Good afternoon, everyone. Welcome to Ooredoo Group's financial results call for the period ended 30th September 2024. My name is Luelle Pillay, and I'm head of investor relations for the group. Today, I'm joined by our CEO, Aziz Aluthman Fakhroo, who will take us through an update of the strategy and walk us through the consolidated results. He will be followed by our Group CFO, Abdulla Al-Zaman, who will walk us through the operations performance. We will keep the presentation brief to allow enough time for your questions. Please type your questions in the Q&A section of the Zoom seminar at any time during the presentation. The presentation is available on our website at ooredoo.com, as well as on this webcast. The recording and transcription of the session have started now, so by joining the session, you consent to being included.
Please note our usual disclaimer on slide number two, and on that note, I hand over to Aziz.
Good afternoon, everyone. Welcome to our Q3 2024 investor call. Starting off, we continue to be guided by our clear strategy, which remains unchanged, and focus on our five core pillars. We are making progress across each of the verticals. On the tower, we reiterate our priority remains on completing the transaction closure in each market. We have already started with Qatar, which is progressing well. As previously mentioned, we expected the transaction to be completed within 18 to 24 months from announcement. To accelerate the expansion of our data centers, we signed a QAR 2 billion financing deal with three local banks. I will elaborate more on the transaction in the next slides. This deal further supports our recent initiative to lead in AI, following our strategic collaboration with NVIDIA, and marks another significant milestone on our journey to become the MENA region's leading digital infrastructure provider.
On the DC carve-out, we completed Qatar, Tunisia, Kuwait. Other countries are on track to follow suit in 2025. Moving to our FinTech vertical, we are progressing with obtaining licenses and have received PSP license in Oman, and more recently in the Maldives. We are currently in advanced discussion with the regulator in Tunisia and are working on our license application in Iraq and Kuwait. It has been a notable period for financing initiatives. As mentioned, we successfully signed a QAR 2 billion 10-year financing deal with QNB, Doha Bank, and Masraf Al Rayan, marking the largest transaction ever achieved in Qatar's tech industry. The funds will be used to carve out existing data centers assets from telecom operations, and a large portion will also be used to expand capacity and upgrade infrastructure supporting the growing demand for AI, cloud services, and hyperconnectivity in the MENA region.
There is significant untapped potential in AI, cloud services, and accelerated computing, and we believe we are well positioned to take advantage of this.
Recording in progress.
Post-period end, we completed a $500 million 10-year international bond issuance. The bond carries a coupon rate of 4.625% with a yield of 4.714%. Notably, we secured the tightest spread in our company's history at 88 basis points over the 10-year U.S. Treasury, which was also one of the lowest emerging market corporate issuer spreads ever. The issuance was oversubscribed by 3.6 times, underscoring strong demand and further validating our strategic direction. These funds will be allocated for general corporate purposes, which include the refinancing of our existing indebtedness, ultimately enhancing our financial flexibility as we continue to grow. These two initiatives strongly reflect the resilience of the business and our credibility in the markets, reinforcing our banking partners and the market's view of Ooredoo's as a reliable, secure, and future-proofed investment.
Now, turning to the performance for the period, here you can see a snapshot of the performance showing we have maintained a strong growth trajectory while driving consistent profitability. I will walk you through the consolidated numbers in the next few slides. For the first nine months, we delivered year-on-year growth across a majority of the financial metrics. Revenue grew by 2%, EBITDA increased by 4%, and EBITDA margin reached a strong 44%, improving by one percentage point. We delivered an impressive 15% growth in our normalized net profit on the back of strong operational performance. We delivered a robust performance for the third quarter. Revenues were up by 1%. EBITDA came in flat. EBITDA margin was steady at 44%. Net profit was up by 15% on a normalized basis. Revenue for the period reached QAR 17.7 billion. On a year-to-date basis, revenue was up 2%.
