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

Good afternoon, and welcome to our earnings call for the first half year ended 30th of June 2026. And we are appreciate your participation. My name is Ahmed, representing Investor Relations Officer at Ooredoo. We are pleased to have you with us today as we review our half year performance and share updates on our strategic initiatives. Joining us today is Mr. Nasser Al Yaarubi, our CFO; and Mr.. We will take you through our financial performance and key developments for the first half of the year 2026. Before we begin, a few necessary disclaimers in Slide #2. Kindly note that our -- kindly note that we may share forward-looking statements based on the information available for us as of today. Kindly note that our views may change over the time, and we are not required to update you if they do. For further details, we encourage you to visit our public disclosure on MSX and our website. With that, I will turn it over to Mr. Nasser Al Yaarubi to walk us through the highlights of H1 2026.

Thanks, Ahmed. [Foreign Language] Good afternoon. Firstly, I would like to Saoud Riyami, our CEO, regards, and unfortunately, he is not able to join us today as he is on the event traveling, and I would basically take you through the presentation and give you some highlights about our performance, Ooredoo Oman performance in quarter 2 as well as first half of the year. Before we go to the financial performance, I would like to throw some light on the macroeconomic environment in which we are operating. The GDP outlook is fairly positive, and the expected growth in 2026 is between OMR 3.5 billion to OMR 3.7 billion and with the similar results -- expected results for 2027. With 2040 vision, and special focus on investments in tourism, logistics, manufacturing and other private sectors in general, Oman is moving with confidence towards a more sustainable non-oil-dependent economic growth. The inflation is rising, but still relatively moderate. And Oman credit rating as at the end of August is at investment grade, and the outlook is stable. This positive trajectory has been now for a while, and it has improved significantly compared to the situation in 2020, where the debt to GDP at that time was around 68%. And currently, it's at around 33%. The overall economic, also that's mainly supported by healthy price of oil, the average currently is around OMR 84, and this is actually higher than the price that's set in the budget of around OMR 60. So this would give Oman a good briefing space and a positive -- further positive outlook for the economic. When it comes to Ooredoo, the slide here shows actually the development of our customer base. Customer base in quarter 2 is stable compared to quarter 1. We saw growth in the post base versus last year, driven by growth in ICT and IoT, following the company's focus on this particular revenue stream and segment. Rebid, there's the -- and as highlighted in previous calls, there has been a lot of cleanup and rationalization and special focus on value-adding customers. This has resulted actually in an improved ARPU as well as actually a better prepaid revenue. When it comes to the fixed segment, we've seen actually a growth of around 2% compared to the exit quarter to 2025. This is supported by fixed and home broadband growth that's continued to grow supported by fiber FTTH as well as the wireless home broadband. The company has been focusing on superior customer experience. And this has been widely recognized by our customers as well as the community. Ooredoo managed to bag several awards amongst which is actually this -- what you can see here is the best brand in customer experience in telco at Oman Camaro Experience Awards ceremony. We have been also able to get actually a recognition from Okla as the best 5G gaming experience in Oman. And this is actually following the significant investments and efforts that the company has made towards actually strengthening the network and strengthening or creating superior customer experience as well. Moving to the financial performance. Our revenue for quarter 2 has reached around OMR 60.1 million. It's slightly lower than quarter 2 2025, and this is impacted by the -- by lower sales of handsets. The good news here is that the service revenue or the core telecom revenue has seen or witnessed actually an improvement. And this is actually a strong indication that the company is moving in the right direction. It has -- the service revenue improved by around 0.5%, and this is supported by growth of fixed as well as prepaid and ICT businesses. And this trend has been moving slowly positively now. And we are actually very optimistic that this will continue in the coming periods. When it comes to EBITDA, EBITDA is very healthy and has reached 28 -- almost OMR 5 million, a growth of around 2.6% compared to the same period last year. And this is, again, supported by a very healthy service revenue as well as improvement in gross margin and cost efficiency programs that the company is -- has followed and shows a great deal of discipline in this area. Of course, this has cascaded down to the net profit, which has reached for the quarter to a number or close to OMR 4 million, that's more than double of the net profit that we've been making in previous year. And to be more specific, it's 123.5% higher than the net profit