Good afternoon, everyone, and welcome to Vodafone Qatar Financial Results Investor Call for the first half of 2025. I'm Pauline Saab from the Investor Relations team. On this session, we have Sheikh Hamad Abdulla Jassim Al-Thani , our Chief Executive Officer, and Masroor Anjum, our Chief Financial Officer. We'll start the call with a presentation from our CEO on the financial and operational performance highlights, followed by an update on the financial performance for the period ended 30 June 2025 by our CFO. As usual, after the presentation, we'll have a Q&A session where you can ask your questions by virtually raising hands. Today's presentation is available on this webinar and also on Vodafone Qatar website under the Investor Relations section. Please note this session is being recorded and also note the usual disclaimer on slide number two. To begin, I now hand over to Sheikh Hamad.
Assalamu alaikum [Foreign Language]. Good afternoon, and thank you all for joining us today. I'm pleased to report that we had a very strong half year, one that reflects our continued focus on performance, investment, and innovation. The results we are sharing with you today are not just numbers; they are showing that our strategy is working and our customers are noticing the difference. Would you please turn to page number four, titled Key Messages? Let me start with the big picture. We are happy with the overall results of H1 as mentioned. Financially, we delivered double-digit growth in both revenue and net profit. We grew top line by 10.5% year on year, and our net profit or bottom line by 12.1% year on year. We have also continued investment in our mobile and networks and fixed network to support this growth.
A big part of this investment is focused on delivering the best possible 5G experience, which continues to be a key differentiator for us. Looking ahead, we see AI as the new normal in the digital world. That's why we are investing heavily in AI-driven customer initiatives to elevate the digital experience and drive smarter operations. Lastly, I'm proud to say that sustainability has become one of our core focus areas across the company, from network design to customer engagement. Would you turn to the next slide, please? On the infrastructure side, we have made meaningful progress. We increased our 5G indoor coverage size by more than 52% on a year-to-year basis, and our outdoor 5G size grew by 12% on a year-to-year basis, as you can see in the slide.
These upgrades ensured that we improved customer experience, high quality, and high-speed connectivity, especially in densely populated areas and indoor heavy areas. Next slide. Our digital transformation efforts over the past 12 months are paying off. One key example is the instant SIM onboarding journey, a fully digital onboarding experience for the new customers. It's faster, easier, and has received very positive feedback. We also made a major investment in digital marketing, which led to more than 16% growth year on year, increasing our digital visits. On the e-commerce side, we have been doing big upgrades and transformations, which drove the growth on online sales to be 2.25 times the sales on a year-to-year basis. This is a clear sign that our digital channels are becoming the preferred choice for our customers. Now, turning to loyalty, we have listened to our customers. Now go back.
We have listened to our customers, and we previously, in addition to this, we previously have done some research about two years ago, and it shows that 16% to 17% of mobile customers or telecom communication customers in the country are not considering us at all because of the lack of loyalty program. So we built one from the ground up. We are excited to share that we have recently launched our own in-house loyalty program, and the customer adoption is growing rapidly, approaching 100,000 opt-in members, although we just recently launched. In parallel, we are rolling out several initiatives to enhance the customer experience, which collectively led to more than 14% improvement on our digital TMPS and 7% year-on-year reduction in customer effort score. Lastly, we are redesigning our digital platform, apps, and web with the AI embedded natively to serve our customers in a more intelligent way. Next.
From a profitability perspective, as you can see, since 2019, Q1, we had achieved more than 119.8% growth in EBITDA on a TPM basis. During the same period, the overall market EBITDA increased only by 7.4%, reflecting 112.3% performance relative to the market. Last page, please. Lastly, in regard to sustainability, we invite you to review our published 2024 reports. Some highlights are as the following: share of digital invoice payments from the total payment reached 89%. Once again, we recorded zero data breaches. 95% of our diesel-generated power sites is now in a hybrid active status, and we are actively, in addition to this, we are actively switching diesel sites to the power grid and connecting approximately about 6% to 7% of the sites on a yearly basis. First telecom company to achieve four-star GSAS rating in Qatar. Our inclusive workplace reports zero discrimination.
We also focus on our training, and as you can see, there is a big improvement in our training over the last three years with an average of 29 hours of learning per person of the company. With that said, I'm going to hand over to our CFO to go over the financials. Thank you.
