gcc telecom 082011

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Global Research

Sector-Telecommunication

August 2011

GCC Telecom Sector Quarterly - 2Q11

Virgin Mobile shown the exit door

Iraq parliament rejects five-year plan Etisalat renews its management pact with Mobily

Virgin Mobile on its way outThe telecom regulator in Qatar has asked Qatar Telecom to wind up its Virgin Mobile servicesVirgin Mobile has been part of a controversy since its launch as it was seen as a third mobileoperator rather than as part of Qatar Telecom. Opponents advocated that Virgin Mobile shouldn’be allowed to operate as it is effectively a third mobile operator which has evaded paying licensefees. Qtel will now have to transfer its existing Virgin Mobile customers to the other similarservices it offers or will have to give cash refund for the value of the SIM card and credit balanceThe decision will have a negative impact on Qatar Telecom which is facing tough competitionfrom Vodafone Qatar.

Iraq parliament asks telecom operators to pay license fees and fines within a monthIraqi parliament has now asked telecom operators to pay license fees and fines within a monthThis is a turn-around from the previous agreement where the companies were required to paythe fees over a five-year time horizon. The operators are Zain, Qtel’s affiliate Asiacell and Korekwhich is partly owned by France Telecom. Asiacell, Zain and Korek are required to payUSD625mn, USD803mn and USD768mn respectively.

Batelco, Kingdom Holding enter into a non-binding agreement with Zain SaudiBatelco and Kingdom holding have entered into a non-binding agreement with Zain Saudi to buya 25.0% stake. According to media reports the deal is worth around USD1.2bn. Howeverbecause it’s a non-binding agreement any or both of the partners can withdraw. There has beenno further update since the last announcement in July 2011.

Etisalat renews its management pact with MobilyUAE’s Etisalat which holds a stake in Etihad Etisalat (Mobily) of Saudi Arabia has renewed itmanagement pact with Mobily for a period of five years. The details of the agreement havenbeen disclosed. However, we believe that Mobily is likely to focus on the Saudi market while anoverseas expansion will be undertaken by Etisalat directly,

Etihad Atheeb Telecom gets permission to cut capitalEtihad Atheeb Telecom, which is a fixed line operator, has decided to cut its capital fromSAR1.0bn to SAR400mn. The company is seeking to increase its capital to SAR1.57bn through arights issue. The company has previously filed a lawsuit against STC for alleged violation of antimonopoly laws.

Global Research Telecom CoverageTicker Country Mkt Cap Price* Div. Yield

(USD mn) (in LC) 1m 3m 12m 2011E 2012E 2011E 2

Zain Kuwait 14,860 0.94 -6.0% -9.6% -8.4% 8.5% 11.5 10.2 11.5Wataniya Telecom Kuwait 3,552 1.92 -5.9% -4.0% 8.7% 2.6% 10.3 9.8 1.2

Saudi Telecom KSA 19,093 34.10 -3.4% -5.0% -1.6% 5.5% 9.1 8.6 1.4

Mobily KSA 9,847 52.80 -0.01% 2.9% 9.4% 4.7% 7.7 7.2 1.9

Etisalat UAE 21,956 10.20 -2.8% 1.9% 7.4% 5.9% 11.3 10.9 2.0

Qtel Qatar 6,885 142.40 -8.8% -9.1% 4.7% 3.9% 9.0 8.5 1.2

Vodafone Qatar Qatar 1,730 7.45 -3.9% -5.0% -5.7% - nm nm 0.9

Omantel Oman 2,143 1.10 -1.6% 3.4% -0.3% 9.1% 7.7 7.8 1.7

Batelco Bahrain 1,566 0.40 -4.3% -8.9% -20.5% 9.4% 7.8 7.0 1.1

Stock Performance P/E (x) P/BV (x)

Source: Global Research, Zawya & Bloomberg

* Market Price as of 24th August 2011. In case of Vodafone Qatar financial year ends in March.