results that the company achieved in quarter 2 2025. The company is also committed towards strengthening its network. So we are continuing to invest in our 5G, our network capabilities and digital capabilities as well as actually any new areas of revenue, especially in the wholesale and ICT. So the quarterly trend, that's shown in this particular graph, shows that actually, there is a drop -- a slight drop in the revenue between quarter 2 2025 to quarter 2 2026. And again, as highlighted previously, this is driven mainly by the lower sales of devices. And by the way, the sales of the devices, generally speaking, is having a lower margin. The good news here is actually the mobile and fixed as well as wholesale, that's the conventional revenue contribution overall business is increasing. On the EBITDA front, our EBITDA has improved by 2.6%. That's around OMR 730,000. Year-on-year EBITDA has improved, supported by improvement in gross margin as well as actually a reduction in operating expenses following, again, efficiency and optimization programs that the company has engaged in the last few months. Next slide please. These efforts have translated very strong net profit improvement. And our net profit has reached actually OMR 3.8 million in 1 quarter. And this is when it comes actually to local or compared to the industry as a local operation. This is one amongst the best performing. And this is higher than the same period last year by around OMR 2.1 million. And of course, this is not only supported by quality revenue and focus on value-adding activities and initiatives, but also great discipline on the CapEx investments and other initiatives that has actually resulted in balanced kind of depreciation and amortization. And of course, all these things led to a significant improvement in net profit. On the CapEx front, as highlighted previously, we have been investing heavily on our network to improve our customer experience and also to create an infrastructure that supports the increasing in demand for data and connectivity. It is currently at around 16%. We saw basically an acceleration in the investments in quarter 2, and we expect that trend to continue in the next quarters [Foreign Language]. Next slide. When it comes to simple free cash flow, it indicates, as you can see here, strong position and kind of a balanced approach between EBITDA generation as well as business expansion needs. The ratio is here when it comes actually to liquidity as well as gearing, you can see clearly that actually, the company is maintaining a very strong cash position. And it indicates also a very healthy and efficient control of working capital. That's why we are able to maintain very strong, healthy and -- very strong and healthy balance sheet. Let me close with few highlights and stress a few key priorities for the organization for the remainder of 2026 as well as actually the future. When it comes to the organization, we are committed to deliver basically stronger financial performance following actually the number of initiatives that we have taken to optimize our expenses as well as actually push our revenue and get actually new revenue streams that supports the financial performance and creates sustainable, profitable growth for the organization as well as the shareholders. We are also committed when it comes to building our network capabilities, expanding our 5G footprint as well as fiber network, which are extremely important investments that will cater for the increasing demand for 5G as well as actually supports our strategic direction towards creating superior customer experience. And we will also continue to seek efficiencies and create also, again, experience that is seamless and unique for our customers. And we are sure that this will lead to strong, sustainable, again, financial performance. When it comes to the growth pillar, we will be continuing to focus on B2B and strengthening our position in that area. And we will deliver the pipeline projects that will ensure and taking our capabilities when it comes to creating the growth that means the shareholders' expectation. On the efficiency front, we will be, and we are actually doing a great deal of efforts when it comes to AI, automation and new technologies that deliver efficiencies and optimization. And when it comes to investments, we are very particular in our investments when it comes to ensuring that we invest in great value-based projects that is supported basically investments that supported by kind of strong data and analytics and facts that are in the market as well as actually meets our strategic direction in various revenue areas. I think with that, we open the floor for any questions.

[Operator Instructions]

The first question is on the prepaid business of Ooredoo. Could you reflect on the challenges that you're facing in terms of both ARPU and retaining customers? And what is the company doing to actually arrest this downside that we've seen in a number of customers over the last couple of years? And of course, the second question is your sort of nonvoice and nondata revenue, the wholesale revenue that you've been speaking about over the last few calls, what sort of update is there? When do you see these opportunities leading to good revenue and profitability? Is there any update you can share in terms of time line, in terms of the size of the opportunity?