Thank you, Hamad, and good afternoon, everyone. It's a pleasure to welcome you all to our FY25 half-year financial performance review. We are pleased to report a strong financial performance, with results significantly surpassing analyst expectations across all key financial indicators. This performance reflects the strength of our resilient business model and our continued focus on delivering long-term shareholder value. I will now start the review with key financial highlights on slide number 10. The positive momentum observed in Q1 accelerated further in Q2. Total revenue increased by an impressive 10.5%, driven by continuous growth in service revenue. This growth was broad-based, with strong contributions from both mobile and fixed product segments, as well as increased revenue from handsets, equipment sales, and enterprise projects. Our continued focus on cost optimization remains a key pillar of our success.
This disciplined approach to operational efficiency has enabled a reduction in our OpEx by 1.2%. This achievement is further underscored by a record low OpEx intensity of 21.4% for the first half of 2025, and this represents an improvement of 2.5% points versus last year. Continuing top-line expansion, along with commitment to operational efficiencies, has translated into exceptional profitability during the first half of the year. Our EBITDA is QAR 732 million, growing by 9% year on year, while net profit for the period stands at QAR 329 million. Lastly, our liquidity and overall financial strength remain solid. Operating cash flow reached QAR 375 million in the first half of the year, marking a strong 16.8% year-on-year increase. Despite higher dividend payout, we successfully maintained net debt at 15% below last year's level, further reflecting our disciplined financial management. Now, let's turn our attention to slide number 11.
This slide showcases our key financial performance metrics for H1 compared to the same period of last year. Total revenue grew by QAR 167 million, representing a substantial 10.5% growth year on year. This growth was primarily driven by an impressive 3.4% increase in service revenue, coupled with the impact of higher handsets, equipment, and enterprise projects revenue. Despite higher revenue, ongoing network expansion and increase in subscriber base, we have effectively maintained stable expenses, underscoring the success of our smart cost-saving initiatives. Year-on-year increase in direct cost is directly attributable to higher equipment costs corresponding to higher equipment revenue. Excluding equipment costs, direct cost is largely in line with the last year. Looking at OpEx, despite continuing network expansion and its associated costs, OpEx is lower compared to the same period of last year.
With increased service revenue and optimized costs, our EBITDA grew by an impressive 9% year on year, translating to a margin of 41.8%. Our strong financial performance translated into robust bottom line, with net profit rising by 12.1% year on year to QAR 329 million. This double-digit growth was achieved despite recognizing an accelerated depreciation charge of QAR 24.1 million during the first half of the year. This charge was related to full write-off of assets related to FDD to TDD migration, in line with recent regulatory changes and early retirement of certain assets as part of our initiatives aimed at enhancing efficiency and reducing future maintenance costs. Now, taking a closer look at service revenue on slide number 12, as I mentioned before, all our service revenue segments continue to show positive growth year- on- year.
Our postpaid segment continues to deliver solid performance, driven by our focus on customer value and growing traction of our refreshed product portfolio. Postpaid revenue increased by 1.4% year on year. Our new offerings, Unlimited Plus and Postpaid Plus, are performing well and contributing meaningfully to segment growth. Following the removal of discounts for existing customers last year, our postpaid base has returned to growth, increasing by 3.4% year on year. In the enterprise segments, we are still operating in a very competitive pricing landscape, a trend we have highlighted before. While we anticipate improved market discipline, our strategy involves a careful and selective approach to competitive offers, allowing us to remain highly competitive while upholding our value proposition. In contrast, the consumer pricing environment has remained largely stable, supporting the maintenance of overall postpaid ARP.
Moving to the prepaid segment, prepaid revenue has recorded a growth of 7.7% year on year. As we have mentioned previously, the prepaid segment is experiencing a noticeable reduction in market pricing regression. Customers are now receiving good value at a reasonable price. Lastly, managed services, wholesale, and fixed revenues continue to be an integral part of our service revenue growth drivers. Our commitment to diversification and expanding our fiber network is paying off. We are adding new customers nationwide, which has led to a steady increase in year-on-year revenue. Overall, total service revenue increased by 3.4% year on year. Turning our attention to slide number 13, let's analyze the efficiency and profitability margin trends. In this slide, I will focus on the underlying trends represented by solid lines, while the reported numbers are depicted by dotted lines. Diving deeper into operational efficiency, the first graph showcases OpEx intensity.
Even with significant growth in both our mobile and fixed networks, we have made impressive improvements. As shown in the first graph, our OpEx intensity continues to decline, achieving a further reduction of 2.1% points over FY24. OpEx intensity is positively impacted by non-recurring project revenue recognized during the period. Excluding this impact, OpEx intensity stands at 22.4%, reflecting a decline of 1% point versus FY24 underlying intensity. Moving to the center graph, growth in service revenue, combined with our relentless focus on operational efficiencies, continues to drive margin expansion. We achieved an underlying EBITDA margin of 48.5%, reflecting 2.7% points improvements versus last year. Reported EBITDA margin remains stable at 41.8%, despite increasing revenue mix of low margin equipment business. Turning to the net profit margin trend, on an underlying basis, we recorded a further increase of 0.4% point over FY24.
