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Batelco Group Announces First Quarter 2012 Financial Results; Reports BD16.1 million (US$42.7 million) Net Profit

Batelco Group Announces First Quarter 2012 Financial Results; Reports BD16.1 million (US$42.7 million) Net Profit

Batelco Chairman Oct 2011Sh Mohd Aug 2011Manama, Bahrain:Batelco Group (Ticker: BATELCO), the regional telecommunications operator of reference with operations across six countries, today announced its results for the first three months of the year ended 31 March 2012 ("the Period"). The period was marked by continued market leadership in the Kingdom of Bahrain, its home market, and solid contributions from overseas markets especially from Jordan and Kuwait.

 

Financial and Subscriber Highlights

  • Gross Revenues of BD78.0M (US$206.9M) for the period;
  • EBITDA of BD28.3M (US$75.1M) representing a 36% margin;
  • Consolidated Net Income of BD16.1M (US$42.7M);
  • One off BD2M adverse impact - share of Sabafon results relating to 2011 period;
  • Group total subscriber count of 6.9M reflecting the STel impact;
  • Diversified Group revenues with 38% of revenues and 34% of operating profit now sourced from markets outside Bahrain;  and
  • Cash and bank balance of BD61.8M(US$ 163.9M).

 

For the period, the Group reported Net Profit of BD16.1M (US$42.7M) versus BD17.5M (US$46.4M) for the corresponding period in 2011, a decrease of 8% year over year. EBITDA for the period was BD28.3M (US$75.1M), representing a 36% margin, versus EBITDA of BD32.6M (US$86.5M) for the corresponding period in 2011. The Group's Gross Revenues stood at BD78.0M (US$206.9M) for the period, down 4% from BD80.8M (US$214.3M) in the corresponding period last year. Operating Profit for the quarter was BD19.6M (US$52.0M) for the period versus BD23.3M (US$61.8M) for the corresponding period in 2011. In line with ongoing efforts to diversify revenues and maximise investments, the Group saw a healthy contribution from overseas markets. At the end of the first quarter, 38% of revenues and 34% of Operating Profit were generated from markets outside of Bahrain.

The Group's balance sheet also remained strong. As of 31 March 2012, the Group had low debt and significant cash and bank balances of BD61.8M (US$163.9M). While this reflects a decline of 6% when compared to the same period last year, it takes into account the impact of a substantial one-off payment made in January 2012 for the acquisition of a 3G licence for Umniah, the Group's majority owned Jordanian subsidiary. Earnings per share for the period stood at 11.2 fils.

Batelco Chairman, Shaikh Hamad Bin Abdulla Al Khalifa, announced the Group's first quarter 2012 results following a Meeting of the Board of Directors at Batelco's Hamala headquarters stating:

 "During the first quarter of 2012, we continued to focus our efforts on maximising the performance of our investments overseas whilst maintaining market leadership in the Kingdom of Bahrain. In line with the guidance that we provided at the outset of the year, our results for the quarter reflected the continued impact of significant competition in Bahrain and in the highly competitive environments across the MENA markets in which we operate. We are nevertheless pleased with the ability of the Group companies to continue to deliver solid results, despite challenging operating environments, as evidenced by strong cash flow generation during the period and the overall strength of our balance sheet. Having ended the quarter with significant cash balances despite significant one-off capital expenditures, we continue to be in a strong position to deploy our resources towards further strengthening our existing operations and making investments in the growth and expansion of the Group, which is a key priority in 2012 as we work to build scale and deliver even greater value for customers and shareholders."

Operational Highlights

The first quarter of 2012 saw steady operating performance in Bahrain, where the Group continued to maintain its market leading position, combined with ongoing efforts to build its presence and strengthen the foundations for future growth in overseas MENA markets.