On a quarterly basis, it rose 1%. Growth for the quarter was driven by our operation in Iraq, Algeria, Kuwait, Tunisia, and Maldives, all of which sustained their momentum. Qatar and Oman continued to see their top-line performance mainly impacted by the highly competitive environment. Looking at EBITDA, we continue to drive profitability and operational efficiency, which is contributing to solid EBITDA performance. EBITDA increased by 4% to QAR 7.7 billion. EBITDA margins reached a strong 44%. Iraq, Algeria, Qatar, Tunisia, and Maldives were the main contributors to this solid performance. Looking specifically at the quarter, the group EBITDA's performance was impacted mainly by the decline in Oman's EBITDA due to lower revenue and gross margin, and a drop in Kuwait's EBITDA due to a one-off bad debt provision. The net profit growth delivered by the group was derived by a healthy increase in revenue and EBITDA.
On a reported basis, net profit was up by 10% and up by 15% on a normalized basis to QAR 2.9 billion. In the following slide, you can see the bridge between reported and normalized net profit. It's worth noting that the nine months' 2024 figures include a one-off gain from the Myanmar disposal. Though the same period in 2023 also benefited from a number of one-offs, including gains from the NMTC legal case, the MEEZA IPO, and the IOH tower sales. Turning to net profit in Q3, we delivered growth at a reported basis of 21% and 15% on a normalized basis to QAR 1 billion. In the third quarter of 2024, we did not recognize any material one-offs. Turning to CapEx, we continue to invest strategically for strong returns.
For the first nine months, we invested a total of QAR 1.9 billion, up by 22%, mainly in Iraq, Oman, Qatar, Algeria, Tunisia, Kuwait. Investment covered mostly network rollouts, including site and fiber, plus digital spend. Normalized free cash flow remained flat at QAR 5.8 billion. The strong EBITDA performance was offset by an acceleration in CapEx projects as we continue making strategic investment in the growth of our telecom operations, particularly Algeria and Iraq, to capitalize on market expansion and rising demand. During the period, including IOH and excluding Myanmar, we increased our customer base by 1% in just shy of 150 million subscribers on our network. The group's financial and liquidity position remains resilient with investment-grade rating. Liquidity remains strong with QAR 12.4 billion in cash reserves and QAR 5.2 billion in on-loan facilities. Leverage is conservative at 0.6 times below our board guidance.
We have a balance of maturity profile with over six-year average remaining maturity at the group level. 98% of our debt is at a fixed rate, which means we are structurally hedged against interest rate hikes. Following the period's end, as mentioned earlier, we successfully completed the issuance of a $500 million 10-year bond. To conclude, Ooredoo delivered robust results in the third quarter, and we are in a strong position. The nine-month result is ahead of our full-year guidance for revenue and EBITDA margin. Our revenues are up by 2% thanks to growing service revenues. The EBITDA margin expanded by one percentage point to 44%. For 2024, we expected an EBITDA margin in the low 40s% with a continued focus on cost discipline. CapEx will continue to ramp up in the fourth quarter and fall within our guidance target of approximately QAR 3.5 billion.
On this note, I leave it to Abdulla to take you through the operational review. Thank you.
Thank you, Aziz. Good afternoon, everyone. I will take you through the group year-on-year operational performance for the first nine months of 2024. Starting with our home market, Qatar, revenue decreased by 4% on a reported basis. Revenue was higher in 2023 due to FIFA 2022 contracts relating to B2B services, revenue from data center carve-out, and one-off project revenue. On a normalized basis, revenue decreased by 1%, mainly due to lower mobile services. Ooredoo Qatar EBITDA remained flat on a normalized basis, while the EBITDA margin increased to a healthy 53%, reflecting a 4 percentage point improvement. Customer base increased by 1% to QAR 3 million subscribers. Moving to Kuwait, we continue to see solid top-line performance on the business. Revenue expanded by 6% in the local currency thanks to higher service revenue driven by increased use of data and digital services, and a higher equipment revenue.