G C C

T e l e

c o m

Faisal Hasan, CFAHead of [email protected]: (965) 2295-1270

Chandresh BhattVice [email protected].: (965) 22951282

Umar FaruquiFinancial [email protected].: (965) 22951438

Global Investment Housewww.globalinv.net

8/4/2019 GCC Telecom 082011


Global Research GCC Telecom Quarterly Report

August 2011 2

Bahrain GSM Sector IndicatorsBahrain Cellular Subscriber base (in mn)

1.601.60

1.57

1.631.68

4.2%

0.2%

-2.2%

4.3%

2.9%

-3.0%-2.0%-1.0%0.0%1.0%

2.0%3.0%4.0%5.0%

1.48

1.52

1.56

1.60

1.64

1.68

1.72

Q2-2010 Q3-2010 Q4-2010 Q1-2011 Q2-2011

Bahrain Cellular Subscriber base (in mn) - LHS Q-o-Q growth

Source: Industry Sources & Global Research

Bahrain Quarterly Customer Additions (in ‘000)

63.99

3.00

(34.6)

67.4

47.2

(40.0)

(20.0)

-

20.0

40.0

60.0

80.0

Q2-2010 Q3-2010 Q4-2010 Q1-2011 Q2-2011


At the end of June 2011, Bahrain’s total mobile subscriber base was at 1.68mn, registered a YoY increase of

5.2%. 2Q11 witnessed a QoQ growth of 2.9% in subscriber base.

Operator-wise Subscriber Base (in ‘000)

-

200

400

600

800

1,000

Q2-2010 Q3-2010 Q4-2010 Q1-2011 Q2-2011

869 836770 745 760

604565

499 476 467

125200

297

413 454

Batelco Zain Viva


Operator-wise Customer Additions (in ‘000)

(80.0)

(60.0)

(40.0)

(20.0)

-

20.0

40.0

60.0

80.0

100.0

120.0

Q2-2010 Q3-2010 Q4-2010 Q1-2011 Q2-2011

31.0

(33.0)

(66.0)

(25.0)

14.9

(42.0)(39.0)

(66.0)

(23.0)(9.0)

75.0 75.0

97.4

115.4

41.3

Batelco Zain Viva


In 2Q11, Batelco and Zain have witnessed YoY decline

of 12.6% and 22.7%, respectively, in their subscriber

base.

Zain lost 9k subscribers while Batelco & Viva gained

14.9k & 41.3k subscribers, respectively, during the

2nd

quarter.

Quarterly Market Share based on Subscribers

45.2%

27.8%

27.0%

Q2-2011

Batelco Zain Viva Over the last few quarters, Batelco and Zain are gradually losing their subscriber market share. The entry of the

third operator, STC (Viva) resulted in stiff competition in Bahrain and it gained market share of around 27% at the

end of 2Q11.

49.4%

32.0%

18.6%

Q4-2010

B at el co Zain V iv a

45.6%

29.1%

25.3%

Q1-2011

Batelc o Zain Vi va

52.2%35.3%

12.5%

Q3-2010

Batelco Zain Viva

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August 2011 3

Kuwait GSM Sector IndicatorsKuwait Cellular Subscriber base (in mn)

4.214.27

4.45

4.59

4.80

3.0%

1.4%

4.1%

3.1%

4.6%

1.3%

2.8%

4.3%

5.8%

3.90

4.05

4.20

4.35

4.50

4.65

4.80

4.95

Q2-2010 Q3-2010 Q4-2010 Q1-2011 Q2-2011

Kuwait Cel lular Subscriber base ( in mn) -LHS Q-o-Q growth


Kuwait Quarterly Customer Additions (in mn)

0.12

0.06

0.17

0.14

0.21

0.00

0.05

0.10

0.15

0.20

0.25

Q2-2010 Q3-2010 Q4-2010 Q1-2011 Q2-2011


At the end of June 2011, Kuwait’s total GSM subscriber base was at 4.80mn, registered a YoY increase of

13.9%. 2Q11 witnessed a QoQ growth of 4.6% in subscriber base, added 211.3k new subscribers during the

quarter.

Operator-wise Subscriber Base (in mn)

-

0.50

1.00

1.50

2.00

Q2-2010 Q3-2010 Q4-2010 Q1-2011 Q2-2011

1.89 1.87 1.87 1.892.02

1.67 1.72 1.78 1.87 1.92

0.66 0.680.80 0.83 0.86

Zain Wataniya Viva



(20.0)

-

20.0

40.0

60.0

80.0

100.0

120.0

140.0

Q 2-2010 Q3-2010 Q4-2010 Q1-2011 Q2-2011

8.0

(16.0)

(1.0)

17.0

133.0

45.6 48.960.0

92.3

48.3

69.2

27.7

116.0

30.0 30.0

Zain Wataniya Viva


In 2Q11, Zain achieved a QoQ subscribers growth of

7% and Wataniya reported a growth of 2.6%.

