our Chief Strategy Officer; and Eyas Assaf, the Deputy CFO. 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 will keep the presentation short to allow sufficient time for your questions. The presentation is available on our website at ooredoo.com as well as on this webcast. The recording and transcription of the session has started now. So by attending this meeting, you can send to be included in that. And please do note the disclaimer on Slide #2. And to begin, I hand over to Aziz.

Perfect. Good morning, everyone, and thank you for being with us for these Q2 results and as well as first half results. As Andreas mentioned and following the same presentation structure as last quarter, we'll give you a quick highlight of our strategic pillar, just to recap. To repeat, we have 5 strategic pillar for this year. One is value-creating portfolio. The other one is excellence in customer experience, strengthening the core, evolving the core and then people. If you remember, last quarter, we took a quick snapshot into value-creating portfolio with our Fintech MFS business today, something which is actually extremely important and the change of mindset. We are actually focusing a bit on customer experience. Historically, what we do as a whole has had a general mindset as what I would qualify an incumbent approach with a technology-first mindset. This year is a clear shift where we're really positioning as kind of experience and customer-first mindset. And it's not just saying it, it's really implementing it. One of the first steps we've done is we've implemented a voice of the customer, monitoring, tracking and unified KPIs across every single opco. And that is the first. We've done this in partnership with a leading company and service Qualtrics. We've also historically been measuring CSAT across 7 of our opcos. As I stated, as of today, in 2 opcos, we were ranked #1; in 4 opcos, we're ranked #2; and in 1 opco, we're ranked #3. It's decent picture. Our goal -- our stated goal is to be #1 in customer experience in all markets we operate in. As I said, it's really a strong mandate from the top and embraced by the whole management. As a reflection of this, actually, CX targets and KPIs are implemented in all scorecards of the management of each opcos and as well as the group. They actually represent 15% of the total waiting. This has already yielded fruit. So if we look between the beginning and the year to the first half, the last seaside measuring, we've seen significant improvement to general improvement in 6 out of 7 opcos. So we're very happy with this. Again, we'll do a deeper dive into our customer experience normally at the Capital Markets Day. This slide -- yes, perfect. Financial achievements. We're very happy to continue on the very strong performance we've been having for the last now 18 months. We're seeing growth in revenue of 4% year-on-year. We're seeing EBITDA growth of 2% year-on-year at nearly QAR 4.5 billion. We're seeing EBITDA margin stable at 41% and a CapEx intensity, which is at 9%. Free cash flows are up 10% and net profit is up 43%. I'll dive in a bit more detail for each of these sections. Just to recollect, this is pro forma. So as pro forma, as you remember, last -- at the beginning of this year, we merged our Indosat operation. Now it's called IOH. It's held as a joint venture company. And as pro forma we excluded from the comparison year-on-year. We can go to the next slide. So these are the actual numbers in terms of performance compared to last year. What you will see is a significant drop in revenue and in EBITDA, and this is due to the fact that last year we used to consolidate what was our second largest operation, which is Indosat. In terms of Q2, it's the same trend as for the first half. Revenue is up 3% year-on-year for Q2 alone. EBITDA is up 2% for Q2 year -- for Q2 year-on-year alone. EBITDA margin, again, is unchanged. CapEx intensity is minus 3 points at 11%. Free cash flow is up 13%. Net profit is up 37%. Our net debt-to-EBITDA is stable at 1.3x, and our customer base is at QAR 55 million. We'll touch a bit more on that, minus 6%. So this is the detailed breakdown, which we've been providing everyone recently. What you see is the general pro forma performance of our revenue. What you will note is that in every single operation in local currency, we're actually up and they have experienced growth in local currency in every single market. Actually, Algeria was up by 4% and Tunisia was up by 1%. What we have is a slight drop in actually Qatar reals for both Algeria and Tunisia, and this is driven mainly by depreciation of the currency in this respective market. Group revenues, as mentioned before, have increased by 3% for the second quarter. In the others bucket, what you see is an increase versus last year. This is mainly driven by our subsidiary called StarLink, which is held by Ooredoo Qatar, which is device retail and equip business. The main growth across all opcos is coming from mobile data. Mobile data has grown by 12% across the group. Thank you. Same picture in terms of EBITDA. We've seen improvement across most of the opcos. Tunisia and Algeria are still currently impacted by just currency. We see also a slight underperformance in Iraq. This is mainly due by the cost of energy. Energy has gone up by 14%. I'd like to remind you that Iraq doesn't have a fully sustainable grid. So a lot of our equipment is powered by diesel generator, and therefore, we are quite sensitive to fuel cost in this. There's also a bit of additional spending for the World Cup preparation in Qatar. This is one-off spending. Just as a reminder, Qatar is a popular -- is a country with a population of around 2.7 billion people. Our network is generally geared for that kind of capacity. For a 1-month spike, we will have visitors from 1 million to 1.5 million people. This is a significant strain on our network. Therefore, we