The EBITDA performance was impacted by one-off bad debt provisions raised in Q1 and Q3 of 2024. Excluding these bad debt provisions, EBITDA decreased by 2% in local currency, mainly due to an increase in operating expense. Customer base remained flat at QAR 2.9 million. Moving to Oman, the high-level competitive market conditions in Oman continue to impact Ooredoo Oman mobile business. Revenue decreased by 2% and EBITDA decreased by 6%. Meanwhile, the operation recorded a resilient EBITDA margin at 46%. Our team in Oman has undertaken several initiatives to enhance its competitive advantage in the market. These include extending the 5G network and testing 5.5G, as well as running attractive marketing campaigns. Moving to Iraq, Ooredoo Iraq once again delivered impressive growth, taking advantage of the favorable market dynamics, additional customers, and great uptake of data services. The operation gained 9% additional customers on its network to reach QAR 18.6 million.
In local currency, revenue grew by 15% and EBITDA increased by 19%. EBITDA margin expanded by 1 percentage point to a strong 47%. Algeria is another market in our portfolio with extremely strong growth thanks to our strategic investment into a high-quality network and customer satisfaction. Customer base grew by 10% to QAR 14.5 million. In local currency, revenue grew by 15%, driven by data and digital revenue growth. EBITDA expanded by 22% in local currency, with a 3 percentage point increase in the EBITDA margin, which now stands at 43%. Moving to Tunisia, the operation continues to deliver healthy performance thanks to strategic investment and improved operational efficiency. Revenue increased by 5% in local currency, normalizing for the one-off bad debt in 2023. EBITDA margin increased by 3 percentage points to 41% thanks to continued focus on profitability. In Maldives, we continue to see solid revenue growth across all segments.
Our position in the market will become even stronger as we became the largest 5G network in the country. Revenue increased by 6%, while EBITDA grew by 3%, with an EBITDA margin that continues to remain very healthy at 54%. Moving to Palestine, I want to commend our colleagues in-country for keeping customers connected through the conflict. Support for the customers in Palestine included a free bundle in the form of voice and data packages. Our customer base grew by 8% to reach 1.5 million customers. In the face of the challenging operating landscape and a 2% depreciation of a local currency against the U.S. dollar, revenue and EBITDA decreased by 2% and 7% respectively, while EBITDA margin stood at 39%. Wrapping up with our joint venture, IOH published very strong results for the first nine months of 2024.
Revenue was up by 12% and EBITDA increased by 15%, with a solid EBITDA margin of 48%. This concludes the operational review. Over to IR team. Thank you.
Thank you very much, Aziz and Abdulla. We have now come to the Q&A segment of today's call. Here's how to participate. You can raise your virtual hand to ask a question, and I will unmute your audio line when it is your turn. Alternatively, type your questions in the Q&A box if you prefer. And if you're dialing in via phone line, please press star nine to ask a question. I'm joined by the senior leadership team today for the Q&A section. In addition to Aziz, we have Sheikh Mohammed bin Abdulla Al Thani, Deputy CEO; Iyas Assaf, Deputy CFO; and Rene Werner, our head of strategy. So let's open the floor to questions. I don't see any typed questions. I see a hand raised. Fahad Al-Dhahlamdi, please go ahead and ask your question.
Yes, Assalamualaikum. This is Fahad Al-Dhahlamdi from NBK Capital. I just have one question. What is the percentage of your revenues in Qatar that are related to the B2B segment? Thank you.
I want to take it, or I ask?
Sure. Can the group level collect the question?
Qatar. Thank you. Qatar is, I think, on the cusp, and we can send you the right number. I think we're talking roughly around 17%. I think it's around 22%.
22%. This is B2B audio, including the B2G in it, or it's only B2B?
Yes. Yeah. B2G isn't in it.
Do you disclose how much is the B2G?
