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Strong Growth in Customer Base partially offsets Markets Share Losses in the Bahrain Market

Strong Growth in Customer Base partially offsets Markets Share Losses in the Bahrain Market
Chairman Shaikh Hamad Bin Abdulla Al KhalifaGroup CEO Peter Kaliaropoulos 2010

Manama, Bahrain: Batelco Chairman Shaikh Hamad Bin Abdulla Al Khalifa announced that Batelco Group has reached over 7 million customers across its operations at the end of Quarter 2. He added however that intense competition in the Bahrain market contributed to lower Group net profits.

Following a Board Meeting on July 21st 2010, Batelco's Chairman announced for the half year 2010, a net profit of BD46.7 million ($124 million) against gross revenues of BD170.7 million ($453 million).

Earnings per share were 32.4 fils and the Board of Directors approved an interim cash dividend of 20 fils per share, as it has done for the last 3 years.

"Overall our gross revenues did not grow in the first half of 2010 predominantly due to the entry of the third mobile operator in the Bahrain market. Reduced market share for mobile and broadband services in Bahrain and strong price erosion adversely affected our revenues and profits. We also expected lower profits due to funding the growth of our start-up operation in India," explained Shaikh Hamad.

"The Bahrain telecommunications market today is the most competitive in the region; customers have the widest choice of brands and service providers to choose from for their mobile and broadband services, including international and local calls," continued Shaikh Hamad.

"Government policy through regulatory reform introduced by the TRA has successfully transformed the industry to similar open-competition levels compared to overseas markets which took many more years to transform."

"Customers have real choices; alternative networks in Bahrain allow customers to enjoy innovative solutions from many brands. Batelco will continue to compete for market leadership by offering a full range of products and services at affordable prices," added the Batelco Chairman.  

Batelco Group Chief Executive Officer, Peter Kaliaropoulos, stated that across Batelco's Operations the customer base grew to a total of 7.3 million customers.

Mobiles customers grew by 47% to 6.88 million in H1 2010 compared to 4.68 million in the same period last year. For the same period, broadband services grew by 54% to 230,600 customers and fixed lines declined by 5% in Bahrain to 192,000 lines.

"We continue to diversify our operations and customer base," said Mr. Kaliaropoulos.

"We had informed the market in February 2010 that we expected a reduction of profits for 2010 due to the new mobile operator and related competitive activity in Bahrain. Whilst our operating revenues were flat we managed costs effectively and delivered an EBITDA margin of 43.5% and an EBITDA of BD74.3 million, a decline of 4% versus the same period in 2009," outlined Mr Kaliaropoulos.

"Whilst our Operating Profit of BD54.1 million in H1 2010, is 4% below the 2009 figure, our Group Net Profit of BD46.7 million is 14% below H1 2009 results as it includes share of losses for our associated companies and profits from overseas investments.  We have welcomed further competition in Bahrain and increased our mobile customers but the Bahrain market is now ex-growth for revenue and profits," added Mr. Kaliaropoulos. 

"Mobile and broadband operators are adding new customers - however, revenues per customer are declining whilst costs to acquire and retain customers are growing. In a highly penetrated market for mobiles (150% of population) and broadband (110% of households and businesses) with 3 mobile operators, this is a natural competitive consequence."

"We expect some growth from mobile and fixed data in terms of new services but overall price erosion will continue to reduce revenues and profits in Bahrain. Additional operators and investments by Government Organisations in cable systems and other telecommunications infrastructure, as announced recently, will further benefit Bahrain by increasing competition but naturally will reduce growth opportunities for Batelco in Bahrain."

"Strong cost reductions and cash flow management are key priorities for our Bahrain Operations whilst ensuring we remain innovative with new services and customer care," said Mr. Kaliaropoulos.

The Group's 96% owned subsidiary in Jordan, Umniah, is on track for another successful year thanks to a 14% increase in the number of mobile subscribers with their customer base now standing at 1.70 million. Sabafon, in which the Group holds a 26.94% equity investment, delivered revenue growth and their mobile subscriber base increased  by 22%, to 2.98 million.