have to put in place additional redundancy to ensure that we can deliver an exceptional performance for that event. Next slide. So here, we decided to show you a bit more breakdown given that you've asked many questions on what are the adjustments we're doing in terms of normalization. So if we look at first half 2022 reported versus first half 2022 normalized, we have an adjustment of QAR 97 million. This is FX, and we have a positive adjustment from data center sale gain in Indonesia of QAR 245 million. This explains the adjustment of minus QAR 148 million for the first half of this year. If we look at last year the adjustments we had, we had an impairment loss of Myanmar -- as a reminder, we took a $750 million write-off, approximately. We had an FX impact of QAR 545 million across all operations. And a one-off gain from the tower sales in Indonesia, which gave us a normalized H1 QAR 930 million net profit. So now if we go to a comparison, what we see from a normalized standoff, what we see is we've grown our net profit by 43%. This is mainly driven by a reduction in depreciation given the total write-off of Myanmar last year. That accounted for close to QAR 235 million improvement in net profit. Similarly, we saw that -- we're showing you here the bridge for the adjustment from Q2 reported versus Q2 normalized. FX represented QAR 75 million. And again, the data centers which is recorded this quarter QAR 245 million one-off gain. So that brings us from QAR 816 million to QAR 649 million. When we look at in 2021, the adjustments we did was the impairment, again, was taken in Q2 for Myanmar. FX impact for that quarter only represented QAR 281 million, and the tower sales happened in Q2 of a one-off gain of QAR 1 billion. So we had a normalized net income of QAR 472 million. Now if we compare normalize to normalize, it's a 37% gain. Again, the majority of the off-lift is coming from the reduction in depreciation and amortization, mainly from Myanmar. In terms of pro forma CapEx, we are in line with our guidance. Our CapEx is currently actually slightly lower, and this is due to seasonality. A lot of the CapEx happens in second half of the year, but we're still in line with our target. What you'll see is we have 2 operations which are significantly increase in CapEx versus last year. One is Palestine and the other one is Algeria. Both is driven mainly by the same thing. It was orders of last year due to customs and imports and logistics streams, which were shifted from last year to this year. What you will always also see is in Iraq, Oman and Kuwait, a significant drop in CapEx versus last year. Iraq, as you remember, we launched 4G at the beginning of this year. So last year, we had a significant ramp up for the 4G equipment. Kuwait and Oman had quite a significant 5G ramp-up and Oman had a one-off Mosandam project, which is a data center last year, and that explains the general reduction. Free cash flows in line with both top line growth and CapEx, what you see is we're increasing by 10% our free cash flows. Free cash flows are up in all operations, except again Tunisia and Algeria, and this is mainly driven due to the currency depreciation. And Palestine, which has a slightly negative free cash flow due to the CapEx profile, which we've explained before. Customer base. Our customer base is actually the 6%. The main driver to the 6% is a 5.5 million drop in customer base in Myanmar. This is due to a couple of instances. As you remember, there was some political instability and coup d'état there. The regime has installed an $11 tax for recharges, which have driven throughout all operator, a significant drop in subscribers. It's a market where people use to dual SIM, triple SIM. That new tax has driven people to reduce the number of SIMs they're using. And therefore, there's a 5.5 million drop in customer base. That being said, ARPU has increased, respectively, in Myanmar. Tunisia, what we're seeing is a 340,000 drop in subscriber base, and that's from a cleanup of our subscriber base of idle subscribers and rectification. All other markets we win experience growth in our subscriber base. Just as a note, if we add our Indonesia subscriber base, we're actually at close to 150 million total subscribers. Just as group results, we will reiterate our guidance given the outperformance for the first half, you might find our guidance conservative. We're confident that we'll probably reach the upper end of our guidance. The reasons why we're keeping the guidance in terms of revenue and EBITDA similar and not adjusting is there are quite a few uncertainties in the markets we operate. One is currency and the other one is inflation in terms of fuel and energy costs. CapEx, we're confident that we'll hit probably the lower to mid end of our guidance. For Indonesia, we advise you to go and see the detailed presentation of our IOH performance. The general statement is that the merger is going extremely well, and we're on track to deliver the synergies and the performance that we guided to at the beginning of the merger. And we're very happy with the presentation. It was the performance of IOH. We invite you to go and see -- results presentation, which are happening tomorrow, yes. Exactly. Debt profile. What we can see is our debt profile hasn't changed. We still have a very strong cash position, a very low net debt to EBITDA was 1.3x, I think in the current environment, the key area of focus is what's the amount of variable rate debt, which we have versus the amount of fixed debt. What you'll see is that 86% of our debt profile is fixed, only 14% is floating, and that's nearly mitigated by the cash reserves we have, which also benefit from higher deposit rates as rates increase. I think this slide is self explanatory. Now I'll hand over to Abdulla Al Zaman, which will get you through a detailed review of each opco's performance. Abdulla, please.