This improvement is a direct result of continued strength and expansion of our EBITDA margins, reflecting disciplined execution and operational efficiency. Let's turn to slide number 14. This slide showcases our key financial performance metrics for quarter two in comparison to the same quarter last year. We are seeing strong performance across the board this quarter, led by more than 15% growth in total revenue. Service revenue grew by an impressive 4.4% year on year, with contributions from both mobility and fixed segments. Non-service revenue increased by QAR 87 million, driven by higher handset sales and booking of non-recurring enterprise project revenue of QAR 44 million. Importantly, our OpEx reduced slightly year on year, despite significant network expansion and costs related to revenue growth. Regarding direct cost, the year-on-year increase is directly attributable to higher equipment costs, corresponding to higher equipment revenue.
With increased service revenue and optimized costs, our EBITDA stands at QAR 374 million for the quarter, growing by an impressive 11.8% year on year. Our EBITDA margin for the current quarter is healthy at 41.7%. This strong operational performance translated directly to our bottom line. We recorded a very healthy 16.3% year-on-year growth in net profit, reporting QAR 166 million for the quarter two. Turning to slide number 15, let's take a closer look at CapEx and return on equity. CapEx for the period stands at QAR 150 million, representing an intensity of 8.6%. Our ongoing network expansion in fixed and mobile is driven by a commitment to comprehensive coverage and cutting-edge digital capabilities. The ultimate goal is to provide a superior experience to our customers. Our relentless focus on growth and profitability has yielded impressive results, as evidenced by significant improvement in return on equity.
Compared to FY2024, our return on equity has increased further by 0.8% points on an annualized basis. This translates to remarkable growth in returns over the past five to six years. Coming to cash flow and net debt on slide number 16, working capital management continues to be a prioritized area, as outlined in the previous quarters. The first chart represents free cash flow, a key metric representing cash generated from operations after accounting for capital expenditure, taxes, and lease payments. Our free cash flow demonstrates impressive 16.8% growth year on year. This significant achievement stems directly from our company-wide focus on optimizing cash flow and working capital management, effectively converting our financial performance into tangible cash. Strong cash flow generation continues to drive improvement in our financial KPIs. Our net debt has reduced year on year by 14.8%, even with an increase in dividend payout.
Net debt to EBITDA ratio has improved from 0.38 times to 0.3 times, well below the financing covenant of 2.5 times of EBITDA. Turning to the statutory income statement on slide number 17, we have already covered the major year-on-year movements. Both consumer and enterprise and other revenue increased year on year. Increase in direct cost is in line with the higher equipment sales. Higher depreciation is driven by CapEx investments and accelerated depreciation, I explained earlier. Lastly, earnings per share for the half year stands at QAR 7.8, registering a growth of 12.1%. To sum up the presentation, let's look at the five-year trend view of our key financial performance indicators. Our top-line growth continues to impress, despite the market challenges we discussed earlier.
Over the last five years, our top line has registered a very impressive compound annual growth rate of 7.9% in service revenue and 10.8% in total revenue. This truly underscores our ability to navigate challenges and sustain robust revenue growth. Importantly, while expenses have increased, they have consistently remained lower than the growth in our top line. This strategic balance has resulted in substantial profitability growth. EBITDA has seen an impressive CAGR of 11.6%, and net profit has soared with an extraordinary CAGR of 25.1%. These results underscore our strategic focus on sustainable growth, operational efficiency, and prudent financial management. As we continue to navigate challenges and capitalize on opportunities, we remain committed to delivering exceptional value to all our shareholders. Lastly, as shown on slide number 19, we are updating our full-year guidance in light of our strong Q2 performance.
Based on the results to date, we are pleased to revise our guidance upwards across key metrics. Management expects continued top-line growth of 7% or more for the full financial year 2025. We expect EBITDA margin to remain stable around 42%. With top-line growth and improved EBITDA margin, we expect more than 10% growth in net profit on an underlying basis. Lastly, CapEx investments into profitable growth segments will continue, and we still believe CapEx intensity will range between 13% to 14.5%. We will continue monitoring the performance and update the guidance in Q3 if so required. Thank you for your time. As usual, balance sheet, detailed income statements, subscribers, and output details are available in the appendix. This concludes my review. Thank you, and now back to Pauline.
