Ooredoo (Formerly Qtel)

Transcription

Global Research
Investment Update
Equity - Qatar
Telecommunication Sector
07 May, 2013
Strong Buy
Ooredoo (Formerly Qtel)
Market Data
Bloomberg Code:
Reuters Code:
CMP (06 Mar 2013):
O/S (mn)
Market Cap (QAR mn):
Market Cap (USD mn):
P/E 2013e (x):
P/Bv 2013e (x):
QTEL QD
QTEL.QA
QAR116.2
320.3
37,221
10,198
11.2
1.3
Price Performance 1-Yr
Absolute (%)
Relative (%)
123.3
100.5
74.4
1m
3.5
1.1
3m
3.1
2.4
12m
-4.6
-5.9
Price Volume Performance
600
130
500
120
400
110
300
100
200
90
0
80
May-12
Jun-12
Jul-12
Aug-12
Sep-12
Oct-12
Nov-12
Dec-12
Jan-13
Feb-13
Mar-13
Apr-13
100
Volume ('000)
Ooredoo (QAR)
Source: Zawya
Faisal Hasan, CFA
Head of Research
[email protected]
Tel.: (965) 22951270
Umar Faruqui, CFA, ACCA
Senior Analyst
[email protected]
Tel : (965) 22951438
Global Investment House
www.globalinv.net
Gives exposure to high growth markets of Iraq and Algeria
Seeking to enter Morocco and Myanmar markets
4G launched in Qatar; Kuwait and Oman operations to follow
Offers growing dividend yield; attractive valuations
Ooredoo differs from other incumbents in GCC due to its substantial exposure to
growth markets. Indonesia, Algeria and Iraq accounted for 57.0% and 61.0% of
total revenue and EBITDA in 2012, respectively. The competition in its domestic
market has also been relatively benign due to initial setbacks faced by Vodafone
Qatar and proactive measures taken by Ooredoo. Ooredoo has recently
increased its stake in Iraq-based Asiacell and Kuwait-based Wataniya in view of
their growth potential and good track record. On the valuation front, the company
is currently trading at attractive valuations and offers a growing dividend yield.
Past 3 year CAGR
High (QAR):
Low (QAR):
Average Volume: (‘000)




Target Price
QAR140.0
Revenue 2013-16 CAGR
Low/decline (less than 2.0%) Medium (2% to 4%)
Low/decline
Tunisia
Medium
Kuwait, Oman
Qatar
High
Indonesia
Source: Company Reports & Glob al Research
High (more than 4.0%)
Algeria, Iraq
Focus turns towards dividend payout
In view of the importance shareholders attach to dividends in the region, Ooredoo has
substantially increased DPS to QAR5.0 (yield of 4.8%) in 2012 compared to DPS of
QAR3.0 (yield of 2.1%) in 2011. The increase in DPS also comes in the backdrop of
increase in Wataniya Telecom dividend payout by 150.0% in 2012 after Ooredoo
increased its stake to 92.1%. Since any overseas acquisition is likely to be done by
Ooredoo directly, we can expect Wataniya telecom to continue with the high dividend
payout going forward. We expect Ooredoo to pay DPS of QAR5.5 (yield of 4.7%) in 2013.
Heavy investment in Capex to continue
We expect Capex/sales to remain high at 18.1% in 2013 and taper off to 12.9% by 2016.
We estimate that around 40.0% of the Capex during the forecast period will relate to
operations in Indonesia. Indonesia has seen rapid subscriber growth in recent years and
the company is investing heavily to expand its infrastructure and improve its network
quality. In addition, Ooredoo will look to expand its recently introduced 4G network in
Qatar and also plans to introduce 4G network in Kuwait and Oman in 2013.
Ooredoo submits binding offer for Maroc Telecom
Ooredoo along with UAE’s Etisalat are vying to buy a 53.0% stake in Maroc Telecom from
France’s Vivendi. The motivating factor seems to be Maroc telecom’s efficient
management, dominant market position and the company’s exposure to sub-Saharan
Africa. In addition, Ooredoo through its subsidiary Wataniya Telecom has experience of
operating in the North African region.
The risk of overpaying for the acquisition seems to be mitigated by the fact that financial
discipline has been imposed by the major shareholders as the overriding concern for
acquisitions. In addition, 2012 net debt/EBITDA of 1.6x is at the lower end of the target
range of 1.5-2.5x.
Untapped Myanmar on the “radar”
Ooredoo is one of the 12 announced finalists for two licenses to build, own and operate a
mobile network for 15 years. The bid winners are expected to be announced in June
2013. Myanmar offers a good opportunity as it opens up to the rest of the world. Mobile
penetration is extremely low at around 9.0% due to high cost of SIM costs.