Thanks, Aziz, and good afternoon, everyone, and thank you for being here today. I will now review the first half quarter 2 result for all our operations. I will start with Ooredoo Qatar. First half of 2022 revenue grew by 3% year-on-year, mainly due to mobile and fixed. Service revenue up by 5%, a slightly drop in EBITDA driven by sponsorship activity for the World Cup. Held the EBITDA margin at the rate of 51% and very good customer numbers stood at 3.2 million, which is 5% year-on-year growth. Economic benefits from higher gas prices. Population up to 7% also year-on-year. World Cup year expected between 1 million to 1.5 million visitors for the tournament. Kuwait, strong growth, 13% year-on-year on revenue driven mainly by mobile data and business and higher also equipment sales. EBITDA increased by approximately 17%, driven by higher revenue. EBITDA margin increased to 31% in quarter 2 of 2022 due to higher revenue and lower OpEx. Overall, the economy outlook improving with the higher oil prices and easy of traveling restriction or removing of the traveling restriction. Customer base reached 2.6 million, 6% year-on-year growth also. On the other hand, there is a new MVNO version launch on 25th of May with a new focus on young segment and offer more value in terms of telecom benefits premium numbers. Market share in the last 2 months, it's almost 0.1% approximately. Algeria, reported revenue year-on-year decrease in the QAR due to currency depreciation of approximately 7%, as Aziz mentioned earlier. Revenue dropped by 3% in QAR and EBITDA by 1% year-on-year on QAR, but the local currency revenue and EBITDA increased by 4% and 6% year-on-year, driven by higher mobile revenue data. Customer number also increased to 12.9%, which is plus 2% year-on-year. EBITDA percentage decline in the quarter 2 2022, due to network coverage penalty provision and litigation with net impact of approximately QAR 9 million. Tunisia, also impacted by currency depreciation, approximately 8%, revenue dropped by 6% in QAR and EBITDA by 2% year-on-year. In local currency, also, we have seen a revenue and EBITDA increase by 2% year-on-year, driven by higher mobile revenue data in consumer and B2B segment. Customer number was -- or is at QAR 6.9 million stable, and we go to a stronger performance on the top line. Revenue increased by 5% year-on-year in local currency terms and 3% in QAR also turn driven by strong detail revenue on the back of 4G launch. Compared to previous quarter, revenues slightly lower due to lower voice revenue. EBITDA year-on-year dropped by 3% due to higher energy, which also, Aziz has highlighted earlier, and lease line cost. Customer number also increased by approximately 3% year-on-year to reach at QAR 16.3 million. Overall, the economical situation is stable and a good growth in B2B segment, which has contributed almost to 39%. Our views reaches QAR 1.54 million in quarter 2, which is a very good news for us. And also, the recharge on the app increase -- an increasing actually trend quarter on quarter by 19%. Arman, revenue year-on-year increased by 2% on the first half of 2022. The growth on the wholesale, mainly the growth coming from the wholesale and higher device sales. EBITDA year-on-year increased by 5% and EBITDA margin increased to 53% in the quarter 2, 2022, which is a very good level. Customer number increased year-on-year by 3%. Overall, economy outlook improving with the high oil prices and mostly applicable on all GCC countries. As of May 22, Vodafone captured around 3.8% of the mobile customer market share, mainly from Omantel and Ooredoo Oman since its launch in December '21. Increase of the fixed royalty from 7% to -- to 10% effectively January 2022, which is also we highlighted on the first quarter. Customer base decreased by 2% year-on-year to 2.8 million due to new market and trends shifted from pre to postpaid also continue. Myanmar, I would say, a strong and excellent performance for Myanmar. Revenue year-on-year increased by 12% driven again by mobile revenue data and voice. EBITDA increased due to higher revenue and better cost control. Customer number declined to 8 million, which is Aziz has emphasized on the reason, due to higher SIM card and taxes, actually, the taxes on the SIM card. Then we have higher taxes and fees and data have impacted on consumption significantly, and voice usage also has increased. EBITDA percentage lower quarter-on-quarter due to higher voice interconnect, which led to a higher OpEx. More restriction by Central Bank and USD payment. This is what we've been observing also from the beginning of the year. Maldives, another positive and strong, I would say, pro forma opco. Revenue increased by 9% year-on-year, EBITDA increased by 15% year-on-year and EBITDA margin increased to 55%, supported by efficiency -- efficient programs. Customer base increased to 375,000, up to 3% year-on-year and 5G expansion of project is ongoing in Maldive. Lastly, will be Palestine. Revenue -- actually, revenue year-on-year is increasing by 5% and EBITDA margin increased to 37% due to higher efficiency and lower cost of sales. Customer number increased to 1.4 million, which is a 5% increase driven by prepaid and postpaid mobile. And Palestine considered one of the most efficient of good that we have, one of the most efficient good that we have in term of mix. Thank you. This will conclude my presentation, and I will hand it to Andreas for the Capital Market.