In 2Q11, Zain took the higher share of new

subscriber additions, added 133k new subscribers,

followed by Wataniya which added 48.3k subscribers

during the quarter.


42.1%

40.0%

17.9%

2Q-2011

Zain Wataniya Viva On YoY basis, Zain witnessed decline in subscriber market share from 44.8% in 2Q10 to 42.1% in 2Q11. In this

quarter Wataniya & Viva have almost maintained their market share at 40% & 18% respectively. Viva’s market share

increased from 15.6% in 2Q10 to 17.9% in 2Q11.

41.1%

40.8%

18.1%

Q1-2011

Zain Wataniya Viva

42.0%

40.0%

18.0%

Q4-2010

Zain Wataniya Viva

43.8%

40.2%

16.0%

Q3-2010

Zain Wataniya Viva

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August 2011 4

Oman GSM Sector IndicatorsOman Cellular Subscriber base (in mn)

4.394.53 4.61 4.47 4.58

4.3%3.0%

1.8%

-2.9%

2.3%

-6.0%

-3.0%

0.0%

3.0%

6.0%

2.00

2.50

3.00

3.50

4.00

4.50

5.00

Q2-2010 Q3-2010 Q4-2010 Q1-2011 Q2-2011

Oman Cellular Subscriber base (in mn) - LHS Q-o-Q growth


Oman Quarterly Customer Additions (in mn)

0.18

0.13

0.08

(0.13)

0.10

-0.20

-0.15

-0.10

-0.05

0.00

0.05

0.10

0.15

0.20

Q2-2010 Q3-2010 Q4-2010 Q1-2011 Q2-2011


At the end of June 2011, Oman’s total mobile subscriber base was at 4.58mn, registered a YoY increase of

4.2%. 2Q11 witnessed a QoQ growth of 2.3% or 104.7k subscribers during the quarter. The subscriber growth

has been slowed down due to implementation of new regulation on active subscribers.


-

0.50

1.00

1.50

2.00

2.50

3.00

Q2-2010 Q3-2010 Q4-2010 Q1-2011 Q2-2011

1.99 2.04 2.11 2.02 2.01

2.41 2.49 2.49 2.45 2.57

Nawras Omantel



(100.0)

(50.0)

-

50.0

100.0

150.0

Q2-2010 Q3-2010 Q4-2010 Q1-2011 Q2-2011

35.350.7

77.4

(89.3)

(16.2)

145.0

81.0

3.0

(42.9)

120.9

Nawras Omantel


In 2Q11, Omantel’s mobile subscriber base grew

marginally by 4.9% QoQ while Nawras’s subscriber

base declined marginally by 0.8%.

In 2Q11, subscriber base of Nawras declined by

16.2k QoQ while Omantel’s subscriber base

increased by 120.9k.


45.0%55.0%

Q3-2010

Nawras Omantel

45.9%54.1%

Q4-2010

Nawras Omantel

45.3%

54.7%

Q1-2011

Nawras Omantel

43.9%

56.1%

Q2-2011

Nawras Omantel Over the last few quarters sub. market share for both the operators, Omantel & Nawras, remained almost

unchanged at 55% & 45% respectively. However, in 2Q11 Omantel’s market share increased a bit to 56%.

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August 2011 5

Qatar GSM Sector IndicatorsQatar Cellular Subscriber base (in mn)

2.69

2.73

2.81

2.83 2.84

2.8%

1.7%

2.8%

0.8%0.2%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

2.65

2.702.75

2.80

2.85

2.90

Q2-2010 Q3-2010 Q4-2010 Q1-2011 Q2-2011

Qatar Cellular Subscriber base (in mn) - LHS Q-o-Q growth


Qatar Quarterly Customer Additions (in mn)

0.07

0.05

0.08

0.02

0.01

0.00

0.01

0.02

0.030.04

0.05

0.06

0.07

0.08

0.09

Q2-2010 Q3-2010 Q4-2010 Q1-2011 Q2-2011


At the end of 2Q11 Qatar’s total GSM subscriber base was at 2.84mn, registered a YoY increase of 5.6%. 2Q11

witnessed a QoQ growth of 0.2% in subscriber base, added 5k new customers during the quarter.