Thanks a lot, Abbas. When it comes to prepaid, it's not a secret that the market is extremely crowded. And there are a lot of operators. We've seen a lot of value destroying activities previously. The company has been actually successful this year in maintaining the -- and even growing the prepaid revenue, improving the customers' ARPU by focusing on value customers with ensuring that actually we are getting the maximum out of these customers by having the bundles and the products that shows their needs. And we are trying to differentiate ourselves by meeting the need of the customers and ensuring that actually we are having superior customer experience at all touch points. That is when it comes to prepaid. Now when it comes to wholesale, we believe that there is an increase and significant increase in demand for wholesale, either from international connectivities, data centers and other areas. Now, we've been investing in building those capabilities. And we've been seeing growth in lots of areas of wholesale. Some of them are double digit. And we are actually expecting even more and more growth in this particular area that can beat also the other traditional core telecom revenues in the areas of fixed and mobile, for example. So yes, there are areas of wholesale, where we have seen a significant growth. Yet the wholesale is not actually the biggest revenue stream, as you saw in one of the slides. However, we are actually giving a great deal of attention, and we see that area improving, and we are very optimistic about the investments in this area and the return from those investments as well.

Ahmed, can you -- if you have any question, please ask.

Congrats on the results. Two questions from my side. The first is regarding the revenue growth. So beyond migrating customers from prepaid to postpaid and relying on further cost efficiencies, what are the actual initiatives that can turn Ooredoo to sustainable top line growth in terms of revenue? So like are you targeting measurable revenue from fintech payments, AI solutions, digital services, data centers? And if you can please quantify which of these businesses do you expect that will contribute the most to the revenue over the next 2 to 3 years?

Okay. Thanks a lot -- Ahmed, thank you very much for the question. When it comes to the revenue of postpaid or the migration you highlighted from prepaid to postpaid, of course, there is a merit and logical arguments behind this particular move when it comes actually to the loyalty of the customers as well as the ARPU improvement. The key important focus area when it comes to mobile and ensuring that this particular revenue stream is sustainable, is when it comes to the quality of customers as well as the share of wallet. And here in Ooredoo, we are working on both areas, the quality of customers ensuring that actually, we focus and invest in kind of bringing and retaining customers with higher quality we can basically create value as well as actually grow with those customers and ensure that we meet their demand and we get a fair share of wallet, which will result in ARPU improvement.

Clear.

Other initiatives or other revenue streams, we've been highlighting this multiple times that there are multiple initiatives, and you mentioned the fintech and our partnership with Ooredoo Fintech company who are actually the they are having also very interesting products and been very active and been also growing fantastically. There are also lots of initiatives in the areas of AI that will not only drive revenue through multiple use cases, but also improve efficiency and quality. So yes, there are also lots of things that are happening currently. And we are monitoring what is happening also in the world taking the best practices. And the other area is the wholesale. I have highlighted this in my presentation as well as my answer that there are lots of work also happening there, and there is a massive amount of investments that ensure that actually this particular area is strong, and we are ready to meet and beat the expectation of our existing customers and also potential customers, both locally and internationally.

Clear. The second question is regarding the dividends. So as we all know, you maintained a dividend of around OMR 0.1153 per share for 2025 despite very weak profitability. With H1 2026 net profit already around OMR 8.3 million and full year earnings estimated around OMR 17 million to OMR 20 million, could shareholders now expect the dividend to increase materially compared to the last year?

Last year, actually, we -- the net profit for the organization for the full year was around OMR 900,000. And we are committed to our shareholders in terms of ensuring that we are giving good dividends. And that what happened last year through payment of dividend that's far higher than our net profit. Now what will happen in the AI 2026. All I can say here is I assure you that we are looking at all options and all possibilities. With our boards, that ensures the maximum return to our shareholders. This is actually something, which we are -- we will be, and we've been doing it previously, and we'll continue to do it to ensure that we are giving a dividend that is balanced between the shareholders' expectation on the dividend as well as the company's ability to create or to expand and create value through growth and creating sustainable, profitable growth kind of business, which will, of course, eventually result in a better value for the shareholders.

Okay. Mr. Aamir Ali, please, if you have a question.

I have a couple of questions. Sir, my first question is related to what your tower sale business. Can you guide us what is the update on that front?