Much appreciate it. Thank you very much, Abdulla. So we are very excited about our upcoming Capital Markets Day. It's now scheduled for the 26th of September. We haven't done a Capital Markets Day since 2019. So this will be a great opportunity to meet our management team, and hear the latest Ooredoo news. It's going to be a hybrid event probably. So it's definitely going to be a webcast and hopefully in Qatar as well. With regards to other events, we also have a few conferences coming up, just Bank of America and EFG as well in Dubai, and then with HSBC, a virtual conference at the end of September. Before we go into the Q&A section, I would just remind you that at the back of the investor deck, we have many additional slides that you find some additional KPIs from our commercial team and our technology team, and we added quite a lot of new data points this year. So that's definitely worth having a look at. And we're also keen to hear your feedback on our new format and our IR activities in general. So we prepared a brief survey for you. When we finish the seminar, you will get some questions and would be much appreciated if you could answer this. And give us your feedback, how do you like the new format, what information are you missing and what comments you have in general for us that would be much appreciated.

Okay. So now we come to the Q&A part. And you have a chance to use the Q&A function here in Zoom. You can type your questions or you can just raise your hand in Zoom and then we open the microphone for you, and you can ask your question live. [Operator Instructions] I see the first question is already coming in from Ziad. Yes. Let's start with one of the questions here, then we come to you in a second. There's a question from Manyun Tan from Eastspring. Thank you for the presentation. Net profit in the first half seems to be driven primarily by the Myanmar segment, is that sustainable going forward?