Global Research - Qatar
Ooredoo
Valuation & Recommendation
SOTP DCF based valuation
We have used a discounted cash flow (DCF)-based sum-of-the-parts (SOTP) methodology to arrive at the fair value of Ooredoo.
We have used a different WACC for each country operation based on their capital structure and perceived riskiness. The WACC
ranges from 18.0% for Palestine operations to 9.1% for Qatar operations. We have also taken a high WACC for Tunisia, Iraq and
Algeria operations of 14.0-17.0% to account for political and regulatory risk. Meanwhile, the terminal value of each of the
operations is based on target EV/EBITDA.
Based on consolidation of the individual country operations, our SOTP valuation fair value of Ooredoo stock is QAR140.0 per
share. The stock at its current price of QAR116.2 per share offers a potential upside of 20.4%, thus we recommend a Strong Buy
on the stock.
Ooredoo SOTP Valuation Summary
Country Operations
Holding
Ooredoo Qatar Operations
Proportionate
EV (QAR mn)
% of EV
100.0%
21,469
Naw ras Telecom - Oman
55.0%
2,309
31.0%
3.3%
Asiacell- Iraq
64.1%
12,422
18.0%
Wataniya Telecom - Group
92.1%
15,411
22.3%
Algeria (Direct stake)
9.0%
863
1.2%
Tunisia (Direct Stake)
15.0%
870
1.3%
PT Inodsat- Indonesia
65.0%
13,937
20.2%
Others
1,873
2.7%
Total EV
69,154
100.0%
Net Debt
(24,321)
Total Equity Value
44,834
No. of shares outstanding (mn)
320.3
Per share Value (QAR)
140.0
Source: Company Reports & Global Research
Ooredoo attractive on EV/EBITDA basis
Ooredoo trades close to its GCC peers on a P/E basis but is attractive on an EV/EBITDA basis. Ooredoo’s 2013e EV/EBITDA of
4.3x is at a 19.0% discount to the GCC average 2013e EV/EBITDA of 5.3x. Volatility of bottom line and differing capital
structures make EV/EBITDA a better metric to use than P/E. Dividend payout has also been jacked up by Ooredoo making its
2013e and 2014e dividend yield close to average GCC dividend yield. When compared to the aggregate of selected emerging
market companies and GCC companies, Ooredoo becomes attractive on both P/E and EV/EBITDA basis.
EV/EBITDA
Com pany
Country
Saudi Telecom Company
Saudi Arabia
Etihad Etisalat (Mobily)
Market Cap USD (bn)
Dividend Yield
P/E
2013e
2014e
2013e
2014e
2013e
2014e
23.1
5.3
5.3
4.6%
4.6%
10.4
10.7
Saudi Arabia
16.4
7.4
6.8
5.8%
6.3%
9.4
8.9
Ooredoo
Qatar
10.2
4.3
3.8
4.7%
5.2%
11.2
10.2
Zain
Kuw ait
11.5
6.1
5.9
6.7%
6.7%
10.6
9.9
Oman Tel
Oman
2.9
5.1
4.8
5.0%
5.0%
8.9
8.8
Etisalat
UAE
24.2
4.4
4.3
6.3%
6.5%
11.3
10.9
DU
UAE
6.4
4.9
4.5
5.4%
5.6%
12.6
12.8
Batelco
Bahrain
1.5
5.3
5.1
6.2%
6.2%
10.4
7.9
Turkcell
Turkey
13.9
9.1
9.0
6.1%
5.6%
11.3
10.6
MTN
South Africa
36.4
5.5
5.1
5.6%
6.3%
13.3
11.9
Telecom Egypt
Egypt
3.1
4.1
4.2
10.7%
10.8%
8.5
8.4
Rostelecom
Russia
11.0
4.5
4.4
3.4%
4.5%
10.2
9.3
Telkomsel
Indonesia
23.4
5.6
5.3
4.3%
4.8%
15.1
14.0
China Tel
China
40.8
3.3
3.0
2.6%
3.0%
13.8
11.4
Telefonica Brasil
Brazil
30.1
4.9
4.7
7.3%
7.5%
13.3
12.6
Maxis
Malaysia
16.7
12.6
12.2
6.0%
5.9%
23.3
22.1
Idea Cellular
India
8.3
7.0
7.7
0.1%
0.2%
25.1
28.0
Average Total
5.8
5.7
5.3%
5.6%
12.9
12.3
Average GCC
5.3
5.1
5.6%
5.8%
10.6
10.0
Average ex-GCC
6.3
6.2
5.1%
5.4%
14.9
14.2
Source: Bloomberg & Global Research
Note: Year-end of some companies is 31 March.