Okay. And your second question?

And my second question is related to the CapEx guide for the second half of 2026 and 2027. And if you can also tell us the breakup like for what is technology, like breakup of the CapEx, like ICT, 5G or telecom services, if you can guide us for the CapEx breakup for the second half and for this 2027 full year.

Sure. When it comes to the tower sales, we do not have updates. And as we've been highlighting in previous meetings that we are committed to give the public and announce any material information when it comes to this particular topic. When -- regarding your second question, which is actually the CapEx, we expect to see an acceleration in the CapEx investments in the second half of the year with the projects reaching kind of a stage of completion, and there is a great deal of interest in accelerating those investments. We saw that in quarter 2 alone, for example, we have added number, like just let me get the numbers here. We have added like 36 new sites and 65 5G sites. Going forward, there will be execution of lots of blends that are in the road map [Foreign Language]. When it comes to the technology, -- we will continue to expand our coverage and our network and our 5G network in particular. When it comes to wholesale capabilities, as you mentioned, we will -- we are investing actually in C cables that will cater not only for our for our use and increase in the demand by our customers, but also for international customers. And when it comes to digital capabilities, we are also investing heavily there, trying to take full advantage of the emerging technologies of the AI and other things that are actually happening in the world right now. The same thing is applicable to data centers and other areas. So all in all, we are investing in various fronts with a great deal of focus in some particular areas that will lead to -- as I said earlier, to sustainable profitable growth.

Mr. Rashid Hamed.

Thank you. I think -- I mean, I've got a couple of questions, but I'm sure you touched base already on the on some of them. I think some of the answers you have already given. But if you're okay, I'll go ahead and ask my questions, if that's okay.

Yes, please.

The first 1 on the sustainability of profitability improvement. Now I mean, you guys have done an extremely -- I mean, good job in terms of reducing your cost. I mean, most of you or secular profit in H1 was mainly driven by -- or entirely driven by cost reduction. But a bigger part of that has come actually from the cut on the employee cost benefit experiences, which I think would be related to the termination of a big amount of people, I think, last year or something like that. However, I mean, your revenue growth has actually decreased a little bit year-on-year for the first half. So I know you've talked about some of this, but are you confident that your drive towards [indiscernible] revenue, are you confident about it? And what are you going to do differently for the remaining of the -- for the year? I mean, are you going to continue to focus on the cost reduction only? Or there is some genuine plans about improving the revenue and growth?

Thanks a lot, Rashid, for your question. And the answer to your question is the market, yes, is challenging, but I have highlighted that in quarter 2, if you look at the service revenue, it has grown compared to the same period last year. And we saw basically a growth in some of the core revenue streams in the areas of prepaid, in the area of fixed, ICT, IoT and in lots of areas in the wholesale as well, especially the international ones. So we are seeing actually a growth in lots of revenue streams that we are having. And the good news that a lot of those areas are actually not based on one-off, but it's more on a recurring kind of revenue. And what's going to happen tomorrow or the after, we are very optimistic. Nobody can tell for sure what is going to happen, the -- all what we can assure you is that actually, we are setting the organization, ensuring that we are doing the right investments, building the right capabilities, taking the maximum opportunities that are available and ensuring that we are ready and capable of grabbing those opportunities. Now, it's not only cost efficiency that we are focusing on. We are looking at various dimensions. Number 1 is actually the organization itself, ensuring that actually, we are having an organization that is capable of creating value for our shareholders in a sustainable way. From a structure perspective, from employees' capabilities perspective, from technologies perspective, that's why we are investing in all those means. Then, on the revenue stream, we are looking at all possibilities, and we are looking at all opportunities and all the new areas of revenue, as I've highlighted. And on the optimization and efficiency, that's the third in our strategic way of looking at our business, is to ensure that actually, we are spending or getting the maximum for each Oman Rial that we are spending. So to summarize it, we are not looking only at 1 dimension, but we are looking at it from 3 various lenses, the organization, the revenue streams as well as the cost efficiency and investment optimization. I hope this answers your question.

It does. So you seem to be confident. Can I ask the second question quickly, please?