So the Myanmar, the -- net profit has increased generally also in line with the general increase in performance. It is true that versus last year, between the impairment of Myanmar last year, there is still the benefits as we reduce our asset base depreciation and amortization will reduce. And this is sustainable in the future.

Thank you very much. Then there's another question from [indiscernible]. What is the situation of the TowerCo project outsourcing of technical sites in Nigeria?

So the current TowerCo project is a project we have, and it's not just in Algeria, it's across 6 of our opcos. As mentioned before, this is -- will be part of a more detailed update during Capital Markets Day.

Then we have another question from HSBC there. The last time we spoke about Myanmar, mentioned that the company is quite committed and recently tower leases to lower the rates there. Has -- what has changed since the last and is there a consideration to sell?

First of all, as you've seen, the performance of Myanmar has been very strong this quarter and since the beginning of the year. We're still committed to the business, and we're supporting the Myanmar's management into the strong performance. That being said, we will always be opportunistic in reviewing any strategic options. For the time being, we have nothing to report to the shareholders. But to the extent we do view a value-creating transaction in Myanmar for an acquisition at that point of time when we will report it.

Excellent Yes. Fahad, can you open the microphone for Ziad? So on the sale of data center in Indosat, this generated a substantial QAR 245 million gain. It seemed sizable for how much was the sales for? And most importantly, how much was it contributing to Indosat's net income basically, will this have a material negative impact on Indosat's EPS going forward?

So it's a very positive transaction for both Indosat and ourselves. We do believe that this transaction will allow us to grow our data center business in Indonesia, which is a fast-growing market with a partner alongside us. It's not a 100% sale, but it's a 70% stake still with a partner, which will be able to fund substantial CapEx going forward and for us to capture growth. We will let the benefit tomorrow of the presentation of Indosat to go into more detail in this action. We believe here at the group that it is a very good transaction, both for IOH shareholders, but also for us, Ooredoo and Ooredoo Group shareholders.

Excellent. So we got a question from Omar Maher.

Just a couple of questions. First one on Oman actually. I guess my question is on -- both on the revenue and the EBITDA, I find it a bit surprising that revenue has picked up quite nicely in the first half of the year, which I find a bit counterintuitive because this is right at the time of the entry of the third operator. So I guess we're thinking that perhaps this is something that should have pressured revenue share in general or the absolute figures. So I was wondering if you could give us some insights on what's going on in Oman just to understand the market dynamics after the entrance of the third player? And the second question is actually on the reported EBITDA for this quarter. If I take the sum of the opcos, there seems to be positive difference between reported EBITDA and some of the opcos EBITDA, which is -- has not been the case in the past. So -- was there like any reversal of intercompany eliminations at the EBITDA level or anything of the sort?

So I'll take both questions. I'll take both questions. First, when it comes to Oman, indeed Oman has had quite a strong performance. Revenue has grown by 2% and EBITDA has grown by 5%. What you will see is there are quite a few drivers to this. One is the economic recovery in general in Oman, driven by higher oil price, a bit of recovery of tourism with the reopening of the country. That has helped not just us, but all the economy in Oman. Also secondly, it's true that there is a third entrant. One of the things we've done is we've secured a wholesale agreement with Vodafone, and Vodafone currently uses our network. So even if Vodafone is capturing customers from us and from our competitor, we get revenue stream from that business. And that has been one of our defensive play to protect from market erosion in the country. We're also seeing quite a strong performance from our operation in general with a customer increase even with a third entrant of 3%. So the management in Oman has been doing a very strong work. We've been preparing for the entrance of Vodafone now for close to over a year before their entry. And I think the strategy we've put in place has proven to be successful.

Sorry, on the second question, on difference between reported and total EBITDA...

Sorry, could you report -- could you repeat the question?