0.00

0.50

1.00

1.50

2.00

2.50

Q2-2010 Q3-2010 Q4-2010 Q1-2011 Q2-2011

2.15 2.13 2.10 2.08 2.08

0.53 0.60 0.71 0.76 0.76

Qtel Vodaf one



(40.0)

(20.0)

-

20.0

40.0

60.0

80.0

100.0

120.0

Q 2-2010 Q3-2010 Q 4-2010 Q1-2011 Q 2-2011

4.5

(20.3)(33.7)

(23.7)

0.8

69.5 66.4

110.3

45.6

4.2

Qtel Vodaf one


In 2Q11, Qtel’s mobile subscriber base increased

marginally by 0.04% QoQ while Vodafone’s subscriber

base grew by 0.6%.

In 2Q11, Vodafone added 4.2k new subscribers while

Qtel added 0.77k subscribers during the quarter. After

3 consecutive quarters of subscriber loss, Qtel ended

the quarter in positive.


78.0%

22.0%

Q3-2010

Qt el V od af one 73.3%

26.7%

Q1-2011

Qt el V od af one 73.2%

26.8%

Q2-2011

Qt el V od af one Since last two quarters, subscribers market share remained constant wi th Qtel’s share at 73% and Vodafone’s

share at 27%.

74.7%

25.3%

Q4-2010

Qt el V od af one

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August 2011 6

Saudi GSM Sector IndicatorsSaudi Cellular Subscriber base (in mn)

45.73 47.31 48.01

51.60

53.30

3.9% 3.4%

1.5%

7.5%

3.3%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

40.0

42.0

44.0

46.048.0

50.0

52.0

54.0

Q1-2010 Q2-2010 Q3-2010 Q4-2010 Q1-2011

Saudi Cellular subscriber base Growth


Saudi Quarterly Customer Additions (in mn)

1.7 1.6

0.7

3.6

1.7

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

Q1-2010 Q2-2010 Q3-2010 Q4-2010 Q1-2011


Saudi cellular subscriber base grew by 3.3%QoQ to 53.3mn in 1Q11 after a 7.5%QoQ increase in 4Q10. As

anticipated, subscriber growth slowed down after the Haj season in 4Q10. Typically the Haj season which has

recently been falling in 4Q10 sees a surge in new subscribers as pilgrims start flocking to Saudi Arabia.


-

5.00

10.00

15.00

20.00

25.00

Q1-2010 Q2-2010 Q3-2010 Q4-2010 Q1-2011

0.20 0.20 0.20 0.20 0.21

18.10 18.13 18.16 19.0119.94

21.80 22.07 22.3424.00 24.71

5.646.91 7.31 8.39 8.44

Bravo Mobily STC Zain


Operator-wise Customer Additions (in mn)

-

0.20

0.40

0.60

0.80

1.00

1.20

1.40

1.60

1.80

Q1-2010 Q2-2010 Q3-2010 Q4-2010 Q1-2011

0.01 0.00 0.00 0.00 0.01

0.49

0.030.03

0.850.93

0.80

0.27 0.27

1.66

0.71

0.40

1.27

0.40

1.08

0.05

Bravo Mobily STC Zain


Saudi Telecom managed to increase its subscriber

base to 24.7mn at the end of 1Q11 compared to

21.8mn at the end of 1Q10. Meanwhile, Mobily

increased its subscriber base to 19.9mn.

The growth was driven by Mobily and STC as they

managed to increase their subscriber base by an

estimated 0.93mn and 0.71mn respectively in 1Q11

on the back of aggressive advertising campaigns.


Over the last three quarters, Saudi Telecom market share has stabilized at around 46.5%. Meanwhile, Mobily

managed to increase its market share to 37.4% at the end of 1Q11 from 36.8% at the end of 2010.

0.4%

38.3%

46.7%

14.6%

Q2-2010

Bravo Mobily Sau di Telecom Zain

0.4%

37.8%

46.5%

15.2%

Q3-2010

Bravo Mobi ly Saudi Telecom Zain

0.4%

36.8%

46.5%

16.3%

Q4-2010

Bravo Mobi ly S au di Telecom Zai n

0.4%

37.4%

46.4%

15.8%

Q1-2011

B ra vo Mobi ly S au di Te lecom Za in

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August 2011 7

UAE GSM Sector IndicatorsUAE Cellular Subscriber base (in mn)

11.72

11.89

12.09 12.04

12.28

2.4%

1.4%1.7%

-0.5%

2.0%

-1.0%

-0.3%

0.5%

1.3%

2.0%

2.8%

10.50

11.00

11.50

12.00

12.50

Q2-2010 Q3-2010 Q4-2010 Q1-2011 Q2-2011

UAE Ce llular Subscriber base ( in mn) -LHS Q-o-Q growth


UAE Quarterly Customer Additions (in mn)

0.27

0.170.20

-0.06

0.24

-0.10

-0.05

0.00

0.05

0.10

0.15

0.20

0.25

0.30

Q2-2010 Q3-2010 Q4-2010 Q1-2011 Q2-2011


At the end of June 2011, UAE’s total GSM subscriber base was at 12.28mn, registered a YoY increase of 4.7%.