No, we don't break down by segment.
Thank you. Our next question comes from Alessandra David from Ashmore. Please go ahead, Alessandra.
Hi. Just one question for me. I think the last earnings call with regards to the data center carve-out, it was mentioned that there was the ambition to have the financials in Q4, to have the data center financials spelled out. Is that still? Are we still operating along that trajectory, or has the timeline been revised?
So, to have segregated financials for data centers, look, the target is to have full segregated by Q1 for the beginning of next year. I don't know if we'll be issuing pro forma in Q4. I need to check with my team.
Yeah, we might do it based on the status of the carve-out of other countries. So it's between Q4 and Q1.
That's clear. Thank you.
Thank you, Alessandra. We have a typed question from Selim Dabbous on Ooredoo Algeria. The postpaid OPU has declined while the base remains stable. How can this be explained? The EBITDA increased by 3 percentage points during a commercially challenging period. How was this achieved? Ooredoo Algeria.
Ooredoo Algeria is a seasonality. Usually, Q3 is the best season for the prepaid. It's lower in the postpaid because some people travel outside. The improvement in the EBITDA percentage is linked again to the seasonality. If you see the highest growth revenue usually comes in Q3 due to the expat coming back to the country and using prepaid more than postpaid.
Okay. Thank you, Iyas. Another question from Rawan Shaker. Are we expecting significant impairment to be booked in Q3? I think you mean 2024, quarter of 2024.
We do this exercise. We review the environment. We do the environment test by the end of the year, and by that time, we'll share the results. As of today, we don't see any material number as a Q3, but usually we do it in Q4.
Okay. I don't see any other questions. Give it 10 seconds. Another question from Alessandra.
Hi, sorry. I just had another question. It was just maybe a more general one. If you could maybe talk to some of the demand that you're seeing in your home market in Qatar. I think the 2023 numbers, especially on the customer side, I understand there was that reclassification. But just in terms of how your market share is looking within both the postpaid and the prepaid segments, and maybe some of the competitive dynamics you're seeing on the ground, that would just be really helpful to get a bit more color on that. Thank you.
Yeah. The market is quite competitive here at Qatar. It has been a very challenging year. There has been, as you said, about the segmentation and the classification. It's still, honestly, the market itself very competitive and a lot of promotions going here and there. However, we acknowledge that challenging in the top line and what we are facing. However, Ooredoo Qatar has made a good contribution to the bottom line, or specifically to the EBITDA, standing at 53% of EBITDA margin, which is quite healthy for the entire group.
Thank you, Sheikh. Our next question comes from Himoli Shah. Please go ahead and ask your question. Himoli.
It's the text there.
Okay.
Hello.
Please go ahead.
Hi. I'm Molly. Can you please share the expansion strategy in depth with respect to data centers, especially AI data centers?
As you know, for the data centers, we've announced a carve-out. We've already carved out most of our significant markets. We're finalizing currently. We've carved out Qatar, Tunisia, and Kuwait. We're finalizing the carve-outs in Iraq. We have quite an aggressive expansion strategy, which is not driven as what I would call opportunistic. We will build it, and they will come. Most all our expansions are anchored by anchor tenants. We have communicated many times, and we're happy to go into depth and to be probably subject to the capital markets there. We're looking to nearly triple our capacity within the medium term within the next five years, going from close to 40 megawatts of installed capacity to up to 120 megawatts of installed capacity. And this is driven just by cloud-native data centers. To this, we have added a leg recently with the NVIDIA partnership.
We are the first telco in the region to become an NVIDIA cloud partner, to layer GPU as a service, and to go up the value chain in the AI stack as well. We're seeing significant demand. We estimate the first AI chips to be installed and leased by Q1 of next year. To that effect, we've committed $1 billion of expansion over the same period for this expansion. As you might have noted, we've raised $550 million of debt facility with three local banks.
That answers the question. Thank you.