Yes, sure. There's a difference reported and the sum of the EBITDA for the opcos that is very different than historical quarters. Usually, it's -- reported EBITDA is typically lower than the sum of the opcos because I'm guessing because of the eliminations and this difference is usually around QAR 100 million to QAR 200 million. But this quarter, it's the opposite. Actually, it's around QAR 47 million positive, i.e., the reported EBITDA is higher than the sum of the opco. So I was wondering where this is coming from.

Look, I'm not really sure what is your comment. We'll try to clarify it. If you do sum of the opcos, what you -- we also have group revenues which account for close to QAR 22 million. So this is maybe more different. So you have the opcos plus the both group itself generates revenues. I think maybe that's where the differentiation is coming from.

Great. Then I see Faisal [indiscernible] raise his hand, so I'm going to open up your microphone Faisal.

And congratulations on the outstanding set of results. I do have 2 questions. On a sequential basis, what were the main reasons behind the growth and the share of associates and profits from associates on a quarter-on-quarter basis? My second question is, should we -- is it a fair estimate to say that whatever we've seen during the first half in terms of, let's say, clean earnings or normalized earnings is sustainable going into the second half of the year? And that's it.

For your first question, the growth in share of associates, it's mainly due to the difference in accounting treatment of IOH. As you know, IOH was fully consolidated. Now it's on as a joint venture. So the contribution comes at the associate level. We've lost the top line contribution. We've lost the EBITDA contribution in our accounting, but we get the share of associate at the associate level. And the main one-off is the proceeds from the data center sale, which is around QAR 45 million. If you adjust for this one-off and how sustainable is the growth, well, we keep your guidance -- we keep our guidance in place for the full year. We haven't changed. We are very happy for the first half of the year, which has performed very well. We hope we can perform as well, but there's quite a few headwinds, which is out of our control. One mainly is currency with dollar strengthening significantly. We also have tailwinds which are helping us. 6 of our opcos are economies which are oil based or oil-denominated or they're benefiting from the current oil prices and the input in their economy. At the same time, we also have impacts in terms of inflation, especially on the energy cost.

Mr. [Abdul] Aziz, that was quite clear. However, if I were to go back to the share of associates, I completely understand that IOH currency is being recognized as an associate. However, when has this treatment been in place? Is it starting from the second quarter or the first quarter?

No, it's from the first quarter. This treatment started from the 8th of January 2022. On the day we actually closed the transaction from that day immediately, we deconsolidated and the accounting treatment changed as part as a result of the merger. And a reduction in ownership going from 65% to 33% in direct ownership.

So the significant increase from Q1 of 2022 and share of -- profit of share of associates versus Q2 of this year is mainly because of the timing difference of the recognition, right?

Yes. So from Q2 2021 to Q2 2022, is different of accounting treatment. From Q1 of this year to Q2, the increase is because of the one-off sales proceeds of the data centers in Indonesia, which yielded QAR 245 million in terms of share of associates, but also by the good performance of Indosat also that you'll see this.

We got a question here from Cevian to Nigeria. What's happening with regards to cost reduction? What is the impact? And which areas are you targeting?

Ooredoo Nigeria has been performing very strongly, as you've seen. It's a difficult market. We have seen some slight increase in terms of cost, especially again on the energy side. That being said, the management has been putting quite stringent measures in terms to keep OpEx in control, at the same time as the cost of acquisition strategy. I don't think we can go more in specific details of what exact measures we're doing just for competitive reasons.

Right. Then a question from -- Which markets are most challenging? What is the impact of inflation? Is the company increasing prices? And what's the strategy with regards to the new -- Is it a price war?

That was a lot of questions. Can we take them one by one.

The first one was which ones are the most challenging markets and the impact of inflation?

In general, all our -- in general, all our portfolio for the first half is performing extremely well. Each market has their specificities. From an operational standpoint, of course, Myanmar, given the political situation there is slightly more challenging than the rest of our portfolio given -- on one side, political situation and to the currency -- the uncertainty on the currency weighting. The rest of the operations, we have very competitive markets like Kuwait, Oman is becoming a very competitive market as well that we've been performing in all markets growing at the rate of the market or actually exceeding the market growth rate. So we're very happy in general with our performance.