2Q11 witnessed a QoQ increase of 2.0% or 241k subscribers during the quarter.


1.50

2.50

3.50

4.50

5.50

6.50

7.50

8.50

Q2-2010 Q3-2010 Q4-2010 Q1-2011 Q2-2011

7.80 7.81 7.767.43 7.50

3.92 4.08 4.33 4.61 4.78

Etisalat DU



(400.0)

(300.0)

(200.0)

(100.0)

-

100.0

200.0

300.0

Q2-2010 Q3-2010 Q4-2010 Q1-2011 Q2-2011

90.0

10.0

(50.0)

(330.0)

70.0

182.1159.8

252.1 272.0

171.0

Etisalat DU


In 2Q11, Etisalat’s mobile subscriber base grew

marginally by 0.9% QoQ while DU’s subscriber base

grew by 3.7%.

In 2Q11, Etisalat added 70k subscribers while DU

added 171k subscribers.


65.7%

34.3%

3Q10

Etisalat DU

64.2%

35.8%

4Q10

Etisalat DU

61.7%

38.3%

1Q11

Etisalat DU

61.1%

38.9%

2Q11

Etisalat DU DU achieved significant mileage in terms of subscriber’s market share which increased from 31% at the end of

4Q09 and 35.8% in 4Q10 to 38.9% at the end of 2Q11.

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August 2011 8

Sector Universe OutlookGlobal Research Telecom Universe

2Q11 Performance Key Factors

Wataniya Telecom’s revenue grew by 35.2% YoY and 7.4%QoQ to KWD182.3mn. The group EBITDA grew by 52.1% YoY

and 11.9% QoQ to KWD2.1mn, resulting in EBITDA margin of

45.0% which increased from 40.1% in 2Q10. Net profit att. to

equity holders of the parent co. (ex-revaluation gain) was at

KWD23.3mn, registered a YoY growth of 18.7% and QoQ growth

of 18.9%.

In the 1H11, top-line grew by 35.2% YoY to KWD352.1mn, Group

EBITDA grew by 54.6% to KWD155.5mn and net profit (ex-

revaluation gain) grew by 19.8% to KWD43.0mn. The

consolidated net profit in 1H11 was at KWD308.5mn which also

includes a fair value gain of KWD265.5mn recorded due to

revaluation of existing stake held in Tunisiana following theincrease in the shareholding from 50% to 75%.

In 2Q11, customer base in Kuwait increased to 1.92mn, anincrease of 14.9% YoY & 2.6% QoQ. In Kuwait, ARPUdeclined marginally 0.6% YoY and 1.6% QoQ to US$36 athe end of 2Q11. EBITDA margin in Kuwait increased from46% in 2Q10 to 48.4% in 2Q11.

Due to stake increase 2Q numbers for Tunisiana are nocomparable YoY. In Tunisia subscriber growth would be thekey growth driver, which was at 2.8% QoQ. ARPU improvedsignificantly by 18.8% QoQ to USD10.1 while on YoY ideclined marginally by 1%. In 2Q11, EBITDA marginimproved to 57.4% from 52.1% a year before and 54% in1Q11.

In Algeria subscriber base declined marginally by 0.3% whileon YoY it increased marginally by 0.4% to 8.05mn. ARPUimproved significantly by 12.3% QoQ & 38.9% YoY toUSD8.2. In 2Q11, EBITDA margin improved to 39.6% from37.8% in 1Q11 and 39.3% in 2Q10.

Zain group’s revenue declined by 2.3% YoY and grew 3.3% QoQ

to KWD335.1mn. The group EBITDA declined by 1.8% YoY and

1.6% QoQ to KWD145.4mn, resulting in EBITDA margin of 43.4%

which increased marginally from 43.1% in 2Q10. The group

finance cost declined during the quarter by 56.1% YoY to

KWD8.5mn from KWD19.3mn in 2Q10. Net profit att. to equity

holders of the parent co. was at KWD70.3mn, grew marginally by

0.5% QoQ.