Batelco's partnership with Etihad Atheeb is an evolving success story as the company's customer base, now 87,000 customers, grows steadily buoyed by the popularity of their GO brand which offers quality and value for money broadband and voice services.

STel continues to surge ahead; it has built a customer base of 1.33 million customers using S Tel services across the 3 circles - Bihar, Orissa and Uttar Pradesh. Having won 3G spectrum for the same three areas in the recent 3G auction, S Tel is now in the early stages of planning the introduction of 3G services.

Batelco's mobile customer base in Bahrain grew by 16% to 869,000 and its fixed and wireless broadband services also grew by 8% to 88,000 accounts. Fixed lines continue to decline and now stand at 192,000, a 5% decline.

"We continue to explore suitable M&A opportunities in North Africa, India and Asia Pacific regions, with our preference being companies that have recently begun operations or are already established and still growing," the Batelco Group CEO elaborated.

Batelco Chairman Shaikh Hamad added that Batelco's expansion strategy is fuelled by the challenging Bahrain telecommunications environment with its saturated market.

"We continue to encounter accelerated regulatory reform policies especially in the broadband and data services - we support further competition whilst we understand that these policies will continue to adversely impact our future financial results. As a consequence, in a highly saturated market, cost containment strategies are the priority to allow Batelco to compete favourably with competitors in Bahrain. We understand the impact of regulatory reform and increased competition and consequently we have to adjust the way we operate - it's necessary," Batelco's Chairman stressed.

Focus on Customer Service and Infrastructure Investment

Batelco, in H1 2010 also entered into contracts to further expand its wireless infrastructure including a BD14.5 million ($38.5 million) Mobile Network Expansion project with Ericsson which will see Batelco's technological capability further enhanced to tackle a number of needs such as providing or enhancing coverage and quality of service in newly developed or remote areas as well as ensuring readiness for LTE (Long Term Evolution), often branded as 4G.

Along with a remit to continue investing to deliver new technologies and innovative product/service offerings, Batelco's key focus is fixed on its customer service delivery.

"As part of our customer services programme, we continually review our fixed and mobile broadband services to align our offerings with international standards. For local and international voice and data services, there is a steady stream of top value promotions," said Mr. Kaliaropoulos.

To address the heavy demand on the Blackberry service due to the massive growth in subscriber numbers, Batelco completed a major enhancement to its Blackberry platform to deliver up-to 17 times faster connection over Batelco's Global Network. Furthermore, Batelco has also introduced Blackberry services for its prepaid SimSim customers.

 "Additionally, our product and services delivery for business customers is undergoing major enhancements to ensure that Batelco is the brand of choice for businesses in the Kingdom and supports their success in the region and further afield," he added.

Supporting the Community

Shaikh Hamad, Batelco's Chairman stressed Batelco's commitment to giving back to the local community through its well established sponsorship and donations programme.

"The Company continued its annual support for Shaikh Mohammed Bin Khalifa Bin Salman Al Khalifa Cardiac Centre by donating BD600,000 to purchase specialised instruments which aim to enhance the medical care and services for cardiac patients at the Centre," said Shaikh Hamad.

"Additionally, Batelco was the Diamond sponsor of a 4 dayUnderstanding Autismawareness exhibition which was held under the patronage of InJaz executive director Shaikha Hessa bint Khalifa Al Khalifa and organised by Wish Child Welfare, which is part of the Bahrain society for Women's Development," he added.

Batelco Group CEO Mr. Kaliaropoulos concluded by reiterating Batelco's key goals going forward.

"Our priority is focused on growing profitable market share in all of our overseas markets, adding to our overseas JV portfolio by investing in a suitable M&A opportunity whilst also striving to retain market leadership in Bahrain by providing excellent customer care, a full range of services and better value every day of the year."

"We believe that we have the right people in our team in Bahrain and resources to shape a better business with a better future despite some short term challenges," Mr. Kaliaropoulos concluded.