May - 2013
2
Ooredoo
1Q13 results
Qatar, Iraq, Indonesia and Algeria drive revenue growth
1Q13 revenues increased by 5.2%YoY to QAR8.4bn. The revenue growth is at the higher end of the 2013 management
guidance range. Revenue was driven by revenue growth in Qatar, Iraq, Indonesia and Algeria operations by 5.0%YoY,
6.0%YoY, 9.0%YoY and 16.0%YoY respectively. Meanwhile, revenue from Kuwait operations declined by 11.0%YoY due to
intense competition in the market. Increased data usage is leading to lower international and SMS revenue in Kuwait. Revenue
in Tunisia also saw a decline of 5.0%YoY due to the difficult economic conditions in the country.
EBITDA affected by rebranding costs, regulatory fees and competitive environment in Kuwait
1Q13 EBITDA declined by 4.3%YoY to QAR3.7bn. EBITDA was adversely affected by rebranding costs, regulatory fees in
Tunisia and competitive pressure in Kuwait. Consequently, EBITDA margins were also adversely affected and declined to
44.0% in 1Q13 compared to 48.0% in 1Q12. Qtel unveiled its new brand “Ooredoo” in February 2013 and launched it in Qatar
in March 2013. The company expects the cost of group-wide rebranding to stretch till 2014.
QAR (m n)
1Q12
4Q12
1Q13
YoY
QoQ
Consolidated Revenue
8,026
8,078
8,442
5.2%
4.5%
-3.1%
EBITDA
3,833
3,881
3,716
EBITDA Margin (%)
48.0%
48.0%
44.0%
-4.3%
-
-
Net Profit Attributable to Ooredoo Shareholders
711
523
808
13.6%
54.6%
Consolidated Customers (mn)
84.4
92.9
91.0
7.70%
-2.1%
Source: Ooreedo investor presentation, Company reports and Global Research
2013 Guidance
Grow th
Revenue
2-6%
EBITDA
1-5%
Capex
QAR 8-9bn
Source: Ooreedo presentation
Key Risks to Valuation

Change in regulations
Favorable and adverse impact of regulatory changes in countries where Oreedoo Group companies operate. Possibility of
regulatory changes or interventions remains high in markets such as Iraq, Algeria and Tunisia.

Political risk remains elevated
Political risk remains high in the North African region as it moves into the post-revolution phase. Political risks remain high in
Iraq as well.

Stake increase or new acquisitions
Possible acquisitions of Maroc Telecom or license in Myammar can have a positive/ adverse impact on our forecasts. Any
further stake increase in existing operations or new acquisitions can have significant impact on our financial forecasts. Any
possible entry into other markets through management contracts and MNVO’s can also affect our valuations.

Uncertainty of 3G licenses in Iraq and Algeria; Possible entry of 4 mobile operator in Iraq
Issuance of 3G licenses in Iraq and Algeria have been delayed since the past many years. Licenses in both countries are
expected to be issued in 2013. Any further delay can have an adverse impact on our valuations.

Assumed reasonable levels of competition
We have assumed reasonable levels of competition among operators where Oreedoo group companies operate, however,
less or unreasonable competition or entry of new operator could impact our financial forecasts.

Implementation of Mobile Number Portability (MNP)
Qatar launched MNP in February 2013 while Kuwait is expected to launch MNP in June 2013. W e believe that the impact
won’t be significant considering the impact of MNP in other GCC countries. However, any significant loss/increase of
customers due to the MNP service can have a positive/adverse impact on our valuations.
th
 Currency movements
Being a multi-country operator, fluctuations of foreign currencies can have material impact on our financial forecasts.
May - 2013
3
Ooredoo
Major Operations Overview
Qatar
Last to open its door in GCC; Ooredoo has dealt effectively with competition hitherto
Qatar was the last country in GCC to open its door to more competition when Vodafone Qatar made its entry in the Qatari
market in Q1-2009. The competition in the domestic market has been relatively benign due to initial setbacks faced by
Vodafone Qatar and proactive measures taken by Ooredoo in terms of competitive positioning. In addition, the pace of decline
in Ooredoo’s market share has slowed down significantly. Meanwhile, subscriber base increased by 6.4% to 2.53mn in 2012
after remaining more or less flat in the previous three years.
4G services launched; expecting modest growth in revenues
Revenue and EBITDA growth had been strong in the past two years. Going forward, we expect revenue from Qatar operations
to grow at 4-year CAGR of 3.1%. Revenues will be driven by data services which in turn will be supported by the recent launch
of 4G services in Qatar. The take-up off 4G is likely to be quick in Qatar due to the following factors. 1) Increase in smart phone
penetration 2) high-per capita income 3) Increased popularity of social and professional networking sites and gaming 4) use of
Over the Top services 5) Favorable demographics. In addition, Qatar is experiencing a higher population growth than GCC
average due to the requirement of foreign workforce in the backdrop of preparations for the 2022 soccer World Cup.