In the 1H11, group’s revenue declined by 2.2% YoY to

KWD659.4mn. The Group EBITDA increased by 2.1% to

KWD293.1mn, resulting in EBITDA margin of 44.5%. Net profit att.

to equity holders of the parent co. was at KWD140.2mn, registered

a YoY growth of 12.2% on 2Q10 adjusted profit (excluding capital

gain from the sale of Zain Africa).

The group customer base stood at 39.6mn at the end of June

2011, up 16% YoY.

During the quarter the company received remaining USD700mn

from the sale of Africa assets to Bharti Airtel.

Out of total seven countries operations, Kuwait, Iraq, Sudanand Jordan are the key markets as these operations jointlyaccount for about 93% of the group revenue for 1H11.

During 1H11, Jordan, Bahrain and Sudan have recordeddeclining revenue and profitability.

In 1H11 revenues from Kuwait grew marginally by 1.1% YoYto KWD172.7mn. Going forward, we expect that revenuefrom Kuwait is likely to remain under pressure as ARPU andmarket share is on decline due to increasing competitive

pressure. The customer market share is on decline evesince third operator Viva started its operations. With regard to Iraq operation, it has high growth potentia

and its margins are also strong. In 1H11 subscriber base &revenue grew by 5.2% & 5.1% YoY to 12.3mn andKWD219.6mn respectively.

Zain’s Sudan operations continue to be the largest mobileoperator in the country, accounted for 57% market share. Iincreased its customer base by 23.8% YoY to 11.4mn. Theoperation was affected in USD financial performance as locacurrency decreased during the first half. In local currencyZain Sudan reported an increase of 14% and 18% inrevenues and EBITDA respectively. In KWD terms, ZainSudan reported a YoY decline of 6.9% in revenues and neprofit declined by 41.9% YoY which was impacted to some

extent due to a tax increase from 3% to 15% from February2011.

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August 2011 9


Qatar Telecom (Qtel)’s revenue grew by 18.0% YoY and 7.0%

QoQ to QAR7,985.1mn in 2Q11. The group EBITDA grew by

12.8% YoY and 2.9% QoQ to QAR3,654mn, resulting in EBITDA

margin of 45.8% which increased from 47.9% in 2Q10. In 2Q11,net profit att. to equity holders of the parent co. was at

QAR673.3mn, registered a YoY growth of 17.9% and declined

QoQ by 11.7%.

In 1H11, top-line grew by 16.6% YoY to QAR15,446mn, EBITDA

grew by 14.8% to QAR7,204mn and net profit (att. to equity

holders of the parent co.) was at QAR1,435.5mn, registered a

YoY growth of 16.7% on 1H10 normalized profit (excluding the

one-off gain from reduced royalty payment).

In Qatar GSM subscriber growth is under pressure due tostiff competition. At the end of 2Q11, customer base inQatar remained almost same QoQ to 2.08mn and registereda YoY decline of 3.6%. In 1H-2010, Qatar operation

witnessed a marginal YoY growth of 0.8% in revenue toQAR2,862.3mn. EBITDA margin in Qatar improved from53.2% in 1H10 to 54.4% in 1H11. On the back of improvedmargin, EBITDA grew by 3% from QR1,511.3mn in 1H10 toQR1,556.1mn in 1H11.

In 2Q11, Indosat witnessed a YoY growth of 23.7% & QoQgrowth of 3.1% in subscriber base to 47.6mn in 2Q11Revenue and EBITDA grew by 9.3% and 2.8% YoY in1H11.

In Oman, subscriber base declined marginally YoY & QoQby 0.2% and 1.8%, respectively, to reach 1.9mn. In OmanYoY growth in revenue was 5.8% while EBITDA declined by4.4%. EBITDA margin declined to 48.8% in 1H11 from 54%in 1H10.

In Iraq YoY subscriber growth was at 7.4% and QoQ growthwas at 2.4% in 2Q to reach 8.5mn. In Iraq, YoY revenue andEBITDA growth was 17.8% and 12.4%, respectively in1H11.

Revenue from Wataniya Telecom’s group operations grewby 40.7% to QAR4,647mn and YoY EBITDA growth at 61%to stood at QAR2,050mn. This revenue & EBITDA growthwas mainly aided by the full consolidation of Tunisiana.