Thank you. Thank you, Aziz. Our next question is from Nikhil Puthani. Please go ahead, Nikhil.
Yeah. Hi. Thanks for the call. Well, Mike, actually, the question has got to do with your region-wide specific performance. We can see actually a clear demarcation coming out within GCC and outside GCC, so I may add, in terms of both revenues flattening out, margins getting competitive. So largely, as you mentioned, 53% EBITDA from Qatar and to a certain extent, Oman and Kuwait. So how do you foresee that given the fact that it's quite saturated? How will you be able to, at least in the short to medium term, look forward to in terms of revenues getting evolved from this region? Thank you.
Look, I'll try to give a short answer because there's a long answer to that question. I think this is the compelling offer or the value offer of Ooredoo. Ooredoo is a balanced portfolio. It's the most diversified portfolio in the region in terms of footprints. What you get is high, I would say, investor-grade, mature market within the GCC, which gives you stable cash flows, but they're mature, limited growth, and extreme currency stability. All countries have pegged or close to pegged in the case of Kuwait currencies. On the other side is attached the growth engines, which is the Iraq, Algeria, Tunisia, which are emerging markets. As you know, you can see in our numbers what we're announcing are driving the growth of the group, which is expanding top line and profitability. But these markets carry much more volatility historically and probably going forward.
So when you invest into Ooredoo, you're investing into that portfolio effect of the stable foundation, which I would call the GCC, and the upside lever, which is these emerging markets. This is the compelling offer and the differentiation of Ooredoo versus, I think, a number of our peers.
So do you foresee you continue with the strategy, say, within Qatar and maybe to a certain extent Oman of pricing going up, I mean, in terms of maintaining the revenues while you don't mind to a certain extent volumes, I mean, price-driven revenues rather than volume-driven revenues? Do you see that as you're seeing in Qatar?
We've been focused in the past year not on price-driven revenues or volume-driven revenues. What we've been focused on, I think our numbers show as a fact, is profitability-driven revenues. So we're trying to target in any given market. We're generally more focused on EBITDA market share than revenue market share as a metric. What we're trying to attract is the healthiest segments in any given market we operate in terms of revenue that can flow through the biggest contribution to the bottom line.
Okay. Thank you.
I think the constant expansion of our EBITDA margin and our net profit is a testament to that.
Okay. Thank you, sir. Thank you.
Thank you. We have a typed question from Pradyumna from HSBC. Shall we expect any cash proceeds this year from the TowerCo transaction?
So we're working tirelessly to complete the first closing of this transaction. We're still going through regulatory approval process in all jurisdictions, including our own Qatar. These are not tried processes as we're the first TowerCo to establish. So we're going through this process. Realistically, we were hoping to target a close by the end of this year. Given where we are in the year, I think it would be probably end of this year, but more realistically, very early next year.
Another one from Pradyumna from HSBC. This quarter's Ooredoo share in income from IOH has been the lowest in the last five quarters, around QAR 79 million in IOH's earnings. Growth momentum slowing down. Please shed some light on the outlook.
No, there's no slowing down, but the right comparison is to compare year on year. Quarter on quarter, there's seasonality. If you compare Q1 2024, it's higher than Q1 2023, and I can give you the numbers. The same, Q2 2024 is always higher than Q2 2023. Q3 2024 is higher than Q3 2023. We cannot compare quarter four, which is the best performance for Indosat, with Q1, and we cannot compare Q1 with Q2. This is seasonality. In summary, year on year, all the quarters are growing, but if you compare Q2 to Q1 in the same year, it is less, and this is normal. If you check the history, it's the same trend. We are comfortable with IOH results. Maybe Aziz can add, but we compare it year on year; we see always a growth.