No Update yet on QNBN network
There has been no update yet on Qatar National Broadband network (QNBN). Meanwhile, Oreedoo’s fibre-to-home network
has grown to 75,000 connections and has passed 185,000 houses at the end of 1Q13.
Oreedoo Subscribers and Market Share
Qatar Population and Mobile Penetration
2.6
1.9
120%
2.5
100%
2.4
86%
75%
72%
180%
159%
100%
162%
159%
1.8
160%
143.0%
69%
2.3
166%
80%
2.2
2.1
1.7
140%
1.6
120%
60%
2.0
1.9
40%
1.8
1.7
20%
2008
2009
2010
2011
Subscribers (mn)
1.5
2012
100%
2008
Market share
2009
2010
2011
Population (mn)
2012
Mobile Penetration %
Source: Ooredoo Investor presentations & Global Research
Kuwait
Focus turns to data revenues as voice revenues decline
In Kuwait, the story is typical of other GCC countries. With a high penetration rate of above 140.0%, the focus has turned
towards provision of data services to offset the decline in voice revenues. Telco operators are set to benefit from increase in
smart phone penetration as it will lead to increased usage of data services.
Ooredoo Subscribers and Market Share
Kuwait Population and Mobile Penetration
2.5
42%
41%
41%
2.0
40%
40%
39%
39%
38%
1.5
1.0
0.5
0.0
2008
2009
2010
Subscribers (mn)
2011
Market share
2012
3.8
148%
140%
125%
3.7
112%
3.6
38%
3.6
37%
3.5
36% 36%
3.5
35%
3.4
34%
3.4
33%
3.3
160%
136%
3.7
120%
90%
100%
80%
60%
40%
2008
2009
2010
Population (mn)
2011
2012
Source:Ooredoo Investor presentations & Global Research
May - 2013
4
Ooredoo
Stiff competition taking its toll on market share and profitability
Wataniya is set to enter the 4G domain in 2013 to tap this fast-growing data segment. However, it faces stiff competition from
Zain and Viva which have already started their 4G operations. The entry of Viva has intensified the competitive landscape in
Kuwait with the new entrant capturing 20.8% market share in a span of 4 years. Consequently, Wataniya telecom has seen its
market share dip to 36.0% in 2012 from 40.0% in 2011. 1Q13 results also revealed a tough situation in the Kuwait market with
revenue, EBITDA and net profit from Kuwait operations declining by 9.0%YoY, 31.1%YoY and 38.7%YoY respectively.
Indonesia
Increase in smart-phone penetration and data usage offers huge opportunity
Indonesia is a huge country in terms of population (approx 241.0mn in 2012). Indonesian economy, backed by a strong
resource base, has grown at an average of 6.0% in the past five years. Favorable demographics, growing per-capita income
and smart-phone penetration indicates further growth in usage of telecom services and in particular data services.
Robust Industry revenue growth; Data revenues to drive future growth
Total industry revenue growth increased by 11.0%YoY in 9M12 driven by data services. Total industry data revenue increased
by 28.0% in 2011 and 38.0%YoY in 9M12. Data revenues are likely to drive further revenue growth. Meanwhile, total wireless
subscriber base reached more than 268mn. Indonesian market has five major telecom operators with five other smaller ones.
The top three operators Telkomsel, Indosat and XL account for around 80.0% of total telecom subscriber base.
Indosat faring well in the Indonesian market
Indonesian operations contributed 26.1% to total revenue of Ooredoo group in 2012. Indosat’s subscriber base has grown at a
2008-12 CAGR of 12.2% to 58.6mn at the end of 2012. Indosat has also managed to increase its subscriber market share to
26.0% in 2011 from 20.0% in 2010. The company managed to maintain its market share in 2012. Revenue from Indosat has
grown at a 2008-12 CAGR of 20.6%. Strong performance continued in 1Q13 with revenue and EBITDA increasing by 9.0%YoY
and 5.0%YoY.
63.0
29%
Indonesia Population and Mobile Penetration
26%
20%
53.0
30%
26%
245.0
140%
127%
240.0
87%
25%
43.0
33.0
100%
70%
235.0
20%
120%
97%
80%
58%
20%
60%
230.0
23.0
40%
15%
225.0
20%
13.0
3.0
10%
2008
2009
2010
Subscribers (mn)
2011
Market share
2012
220.0
0%
2008
2009
Population (mn)
2010
2011
2012
Tunisia
Ooredoo group’s Tunisian subscriber growth outstrips industry subscriber growth
Tunisia has seen significant growth in its telecom sector in the past few years despite the political upheaval faced by the
country. Total telecom subscriber base has increased at a 5-year CAGR of 13.0%. Ooredoo group’s Tunisian subscribers have
grown at a 5-year CAGR of 14.0% during the same period explaining the rise in market share to 55.0% at the end of 2012
compared to a market share of 51.0% in 2008. We believe, this has been due to effective marketing and attractive product
suites offered by the company.