Commenting on the highlights for the quarter, Group CEO, Shaikh Mohamed Bin Isa Al Khalifa, said: 

"Operationally, we are pleased with the effective execution of our strategy during the first quarter. It is our aim to retain mobile, broadband and enterprise customers in Bahrain, which we've done a great job of. It is also a priority to further build our subscriber base overseas. With the sale of STel which was announced in February 2012, the Group's adjusted subscriber base now stands at some 6.9 million users across six markets. We are focused on ensuring that our operations in each of these markets remain as competitive as possible whilst also working to identify new ways to grow and add customers - both organically and through acquisitions - in existing territories and in others that present a compelling opportunity."

Mobile and Broadband Segments 

For the first three months of the year, the Group reported a decline in mobile subscribers of 40% since the previous quarter and by 32% when compared to the first quarter of 2011. This is largely due to the adjustment for the exclusion of STel operational and customer data. Normalising for the exclusion of STel, mobile subscriber numbers across the Group for the first quarter would have shown a decline of 9% since the previous quarter and a 2% decrease when compared year over year due to competitive pressures in Bahrain and elsewhere across the region.

Broadband customer numbers on the other hand remained robust. For the first quarter, the Group reported a solid 4% increase since the previous quarter and 5% growth when compared to the corresponding period in 2011.

Investing in Overseas Operations

Further strengthening of its operations and positioning the Group to achieve growth in overseas markets remained a priority during the first three months of 2012. Towards this end, investments were made in a number of key markets, which the Group expects will impact positively on performance and growth going forward.

Jordan:The first quarter of 2012 saw significant strides made at Umniah, the Group's 96% owned subsidiary in Jordan. In January, the Group completed an investment of JD50.0 M (US$70.0M) for a 3G licence for Umniah, which it is currently in the process of rolling out. The new service is scheduled to be launched nationwide in the third quarter of 2012 with 3.75G services ensuring the faster and more reliable transfer of data as well as providing subscribers with instant Multimedia Services (MMS). Umniah currently serves 2.3 million mobile customers. While this reflects a slight 1% decline since last quarter and growth of 3% year over year, investments in 3G are expected to both increase the top and bottom line over the coming periods. Additionally, Umniah also continued to show strong growth in its broadband subscriber base, which grew 10% since last quarter and an impressive 31% when compared to the corresponding period in 2011 due to growth in WiMax subscribers.

 

Further positive news during the quarter from Umniah was its first dividend payment to the Group and other shareholders of BD33.3M ( US$88.3M). This is further indication of the growing value of this investment and its strong future prospects.

Kuwait:Batelco's subsidiary Qualitynet, which delivers total ICT solutions, maintained its market leadership in the first quarter as it continued to meet the Data Communications and Internet Services needs of the Kuwait market. For the quarter, the company's customer base remained steady on both a quarterly and year-over-year basis at just over 40,000 subscribers.

Other JVs:Sabafon (Yemen) and Atheeb (Saudi Arabia), in which the Group has minority shareholdings, continued to work to enhance their market positions in order to deliver further profitable growth going forward. For the first quarter of 2012, Sabafon (Yemen) registered a 16% decline in its mobile customer base since last quarter and a 6% decrease year over year. The revised customer base resulted from operations in Sabafon returning to almost normal conditions following the marked reduction of conflict across Yemen. The customer base now reflects active customers and excludes sim cards which have not made or received calls in the last 90 days.   The Group Net Profit includes a one-off BD 2M adverse impact on account of share of Sabafon results relating to 2011 period.

Atheeb (Saudi Arabia), which now delivers voice and data services to approximately 111,000 customers, reported a 2% decrease to its subscriber base since last quarter and a 4% decrease year over year. Further strengthening of Atheeb's operations and performance is nevertheless expected in 2012 with the recently completed SR1.2 billion capital increase undertaken by the company, which will see it embark upon a new strategic focus on the business sector where considerable opportunities and room for customer and revenue growth exist.