Vodafone Qatar follows April-March as its financial year. In

1Q11-12, Vodafone’s revenue grew by 65.3% YoY to

QAR290.6mn. Mobile customer base increased by 42.5% YoY to

761k which gives it a customer market share of 26.8% & mobile

revenue market share of 23.4%. ARPU increased 11% YoY to

reach QAR116 (USD31.9) for quarter ended 30-June-11. It

achieved positive EBITDA of QAR30.9mn in 1Q11-12 as

compared to negative EBITDA of QAR8.8mn reported in 1Q10-

11. Net loss reduced by 17.4% YoY to QAR122.3mn.

In June 2009 it launched its mobile services and in a span ofaround 21-months achieved significant mileage with 26.8%customer market share and 23.4% mobile revenue marketshare for the June 2011 quarter.

In March 2010, Vodafone Qatar was awarded the country’s

second fixed line license for QAR10mn. It launched itscommercial broadband service at the Pearl on 14th July2010.

Vodafone’s entry in Qatar has changed landscape of Qatar’stelecom market as it was served by the only operator QatarTelecom (Qtel). Vodafone has provided one more option tocustomers in terms of offer, pricing and customer serviceTo some extent it was also benefited from dual SIM effect astill now customers were not having second choice.

Vodafone Qatar will be able to capitalize on several levelsfrom its strong affiliation with Vodafone Group, includinginternational roaming agreements, network purchasingbilling platforms and also handset purchasing.

We expect Vodafone Qatar to report a YoY growth of159.3% in total revenue to QAR937.6mn for FY2010-11 andestimate a revenue CAGR of 30.5% during FY2010-11 toFY2013-14. We estimate the operations to turn EBITDApositive on a cumulative basis in FY2011-12.

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August 2011 10


Saudi Telecom Company net profit increased by 9.4%YoY to

SAR2.26bn in 2Q11 driven by increase in broadband revenue.

According to the press release, mobile subscriber base increased

by 8.0% from a year earlier and broadband customers exceeded

11mn by the end of 2Q11. The increase in subscriber base wasreflected in the increase in sales revenue by 10.2%YoY to

SAR13.9bn.Contribution of international operations to total

revenue increased to around 34.0% in 1H11 compared to around

31.0% in the corresponding period last year. Meanwhile EBITDA

grew by 12.9%YoY to SAR5,085mn in 2Q11 due to increase in

higher margin broadband revenues and efforts by group

companies to cut down on costs. There was also an improvement

in EBITDA margins to 36.6% in 2Q11 compared to 35.7% in same

quarter last year. The company announced an interim dividend of

SAR0.5 per share which was lower than our expectation of

SAR0.75 per share. This is the second consecutive time that the

company announced a dividend of SAR0.5 per share indicating

that it might be a policy change keeping in mind the capitalexpenditure requirements.

Refinement and consolidation of overseas portfolio. Effective market, promotional and operational strategies to

retain and attract new customers in the face of growingcompetition in the domestic market.

Expansion of 3G services to encourage use of value added

services which will provide support to ARPUs. Tapping into the high growth broadband market in Saud

Arabia. Streamlining of the organization in view of the new

competitive environment.

Etihad Etisalat announced net profit growth of 29.2%YoY. The

net profit growth was driven by increase in revenues by

29.1%YoY. According to the press release, higher revenue was

attributable to higher minutes of usage, data transmission and

increase in Smartphone sales. As anticipated, data revenues

increased to 20.0% of total revenues in 1H11 while post-paid

revenues increased by 32.0%YoY in 1H11. We expect the strong

growth in profitability to continue in 2H11 as the broadband

demand remains strong. Mobily is the market leader in mobile

broadband market with an estimated market share of 75.0%.Meanwhile, EBITDA margins increased to 35.0% in 1H11

compared to 34.0% in 1H10 reflecting the impact of high margin

data revenue.

Acquisitions in the broadband market, such as that ofBayanat Al-Oula will provide exposure to the high-growthbroadband market in Saudi Arabia.

Targeting of high ARPU post-paid customers. Tie-ups with popular international cell phone brands such as

Blackberry and I-Phone will continue to prop up mobilesubscriber base.

Expansion of network coverage along with focus on qualityMobily has invested heavily to increase its coverage area.

Increasing the portfolio of government and private sector

contracts.

Oman Telecommunication Co. (Omantel)’s group revenue

grew marginally by 3.8% YoY and 0.3% QoQ to OMR111.8mn.