Political turbulence restraining growth; devaluation of Tunisian Dinar affecting returns
Political instability is having an impact on the economy and exchange rate. The country is still facing political turbulence as it
goes ahead with political transition. Since Tunisia does most of its trade with Europe and significant numbers of Tunisian expats
work in Europe, the sovereign debt crisis in Europe is also putting pressure on the Tunisian currency. In addition, reduction in
tourism is also having an adverse effect on the exchange rate. Tunisia has seen its currency decline against the USD in the
aftermath of the uprising which took place in December 2010. Tunisian dinar has declined by 4.0% in 2011, 3.4% in 2012 and
2.9% in 1Q13. The devaluation of Tunisian currency has reduced the returns for the company in KWD terms despite a modest
growth from the Tunisian operations in local currency terms. 1Q13 revenue and EBITDA declined by 5.0%YoY and 19.0%YoY
in KWD terms compared to 1.0%YoY and 15.0%YoY decline in local currency terms.
May - 2013
5
Ooredoo
3G services launched; in the process of launching fixed line services
The company launched its 3G services in July 2012 to tap the fast-growing data services segment. Tunicell, which is the cellular
arm of the incumbent operator, and Orange have already launched their 3G operations. We expect the company to experience
stiff competition in this segment. Meanwhile, the company is also in the process of launching its fixed line services.
Tunisia Population and Mobile Penetration
7.5
58%
55%
56%
140%
10.7
111%
56%
6.5
54%
6.0
54%
51%
52%
4.5
120%
106%
10.5
53%
5.5
5.0
10.9
122%
7.0
93%
10.3
100%
82%
10.1
80%
9.9
4.0
50%
3.5
3.0
48%
2008
2009
2010
Subscribers (mn)
2011
60%
9.7
9.5
40%
2008
2012
2009
2010
2011
Population (mn)
Market share
2012
Algeria
Continues to provide solid growth
Algeria has a large population of around 36.0mn and a GDP per capita of USD5,660. The penetration rate is relatively low at
68.0% indicating the room for further growth. Algerian economy is expected to grow by 3.4% in 2013 driven by high oil prices
according to IMF. The economic growth will have a trickledown effect on usage of telecom services. Thus for Ooredoo Group,
the continuation of healthy subscriber growth and expected increase in ARPU will drive growth for the company. 1Q13 results
confirm our view with revenue, EBITDA and net profit increasing by 18.2%YoY, 19.1%YoY and 13.8%YoY respectively.
The Algerian telecom landscape has two other Mobile service providers, Djezzy and Mobilis. Wataniya telecom, with its brand
name Nedjma, managed to increase its market share to 32.0% in 2012 as Djezzy has been engrossed in a dispute over
government holding in the company.
3G license facing uncertainty
The issuance of 3G license in Algeria has been delayed since 2008. The licenses are now expected to be issued in 2013. The
issuance of 3G license will be a big boost for the telecom sector as a whole as it will allow the companies to tap the
underpenetrated data segment more effectively. However, the exact timing of the issue is still uncertain.
10.0
Algeria Population and Mobile Penetration
32%
31%
9.0
35%
78%
38.0
76%
80%
74%
31%
29%
30%
8.0
36.0
68%
67%
75%
70%
7.0
6.0
25%
34.0
20%
32.0
65%
21%
60%
5.0
55%
4.0
3.0
15%
2008
2009
2010
Subscribers (mn)
2011
Market share
2012
30.0
50%
2008
2009
Population (mn)
2010
2011
2012
May - 2013
6
Ooredoo
Iraq
Strong subscriber growth; Strong presence in Kurdistan
Ooredoo group mobile customers in Iraq have grown at a 2008-12 CAGR of 13.2% to 10.03mn subscribers. Economic
recovery, improvement in security situation, high oil prices, and low mobile penetration along with deregulation of the sector has
lead to a strong increase in mobile subscribers. Asiacell, the Iraqi subsidiary of Ooredoo also has a strong presence in the Iraqi
autonomous region of Kurdistan. This area is the most peaceful and prosperous region in the post-invasion Iraq. The ARPU in
this region is also estimated to be double compared to the rest of Iraq.
Revenue growth likely to slow down as Zain Iraq makes foray into Kurdistan
Revenue from Iraq operations have grown strongly at a 2009-12 CAGR of 19.8% driven by increase in subscribers and increase
in ARPU. Going forward, we expect revenue growth to slow down significantly to 2013-16 CAGR of 4.0% as competition
intensifies and Zain Iraq makes its foray into the Kurdistan region. However, the revenue growth rate will still remain higher than
other country operations with the exception of Algerian operations.