Thank you, Sheikh Hamad and Masroor. Now we can start with the Q&A session. Please raise your hands virtually to ask a question, and I will open the microphone for you. I'll take the first question from Zuhaib Pervez. Zuhaib, microphone is open for you. Please go ahead. Hello, Zuhaib. Can you hear us? Please unmute your microphone.
Can I unmute? R ight?
Yes, we can hear you now. Thank you.
Perfect.
Go ahead.
Thank you. Thank you for the presentation and congratulations on a very strong set of results. A couple of questions. Firstly, could you give us an idea on the equipment sales segment? You've seen some strong growth in that segment. This is usually contract-based, if I'm not wrong. Could you give us more color on that? Secondly, your depreciation has gone up during the quarter, and could you tell us the rationale for that? What's the outlook on the depreciation? Is it going to be around the same level? On the post-prepaid segment, have you changed your strategy, introduced new packages, higher value packages, increased prices? What has led to the strong revenue growth in that segment? Thank you.
Zuhaib, please can you repeat the third question?
Yes, on the prepaid segment, have you?
No, the one before. The one before this.
It's on the depreciation. The depreciation has increased for the quarter. Could you tell us the sustainability of that? Is it going to be around the same level and the rationale?
Okay. Clear. Thank you.
Thank you.
Okay. As I explained during my call as well, non-service revenue growth basically has two components. One is the higher handset sales, and the second is the higher equipment sales related to non-recurring enterprise projects. Out of the overall increase, half is contributed by higher handsets and half by the enterprise project revenue. Regarding depreciation, again, as I explained, there is a QAR 24.1 million accelerated depreciation charge, and this is related to two things. One is the FDD to TDD migration, which we have been explaining since last year. That is mandated by CRA, so we had to do that. The second part is that we keep on looking for initiatives whereby we can reduce our future maintenance costs related to certain assets by modernizing them, resorting to new technologies.
Part of the accelerated depreciation is related to those assets, which we have phased out to save costs in the future. On prepaid.
Yes. Our approach, before I answer the question directly, I'm going to state something. Our approach and strategy has been always to protect the market. We know for sure and from experience that once the prices drop, it's very hard to get it back. When it comes to prepaid, we have been avoiding unreasonable rush after CMS, which happened during the last, let's say, six or seven months. Because of that, you can see that we have lost in Q1 some CMS, but we got it back in this quarter or last quarter. This helps us definitely to maintain profitability because with the rush after CMS, it comes acquisition cost, which reduces the profitability.
In addition to this, yes, we have done some changes into our products last year, but I believe we are benefiting this year, where many of our prepaid packages used to have way more generous than necessary benefits. Those benefits, which most of them were temporary, have been removed. This definitely contributed to people subscribing to higher packages or to add more, let's say, add-ons, which resulted in the addition or improvement on the ARP.
Okay. We'll take the second question from Ryan Derham. Ryan, please unmute yourself.
Hello. Thank you for the presentation and congratulations on a great first half of the year. My question is to do with the prepaid versus the postpaid. Could you just provide a little bit of an overview in terms of what you're seeing in terms of the competitive landscape and any sort of other market dynamics you're seeing there?
Would you repeat that again, please?
I'd like to get a bit more information on the market dynamics and the competitive landscape you're seeing in prepaid versus postpaid.
Sure. Initially, we have discussed multiple times that we had been seeing some unreasonable competition and a price war, let's say, when it comes to low-value prepaid and mid-value. We have seen in the last, let's say, 12 to 18 months, a more reasonable approach toward those segments. I'm not going to talk about the product. I'm going to talk about low-value and mid-value, and mostly the low-value is a prepaid. We have seen a more reasonable approach when it comes to prepaid to low-value and mid-value, including the prepaid. However, now we start seeing in the last, let's say, 18 months plus, an unreasonable, let's say, you know, price reduction when it comes to the high-value. This is, to be honest, where we are worried about. When it comes to low and mid, we think the market is adjusting and becoming more reasonable.
However, the pricing strategies need to be adjusted, to be honest, when it comes to high-value. There are rack prices which should take the market to the right, let's say, to be in a healthy situation. However, sometimes we have seen in the high-value segments unreasonable competition and mainly about the price or extra value, unnecessarily extra value. This is what we see. However, we are satisfied with the low-value. We think it's more reasonable. Low-value, we think it's improving. Mid-value, we think it's improving. High-value, I'm worried about it because once it's gone down, as I mentioned, from experience, it's really hard to go up. Hopefully, it will follow the low and mid-value as what we have seen improving in the last six to seven months.
Thank you very much.