We got to take the questions up there. The next question was -- what's the strategy with regards to the new player in Oman? Is it a price war?

So for the time being, the new player has come, of course, with some quite disruptive pricing in the first offering. Of course, this pricing were what I would qualify, and I can't really comment on Vodafone's strategy. But thankfully, the initial offers, which were launch offers were quite limited in time. What we've seen between us and the 2 historical players in Omantel has been a lot of discipline, and not creating a price war and not value destruction for Oman. Therefore, the strong rebound in our operations, plus we've put in a defensive strategy of during the wholesale agreement with Vodafone and this is helping us in the general performance of the operation.

Excellent. Then we got a question from with regards to our bond maturity. What's the plan for the 2023 bond maturity? Rollover, repay?

So as you know, we've raised the bond last year. We've secured all the financing. And if you look at the chart, maybe you can put in the slide of our cash and debt profile. We actually are fully funded and sustainable to be funded for the foreseeable future and we are in no pressure whatsoever in terms of refinancing. So we will do, as we've done in the past, we will address the market if we see conditions to be favorable for us. And if we can secure compelling cost of capital. But for the time being, we have no pressure, and we've already taken care of our 2023 maturity in last year's bond issuance and RCF put in place as well.

Excellent. That covered the bond question. And then Ziad is asking about the customer satisfaction in U.S. [competitive] prices with inflation kicking in elsewhere and squeezing the customers' wallet. Is there a risk for you to cut prices for better scoring. Or do you see a risk on ARPUs? Why the ARPU and prepaid mobile in Qatar declined so much, 5% Q2 and 15% year-on-year prices?

Can we take them one by one, again?

Sure.

So customer -- look, customer experience is more -- and this is where we're putting in place the voice of the customer. It's more than just pricing. Pricing is a component. There are a lot of touch points during our customer journey, whether from a billing cycle to recharging, quality of service, response time, outage down. So we're trying to touch all of the different points. The impact of inflation is the same for us and our competitors all of the markets. So we're not seeing this as -- and we're seeing quite a lot of discipline at trouble markets in terms of the players. So we're not seeing deterioration of pricing, and we will definitely not impact our revenues for customer satisfaction. We actually started with a price increase at the beginning of this year in Qatar, which is our home market. We believe that stronger -- over time, stronger customer satisfaction actually leads to higher ARPU than lower ARPU. What was the second question?

The ARPU decline in Qatar, in the prepaid segment?

So we've had quite a significant strategy of migrating a lot of the upper tier of our prepaid market to the postpaid market. So the ARPU decline is migration from prepaid customers and the upper tiers of the higher ARPU prepaid customers to our postpaid plans, and has been quite a successful strategy.

Then I see your question here from anything. He was asking about the revenue in Qatar. What's the reason behind the software revenue in Qatar? Is it in a specific segment of competition?

So, look, Qatar has performed very well. We're already the incumbent with 75% revenue market share. Our competitor is performing well, but we're performing in line. I think revenues have been quite sustained across the board from mobile to B2B. I wouldn't qualify them from softening. At the same time, the country is population, and it's 100 -- it's more than 100% penetrated. So there is limited growth left in Qatar. At the same time, we're still capturing quite a bit of growth.

Great. Then we got a question on -- can you comment how you manage FX risk?

FX has always been part of our one of the recon of our portfolio of opcos. We try to secure as many of contracts in local currency in all of the countries, and we try also to a limited extent, try to leverage if it's competitive in the local markets in local currency. The significant -- the most significant hedge we have against FX is converting as much as we can, as many as we can our procurement contracts in local currency, which for certain categories is quite easy, especially on the service side. But when we come to equipment side, which is important, is usually not that evident to do. And even if we converted to local currency, there is an FX calculation into it. So it's part of our endemic, I would say, structure as a portfolio as we do.

Great. Then there's a question from [Omar Anwar]. In terms of fixed business, are you seeing any shortages on the fiber optic cable side? And have fiber optic cable prices increased due to inflation?