11.0
10.0
Iraq Population and Mobile Penetration
36.0
45%
36%
85%
40%
35%
9.0
90%
37%
39%
78%
34.0
34%
8.0
7.0
30%
6.0
80%
72%
35%
32.0
70%
66%
25%
5.0
30.0
54%
60%
20%
4.0
3.0
15%
2008
2009
2010
Subscribers (mn)
2011
28.0
2012
50%
2008
Market share
2009
Population (mn)
2010
2011
2012
Successful completion of IPO
Ooredoo increased its stake to 64.1% from 53.9% in the IPO which took place in January 2013. Asiacell sold 67.5bn shares at a
price of 22 Iraqi dinars (0.02USD) in its IPO. This came as part of the licensing terms in which telecom operators in Iraq had to
list 20.0% of their shares on the stock exchange after four years of issuance of the license. All the telecom operators saw a
delay in the IPO process due to lengthy bureaucratic process in the country. License for Asiacell was issued in August 2007 and
thus it was expected to undertake IPO by September 2011.
Iraq offers good potential as the country rebuilds; Development of post-paid services linked to banking services
Prepaid customers account for 99.35% of the total subscribers in Iraq. This shows the potential for growth in the post-paid
segment. The introduction of post-paid services will be reliant on the development of banking services. Unlike other countries,
where ARPU has been on a steady decline, we believe ARPU in Iraq, at worst is likely to be stable as the country carries on
with its reconstruction. Oil production in Iraq touched 3.0mn barrels in 2012 for the first time in around three decades. The rise
in revenue from oil production will feed into other sectors of the economy and ultimately lead to more spending on telecom
services by the telecom subscribers.
th
3G licenses expected to be issued in 2013; Entry of 4 operator doubtful
3G license is expected to be issued this year after facing delays. The granting of 3G licenses will be a positive development for
all the mobile operators, if additional spectrum is given at a reasonable cost, as they can gain from providing higher speed data
services to the subscribers.
th
Meanwhile, there is still no clarification on whether a 4 mobile license will be issued. Telecom operators in Iraq seem to
th
believe that the auction of the 4 license is unlikely since the three operators are making the desired investment in
infrastructure and there is a reasonable level of competition in the market. There is also a possibility that the government might
allow MNVOs to enter the market instead.
May - 2013
7
Ooredoo
Key Forecasts (QAR mn)
Qatar
Revenue
Growth
EBITDA
Growth
EBITDA margin
ARPU (USD)
2009
5,686
4.4%
3,296
-3.0%
58.0%
42.5
2010
5,400
-5.0%
2,878
-12.7%
53.3%
38.8
2011
5,707
5.7%
2,948
2.4%
51.7%
41.2
2012
6,220
9.0%
3,249
10.2%
52.2%
41.7
2013e
6,491
4.4%
3,129
-3.7%
48.2%
42.9
2014e
6,716
3.5%
3,391
8.4%
50.5%
43.7
2015e
6,860
2.2%
3,410
0.5%
49.7%
43.3
2016e
7,016
2.3%
3,431
0.6%
48.9%
42.8
Kuwait
Revenue
Growth
EBITDA
Growth
EBITDA margin
ARPU (USD)
2009
2,580
-11.0%
1188
-22.9%
46.0%
42.2
2010
2,827
9.6%
1262
6.2%
44.6%
39.5
2011
3,223
14.0%
1469
16.4%
45.6%
38.6
2012
2,880
-10.6%
1101
-25.1%
38.2%
29.8
2013e
2,622
-9.0%
891
-19.0%
34.0%
30.2
2014e
2,673
1.9%
906
1.6%
33.9%
30.2
2015e
2,676
0.1%
896
-1.1%
33.5%
29.8
2016e
2,658
-0.7%
890
-0.7%
33.5%
29.5
Indonesia
Revenue
Growth
EBITDA
Growth
EBITDA margin
ARPU (USD)
2009
6,579
58.0%
3,207
54.2%
48.7%
3.4
2010
7,942
20.7%
4,034
25.8%
50.8%
3.3
2011
8,550
7.7%
4,159
3.1%
48.6%
3.1
2012
8,804
3.0%
4,414
6.1%
50.1%
2.8
2013e
9,463
7.5%
4,665
5.7%
49.3%
2.8
2014e
9,838
4.0%
4,791
2.7%
48.7%
2.8
2015e
10,140
3.1%
4,867
1.6%
48.0%
2.7
2016e
10,271
1.3%
4,899
0.7%
47.7%
2.7
Iraq
Revenue
Growth
EBITDA
Growth
EBITDA margin
ARPU (USD)
2009