I think I would expand on the word comfortable. We're actually very proud of the IOH journey from the work delivered by the management, but also we've realized ahead of schedule all the envisaged synergies when we did the merger. Again, and I've said this many times, when we had announced the merger of Indosat with CK Hutchison, we had guided to $300 million-$400 million of synergies within year four or year five. Today, we're in year three of the merger, and we're realizing at the top range of our guidance. So we're extremely happy with the performance in terms of delivering the synergies in terms of the merger, but also the management in this Indosat has been exceptional in terms of the work they've done on the ground and in the market.
Last point, if you allow me. I just want to continue in Q1. We clarify this point. There are always differences between our books and Indosat books around seven million every quarter. This is, I don't want to go in details about amortization, different tax liability. But as we said in Q1, by Q4, this amortization will finish, and from Q1 next year, it will be 100% apple-to-apple comparison. But overall, I think the comments from Aziz clarified the position.
Thank you. We have four questions from an anonymous attendee. On data center or on MEEZA, what are your plans for the remaining stake you have in MEEZA? Isn't there conflict of interest to grow in data centers while still holding on to a competitive stake?
When it comes to MEEZA, we've already monetized 10% at the IPO. It's an asset. It's a non-core asset. We see it as a financial investment. Our lockup has expired, so we will be looking at monetizing the stake over time in an orderly manner to protect our value, but also as a responsible corporate citizen within the framework of Qatar to protect the value, even if it's of our competitors of MEEZA by not just liquidating this position. Furthermore, we don't need the cash right now, as you've seen from our balance sheet. We're in a strong cash position. As of today, we're holding it and looking to monetize it at an opportune time where we will maximize value for our shareholder without implying any disruption to the value of MEEZA intrinsically by itself. This question is all.
Yeah. That's fine, and the next one on data centers, are you looking for a strategic investor in data centers? And if so, what's the reason behind this?
So yes, we've announced to the market that we're running a process to look at a strategic investor, a significant minority investor. The reason is quite clear. We've been doing data centers for a long time. We're actually, in terms of installed capacity, the market leader in all the markets we operate with close to north of 60% of installed capacity. That being said, data centers as a whole and the way we were trying to gear it up is a whole new business. This is why we're carving out, and we're hiring experts into the business, anchoring that with an investor that is an expert, not a financial investor pure, but is an expert in the space that can help us leapfrog the learning curve, whether technologically designed, built, and commercially. It would be a huge benefit.
Two, it would also anchor the valuation of our data center business standalone within our sum of the parts, so we do believe there is merit to doing that exercise as long as we will achieve the right alignment of interest and the right valuation.
Great. Moving to Iraq, are there any updates on the 5G tender? And what about the issuance of a new mobile license there?
Yeah. There is no such update on the 5G tender, as well as from a new mobile license. Still, the public is there with the leadership of the country. So still, we don't have the timeline of the issuance of these licenses. Back to the 5G, there's no such update, as I said. However, from 4G perspective, we are already covering having a decent coverage in the country. We are really acquiring the highest percentage of the 4G subscription, and we're still committed to invest in the country.
Thank you. And then on dividend, why is your dividend policy so conservative, especially when you compare it to your domestic competitor, Vodafone Qatar, who doesn't shy away from paying even 100% of its earnings in dividends?
So I could shy away from the question by saying that the dividend policy is the prerogative of the board and not of the management team. That being said, our dividend policy is we guide a 60% payout ratio of normalized net profit. At the same time, we've been at the top of that range consecutively for the last three years. And in the same time period, our dividend has grown, I think, close to 128%, something like this. So I'm not sure a lot of our peers in the market have had the same growth in absolute dividend as we've had.
Thanks, Aziz. I don't see any more questions or any more hands raised. Since there are no further questions, I'd like to thank everyone for joining today's Q3 2024 call. Ooredoo Group's next results are scheduled for our results mid-February 2025. If you have any additional questions, please feel free to reach out to our investor relations team. Thank you again, and we look forward to connecting with you soon. Thank you.
Thank you very much, everyone. Thank you, everyone.