During the quarter, Group expenses rose 8.7% YoY and declined

1.7% QoQ to OMR81.3mn. In 2Q11, the group EBITDA grew by

0.4% YoY and 4.8% QoQ to OMR52mn while EBITDA margin

declined to 46.5% from 48.1% in 2Q10. Net profit att. to equity

holders of the parent co. was at OMR29mn, registered a YoY

increase of 1.5% and QoQ increase of 11.6%. In the 1H11, top-line grew by 2.2% YoY to OMR223.3mn, group expenses

increased by 9.4% YoY to OMR164mn and net profit declined by

9.8% YoY to OMR55.0mn. The company's total customer base

increased by 3.2% YoY to 3.348mn, while its mobile business--

Oman Mobile--continued to see significant growth with the mobile

network's market share increasing to 56.1%.

As indicated by the management, the company is reapingbenefits of its investments made in 3.5G and NextGeneration Network in terms of addressing potential growthof broadband services. Currently it has over 274kbroadband customers, which is an increase of 67% YoY.

Revenue growth was impacted by decline in internationagateway revenues as Nawras (the 2nd operator) started itsown international gateway. With competition in fixed line

segment and commissioning of international gatewayoperations by Nawras beginning May’10, the internationaorigination traffic has been switched to their own networkimpacting wholesale revenues of Omantel (declined by23.2% YoY in 2Q11).

During 2Q, mobile revenue grew 6.1% YoY and 8.1% QoQto OMR64.3mn. In 2Q mobile ARPU remained resilient aOMR9.8. We expect it to come under pressure due tocompetitive pressure.

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August 2011 11


Etisalat’s group revenue declined by 1.5% YoY and 1.4% QoQ

to AED7,929.5mn. The net profit att. to equity holders of the

parent co. declined by 14.9% YoY and 12.3% QoQ to

AED1,594mn. Its operating expenses grew by 7.6% YoY toAED4,991.7mn. Operating expenses as a percentage of total

revenue grew to 63% in 2Q11 from 57.7% in 2Q10.

The subdued overall performance for 2Q was mainly due to

intense competitive pressures in its home market UAE

In 1H11, group’s revenue grew marginally by 0.3% YoY to

AED15969.4mn. Net profit att. to equity holders of the parent co.

was at AED3,411.5mn, registered a YoY decline of 11.8%.

In 1H11, the revenue and profit from UAE witnessed a YoY

decline of 4% and 14.9% to AED12,175.6mn and AED6,020.5mn

respectively. In 1H11, revenue from international operations grew

by 17.4% YoY to AED3,933.9mn.

Etisalat group has withdrawn its offer to buy a 46% stake inKuwait’s Zain for US$11.7bn (at a price of KD1.7 per share).

We believe that UAE would still be the main revenue drivefor Etisalat, however, the key growth area in the UAE would

be data and internet services. But since last few quarterswe have seen that both revenue and profitability from UAEare under pressure, mainly due to competitive pressure.

UAE is becoming a matured telecom market (pen. 200%plus) therefore top-line growth from UAE will slowdowngoing forward.

Amongst international operations, we are optimistic aboutEtisalat’s operations in Egypt and Saudi Arabia. Thesemarkets will be the key value drivers in the short to mediumterm.

Etisalat is a net cash positive company, which enables it tocontinue pursuing its expansion strategy and eye strategicacquisitions. We believe that going forward overseasexpansion would be the key for further growth.

Batelco’s net profit declined by 4.7%YoY to BHD21.3mn in 2Q11

as intense competition in the domestic market continued to erode

profitability, particularly with the entry of the third mobile operator

Viva Bahrain. However, the net profit was 13.3% higher than our

estimate of BHD18.8mn as the share of profit from associates

turned positive to BHD4,000 compared to our estimate of a loss.

Meanwhile, operating profits suffered a decline of 13.6% to

BHD22.9mn as a result of decline in revenues by 2.9%YoY to

BHD82.4mn and increase in costs. Network operating costs and

staff costs increased to 33.9% and 16.0% of revenuesrespectively in 2Q10 compared to 32.6% and13.9% of revenues

respectively in 2Q10.

The company’s Jordan operations will be the mainstay fothe company in the medium-term with the decline in markeshare in the domestic market and required time for Indianoperations to turn around.

The Saudi market will become an important cornerstone othe company’s growth if the planned acquisition of Zain KSAgoes ahead.

Management of operations in India will be a key growthdriver for the company in the long term. S Tel has mobilelicenses to operate in 6 states of India which includes

Himachal Pradesh, Orissa, Bihar, Jharkhand, Jammu andKashmir and Assam circles.

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August 2011 12

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