3,998
40.4%
2,162
43.9%
54.1%
12.4
2010
5,054
26.4%
2,621
21.2%
51.9%
14.2
2011
5,934
17.4%
3,233
23.4%
54.5%
15.1
2012
6,878
15.9%
3,689
14.1%
53.6%
15.7
2013e
7,270
5.7%
3,599
-2.5%
49.5%
14.9
2014e
7,612
4.7%
3,730
3.7%
49.0%
14.8
2015e
7,874
3.4%
3,842
3.0%
48.8%
14.7
2016e
8,052
2.3%
3,913
1.8%
48.6%
14.6
Algeria
Revenue
Growth
EBITDA
Growth
EBITDA margin
ARPU (USD)
2009
1,795
7.5%
590
22.7%
32.9%
6.4
2010
2,228
24.1%
841
42.5%
37.7%
6.3
2011
2,961
32.9%
1,101
30.9%
37.2%
7.9
2012
3,479
17.5%
1,374
24.8%
39.5%
9.0
2013e
3,977
14.3%
1,551
12.9%
39.0%
9.6
2014e
4,355
9.5%
1,707
10.0%
39.2%
9.8
2015e
4,670
7.2%
1,835
7.5%
39.3%
9.9
2016e
4,957
6.1%
1,943
5.9%
39.2%
10.0
Tunisia
Revenue
Growth
EBITDA
Growth
EBITDA margin
ARPU (USD)
2009
2,616
3.1%
1,413
6.5%
54.0%
46.1
2010
2,583
-1.3%
1,421
0.6%
55.0%
38.6
2011
2,685
3.9%
1,520
7.0%
56.6%
35.7
2012
2,673
-0.5%
1,515
-0.3%
56.7%
32.6
2013e
2,605
-2.5%
1,277
-15.8%
49.0%
30.1
2014e
2,673
2.6%
1,302
2.0%
48.7%
29.4
2015e
2,759
3.2%
1,338
2.8%
48.5%
29.2
2016e
2,826
2.5%
1,365
2.0%
48.3%
28.9
Source: Ooreedo investor presentations, company reports and Global Research
Note: ARPU is the blended ARPU for mobile services
May - 2013
8
Ooredoo
Financial Statements
2010
2011
2012
2013e
2014e
2015e
2016e
Revenue
Revenue Growth
EBITDA
EBITDA growth
Depreciation and amortization
EBIT
Financial Charges
Other revenues
Profit Before Taxation
Taxation/Royalties
Discontinued operation
Net Profit for the year
Non-controlling interest
Profit attributable to equity holders
Net profit growth
27,377
13.9%
12,465
11.0%
(6,317)
6,147
(1,804)
611
4,954
(866)
4,088
(1,200)
2,888
2.2%
31,745
16.0%
14,796
18.7%
(6,989)
7,806
(1,901)
1,293
7,198
(1,223)
(32)
5,943
(3,338)
2,606
-9.8%
33,714
6.2%
15,546
5.1%
(7,702)
7,844
(1,921)
98
6,021
(1,303)
(68)
4,650
(1,706)
2,944
13.0%
35,447
5.1%
16,139
3.8%
(8,423)
7,716
(1,861)
150
6,005
(1,298)
4,708
(1,372)
3,336
13.3%
37,034
4.5%
16,923
4.9%
(8,842)
8,081
(1,826)
137
6,392
(1,373)
5,019
(1,372)
3,647
9.3%
38,258
3.3%
17,337
2.4%
(9,304)
8,034
(1,511)
169
6,692
(1,377)
5,315
(1,346)
3,970
8.9%
39,087
2.2%
17,606
1.5%
(9,670)
7,936
(1,295)
196
6,836
(1,372)
5,464
(1,352)
4,113
3.6%
Cash and Bank Balance
Receivables and Prepayments
Inventories
Total Current Assets
25,576
4,740
317
30,632
21,250
5,817
343
27,409
15,006
6,102
359
21,467
16,092
6,558
408
23,057
19,448
6,851
426
26,726
21,498
7,078
440
29,016
24,645
7,231
449
32,326
Net property, plant and equipment
Intangible assets
Investments in associates & ava. for sale
Other non-current assets
Total Fixed Assets
32,173
33,279
3,988
1,326
70,766
33,065
36,741
3,922
1,197
74,925
32,503
34,746
4,507
1,006
72,762
32,259
32,966
4,905
1,665
71,795
31,222
31,267
5,282
1,771
69,542
29,191
29,645
5,689
1,884
66,409
26,108
28,095
6,130
2,004
62,338
101,399
102,334
94,229
94,852
96,268
95,426
94,664
10,476
2,519
4,704
43,743
5,731
15,197
11,218
13,851
2,036
32,073
3,764
18,337
11,009
7,308
2,163
32,019
4,841
9,000
11,108
6,577
2,239
31,249
3,683
10,371
11,518
5,919
2,326
29,483
3,767
11,744
11,852
5,327
2,427
25,913
3,261
13,089
12,143
4,795
2,542
22,299
2,776
14,441
1,467
8,834
8,729
19,030
101,399
1,760
9,837
9,459
21,056
102,334
3,203
9,586
15,101
27,890
94,229
3,203
11,320
15,101
29,624
94,852
3,203
13,205
15,101
31,509
96,268
3,203
15,253
15,101
33,557
95,426
3,203
17,364
15,101
35,668
94,664
11,817
(6,954)
(11,326)
(6,463)
15,006
13,678
(7,495)
(5,097)
1,086
16,092
16,101
(6,639)
(6,105)
3,356
19,448
15,948
(6,232)
(7,666)
2,050
21,498
16,316
(5,673)
(7,496)
3,147
24,645
EBITDA Margin
45.5%
46.6%
46.1%
Net Profit Margin
10.5%
8.2%
8.7%
Return on Average Assets
4.4%
5.9%
4.8%
Return on Average Equity