Excellence, Innovation & Commitment Continue to Define Market Leadership in Bahrain

Across the full spectrum of telecommunications services, Batelco remains the market leader for residential and business customers in the Kingdom of Bahrain. Despite tough competition continuing, Batelco's focus on delivering even greater levels of value, innovation and service, during the quarter, delivered results.

For the first three months of 2012, the Group maintained a 44% share of the mobile market. This meant that its mobile subscriber base remained steady from last quarter and only registered a slight 1% decline year over year.

"Despite the aggressive market competition in Bahrain, we are delighted with Batelco's ability to have retained its market leadership during the first quarter of 2012. We have worked hard to ensure that our customers in Bahrain enjoy the most reliable fixed and wireless connectivity and great customer care - there is no better measure of our success in implementing our strategy than this. We are especially gratified that our high value post-paid individual and business subscribers continue to remain loyal to the Batelco brand. They are ultimately our gauge for how innovative and responsive we are being and the results for the first quarter highlight that our efforts in protecting our market position through excellence in customer care are paying off," Batelco's Group CEO Shaikh Mohamed explained.

The Group also reported ongoing impressive growth in its wireless broadband subscriber base - a key area of focus for Batelco. From the previous quarter, it registered 33% growth in its wireless broadband subscriber numbers and 82% growth year over year.

In terms of fixed broadband subscribers, due to ongoing migration to wireless, numbers declined by 4% and 21% quarter over quarter and year over year, respectively. Similarly, fixed line customers, in line with global market trends, declined by 2% since last quarter and 8% year over year, as more and more customers make the transition to mobile services.

"As we've long said, our ability to continue to innovate both from a technology and services standpoint continues to define our success. During the quarter, our teams worked hard to maintain customer loyalty through the delivery of new innovations in both of these areas," added Shaikh Mohamed.

Among the most exciting innovations of the year to date was the successful testing of 4G/LTE at the Batelco Chalet at the Bahrain International Airshow 2012. In cooperation with Ericsson, Batelco was delighted to showcase High Definition Video on Demand over 4G/LTE for His Majesty King Hamad Bin Isa Al Khalifa and accompanying dignitaries. This was followed by a successful trial held at the Group's headquarters in cooperation with Huawei, with speeds of 150Mbps achieved.

Other initiatives introduced in the early months of 2012 were faster Broadband upload speeds of up to 2 Mbps and unlimited calls for Fixed Line customers. For only BD4 per month fixed line customers were enabled to make unlimited on-net calls to other fixed lines throughout each month and for only BD8 they can also include unlimited on-net calls to mobile lines. Both postpaid and prepaid mobile subscribers were also presented with various promotions and prize winning opportunties to encourage and support their usage. To add convenience for customers in Muharraq, Batelco opened up a franchised outlet in collaboration with Lazim Communications, one of the foremost telecom market resellers in the Kingdom. Batelco and Lazim collaborated on opening their first franchised outlet in Juffair in 2011, a venture which has met with great success.  

Batelco and its Commitment to Corporate Social Responsibility

The Group's commitment to community also remained strong. During the first quarter of the year alone, more than BD300,000 was paid to a number of initiatives ranging from health, education and sports as well as other projects to support economic development in the Kingdom.  Key among these was support for Bahrain International Airshow, University of Bahrain Careers Day, the Bahrain Cancer Society, Salmaniya Hospital's Blood Centre and other programmes being spearheaded by the Ministry of Health for the welfare of the community and various vulnerable segments.

Priorities for 2012

Looking at the Group's strategic focus for 2012, Shaikh Mohamed commented that the top priority was building scale and further value across the Group.

"Our focus is firmly on growing the Group's customer base and increasing our scale across the MENA region. We are also continuing to look at our existing operations and finding synergies and ways to further strengthen our performance and derive even greater value from our assets. With a sound strategy and fundamentals across our businesses and a solid financial base from which to work, we are in a strong position to deliver on both of these fronts in the months ahead," concluded Shaikh Mohamed. 

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