No. So fiber is core to our strategy. When we'll do another, the next structure that strengthened the core fiberization is a key player for us across all our markets. Fiber has been highly commoditized and the price of fiber is decreasing year-on-year.

Okay. A question from Ziad on the Wataniya operations. He's asking, what is driving the jump in costs? He said employee salaries are up 30% in Kuwaiti dinar terms, and there is [indiscernible] opcos. Is it a typical salary adjustments happen towards the end of the year? Or what's driving the jump in cost for the Wataniya operations?

So for Wataniya, so Wataniya is -- yes, MMTC. So in this, you have Kuwait, Algeria, Tunisia and Palestine. So you have quite a different variables into it. It's a bigger mix. Look, one of the drivers for increase in OpEx is, of course, the cost of fuel, which is impacted through some of these operations. There is a marginal increase in the staffing cost. In the operations, part of it has been done to an incentive program to drive better performance. And we believe that, that is a fair system, which have driven the good performance in all these opcos. We're still watching very carefully our OpEx and our cost in general across all operations, not just through the Wataniya ones.

Excellent. And there's a follow-up question in Kuwait again. Any updates on the number range case with MMTC? I don't think there are any new development.

No, there's no new developments since last quarter.

Okay. Thanks for the comment on the presentation there. It's very kind of you. Diva would like to know -- how do you see the impact on EBITDA margins with the inflationary environment? And how much are you able to pass through?

So the biggest pressure point today on the EBITDA margin in terms of inflation in this cost of energy. And again, our footprint is quite specific in certain geographies. We're quite diesel dependent. So Iraq, I think probably -- Iraq and Myanmar are the 2 countries, which are the most sensitive to price of energy. As of today, we've seen very marginal erosion. If you see the general performance, our EBITDA margin is down 1 point. So we've been able to control it and mitigate it. And the increase in fuel costs will try to offset it in savings and other segment of our OpEx. In terms of passing it through, the increase is not significant enough in order to pass it through to our customers. But in general, we are always striving for ARPU increase. And not passing to cost, but sort of taking our customers with the ARPU letter by selling more services and VAT.

Excellent. Then I see one question here from [indiscernible] is the free cash flow sustainable? Or is it primarily due to lower CapEx allocation?

No. So two parts to that. Free cash flow is sustainable. We actually have a very strong free cash flow yield as a telecom operator in general. This is driven by top line performance, control and OpEx and also discipline in CapEx. We've guided to sort general reduction in CapEx over time, and we'll commit to this to the extent it doesn't impact our competitiveness in each and every market we operate. But we've been operating in growing markets, in general, historically. So we had CapEx intensity rates in general across our markets ranging from 12% up to 22%. What we're seeing is a lot of the markets we're operating in are maturing. And therefore, our CapEx intensity rate has to go down and to revert back to typical mature markets in the range of 10% to 12%. And this is our goal over the next years. So we do believe our free cash flows are very sustainable.

Excellent. I don't see any more questions in the chat or any hands raised. If there are more questions, please...

I am seeing one more question...

A new question there from Yejide Onabule. Tower sales and data center plans.

So both the towers and data centers are part of our core strategy and stated as our asset-light strategy will come with a full update at the Capital Markets Day for both tower sales and where we're sending that process. And data centers, what is our strategy with data center.

Greetings from Robert Jamal. He would like to know if we see any political risk that might disrupt operations in Asiacell and Iraq?

No, we don't see any political risk that might disrupt our operations in Iraq. At the same time, I think as much as on the currency side, it's part of our portfolio. We are also, we believe, as Ooredoo, our area of strength is operating in certain geographies where there are political uncertainties. And one of our strengths is always trying to be commercial and apolitical. Therefore, we're not impacted as -- or as little as possible by any change in local political sceneries.

Excellent. I think that was the last question. Great. Then I would like to thank you all for the participation and looking forward to further interaction. 26th of September is going to be our Capital Markets Day, and our Q3 results are due at the end of October. And I hand you to fill a little survey after this call in the Zoom section. If you need any follow-up information, please contact us here in Doha. Thank you very much for joining.

Thank you for your time.

Thank you.