16.7%
13.0%
12.0%
Net debt / EBITDA (x)
1.7
1.7
1.6
Interest coverage (x)
6.9
7.8
8.1
Debt / Equity (x)
1.4
1.2
1.1
Capex as % of sales
25.4%
20.7%
21.7%
EV/EBITDA (x)
4.4
4.6
4.3
EV/Revenues (x)
2.1
2.2
2.0
Adj. EPS (QAR)
11.0
9.9
9.2
Adj. Book Value Per Share (QAR)
72.4
80.1
87.1
Adj. Market Price (QAR) *
99.7
94.3
104.0
Market Capitalization (QAR mn)
21,841
25,450
33,313
Dividend Yield
2.8%
2.1%
4.8%
P/E Ratio (x)
9.1
9.5
11.3
P/BV Ratio (x)
1.4
1.2
1.2
Source: Company Reports & Glob al Research
* Market price for 2013 and sub sequent years as per closing prices on May 06, 2013
45.5%
9.4%
5.0%
11.6%
1.3
8.7
0.9
18.1%
4.3
2.0
10.4
92.5
116.2
37,221
4.7%
11.2
1.3
45.7%
9.8%
5.3%
11.9%
0.9
9.3
0.8
16.5%
3.8
1.8
11.4
98.4
116.2
37,221
5.2%
10.2
1.2
45.3%
10.4%
5.5%
12.2%
0.6
11.5
0.7
14.8%
3.5
1.6
12.4
104.8
116.2
37,221
5.4%
9.4
1.1
45.0%
10.5%
5.7%
11.9%
0.1
13.6
0.5
12.9%
3.1
1.4
12.8
111.4
116.2
37,221
5.6%
9.1
1.0
Balance Sheet
Income Statement
(QAR mn)
Total Assets
Accounts payable & accruals
Short term borrowings
Other current liabilities
Long-term debt
Other non-current liabilities
Non-controlling interests
Cash Flow from Operating Activities
Cash Flow from Investing Activities
Cash Flow from Financing Activities
Change in Cash
Net Cash at End
Ratio Analysis
Cash Flow
Share capital
Retained Earnings
Other reserves
Total Shareholders Equity
Total Equity & Liability
May - 2013
9,633
(5,514)
9,383
13,502
25,576
7,910
(8,182)
(4,010)
(4,282)
21,250
9
Ooredoo
Disclosure
The following is a comprehensive list of disclosures which may or may not apply to all our researches. Only the relevant
disclosures which apply to this particular research has been mentioned in the table below under the heading of disclosure.
Disclosure Checklist
Company
Ooredoo
Recommendation
Strong Buy
Bloomberg
Ticker
QTEL QD
Reuters
Ticker
QTEL.QA
Price
QAR116.2
Disclosure
1,10
1.
Global Investment House did not receive and will not receive any compensation from the company or anyone else for the
preparation of this report.
2. The company being researched holds more than 5% stake in Global Investment House.
3. Global Investment House makes a market in securities issued by this company.
4. Global Investment House acts as a corporate broker or sponsor to this company.
5. The author of or an individual who assisted in the preparation of this report (or a member of his/her household) has a direct
ownership position in securities issued by this company.
6. An employee of Global Investment House serves on the board of directors of this company.
7. Within the past year, Global Investment House has managed or co-managed a public offering for this company, for which it
received fees.
8. Global Investment House has received compensation from this company for the provision of investment banking or financial
advisory services within the past year.
9. Global Investment House expects to receive or intends to seek compensation for investment banking services from this
company in the next three month.
10. Please see special footnote below for other relevant disclosures.
Global Research: Equity Ratings Definitions
Global Rating
Definition
STRONG BUY
Fair value of the stock is >20% from the current market price
BUY
Fair value of the stock is between +10% and +20% from the current market price
HOLD
Fair value of the stock is between +10% and -10% from the current market price
SELL
Fair value of the stock is < -10% from the current market price
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May - 2013
10
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Ooredoo (Formerly Qtel)

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