Financial and Subscriber Highlights (excluding recently acquired companies)
-Gross Revenues of BD71.0m ($188.3m) for the period;
-EBITDA of BD21.9m ($58.1m) representing a 31% margin;
-Consolidated Net Profit of BD13.4m ($35.5m) for the period;
-Subscriber base of 7.9 million, an increase of 15% YoY. This includes 13% growth in mobile customers and 76% growth of the broadband subscriber base;
-Launch of 4G LTE service, making Batelco the first to offer the service in Bahrain;
-Further diversification of Group revenues with 42% of revenues and 39% of EBITDA now sourced from markets outside Bahrain;
-Successful completion of the acquisition of Cable & Wireless Communications’ (CWC) Monaco & Islands businesses on 3rd April 2013, adding 10 new markets;
-Significant net cash balances totaling BD75.9m ($201.3m) and Investment Grade credit ratings from Fitch and Standard & Poor’s Ratings Services;
-Earnings per share of 8.5 fils.
The Group’s Gross Revenues stood at BD71.0m ($188.3m) for the period, down 9% from BD78.0m ($206.9m) year over year. For the period, the Group reported Net Profit of BD13.4m ($35.5m) versus BD16.1m ($42.7m) for the corresponding period in 2012, a decrease of 17% year over year. EBITDA for the period was BD21.9m ($58.1m), representing a 31% margin, versus EBITDA of BD28.3m ($75.1m), for the corresponding period in 2012. The decrease in profitability was mainly attributable to competitive pressures continuing in Bahrain.
In line with ongoing efforts to diversify revenues and maximise investments, the Group saw a greater contribution from overseas markets. At the end of the period, 42% of revenues and 39% of EBITDA were generated from operations outside of Bahrain. This will be bolstered in upcoming periods following the successful conclusion of Batelco’s acquisition of a number of Cable & Wireless Communications’ (CWC) companies on 3rd April 2013.
The transaction, a milestone for the Group, has seen the addition of 10 new markets which will serve to further diversify the revenue base and contributions to the bottom line during the remainder of 2013 and beyond.
The Group’s balance sheet remained strong. As of 31 March 2013, there were significant net cash balances totaling BD75.9m ($201.3m) despite the dividend payment during the period. Earnings per share for the period were 8.5 fils.
Commenting on the results for the first quarter following the meeting of the Board of Directors, Batelco Chairman, Shaikh Hamad bin Abdulla Al Khalifa, said, “Results for the period reflect the intensity of the competitive situation in our home market and the need to accelerate the restructuring programme to reduce our operating costs. Our overseas operations delivered steady performance and sound results. In line with guidance, and despite robust competition in all MENA markets, we delivered reasonable profits although revenues recorded a decline. Also impacting performance were costs relating to our ongoing efforts to enhance competitiveness across the Group. We are focused on preserving margins and strengthening cash flows and the bottom line.”
In line with the growth strategy, the Group acquired 10 operations from CWC, a transformative event for the Group on a number of levels. First, it sees Batelco emerge from being a regional telecommunications provider into a regional operator of international reference. Importantly, it also supports our strategy of adding robust, new revenue streams to our business.
As announced, the transaction is accretive and the benefits and contributions from the addition of these cash generative businesses will be reflected in the Group’s financial performance starting in the second quarter with the expected result of enhancing profitability and shareholder value, a main priority. In support of this transaction, the Group has also recently completed a major fundraising exercise successfully launching a $650m 7-year bond offering, our first of this kind.
We are especially pleased that in less than one week, the offering priced at an attractive spread and generated a $4.8bn orderbook from investors across the Middle East, Asia and Europe. The bond also received an Investment Grade rating from Standard & Poor’s and Fitch, reflecting the right confidence in Batelco and its strategy.
Operational Review & Highlights
Commenting on advancements across the business, Group CEO, Shaikh Mohamed bin Isa Al Khalifa, said, “We’re pleased with the continued progress we’ve made across our operations driven by efforts to streamline our business and achieve growth both organically and through the completion of our landmark acquisition, which now sees Batelco Group operate across 16 global markets. For the period, we grew our subscribers to 7.9 million across our six existing markets, a rise of 15% year on year and 1% since the start of 2013. This reflected continued growth in mobile and broadband across key overseas markets. We’ve also continued to enhance our competitiveness in Bahrain where, despite tough competition, we are focused on the retention of high value customers and maintaining market leadership.”
“We are also extremely happy to have concluded the acquisition of the CWC companies at the beginning of April for which we were awarded Deal of the Year at the TMT Finance 2013 Middle East & North Africa Conference & Awards in Dubai We are confident that our expanded network and presence will strengthen our competitiveness and our ability to innovate and continually raise the bar, in terms of the quality and level of service we provide. It also ensures a sound platform to further build upon the strong presence that we and our newly acquired companies have established in each of our markets of operation,” he added.
Continued Growth of the Mobile and Broadband Subscriber Base
During the quarter, mobile subscriber numbers grew 13% year over year and 1% quarter on quarter. This increase was largely attributed to customer growth in Jordan and Yemen. It also reflects the success of ongoing efforts in Bahrain to maintain customer loyalty and numbers. Similarly, positive results were also achieved in Broadband where customer numbers for the quarter increased by 76% year-over-year and by 9% since the start of 2013.
Growing Contributions from Overseas Markets
During the period, overseas markets continued to deliver enhanced results as highlighted by their growing contribution to the bottom line.
Jordan: Umniah continued to deliver strong results for the first quarter of the year. It grew its mobile subscriber base to 2.4 million as a result of 5% growth year over year. This was supported by the roll out of 3.75G services across the Kingdom which began in June 2012. Broadband growth was even more robust; for fixed and wireless broadband, Umniah reported an impressive 21% quarter on quarter.
Kuwait: Batelco’s subsidiary Qualitynet, which delivers total ICT solutions, remains the market leader in Kuwait’s Data Communications and Internet Services industry. At quarter end the company served more than 41,000 users reflecting a gain of 3% year over year and 6% since last quarter.
Other JVs: Sabafon (Yemen), in which the Group has a minority shareholding, ended the quarter with 4.1 million users reflecting growth of 21% year on year and steady results quarter on quarter. Atheeb (Saudi Arabia), in which Batelco holds a 15% stake, reported a decline of 12% year over year in broadband subscribers.
Batelco Bahrain – New Levels of Innovation
In Bahrain, despite aggressive competition, Batelco maintains a strong presence in the mobile market supported by its retention of high value post-paid residential and business customers.
For the period, mobile subscribers increased by 3%, a second consecutive quarter of growth. Year over year, however, there was a 2% decline. Mobile broadband subscriber growth remained impressive with year over year growth of 121% and a 10% increase quarter on quarter. As in previous periods, and reflecting a global shift to mobile services, demand for fixed line and broadband services continued to decrease.
Batelco’s market leadership during the quarter was supported by a number of initiatives. Importantly the company became the first operator in the Kingdom to offer 4G LTE in February. 4G LTE not only helps to provide for the ultimate mobile experience with the fastest download speeds available for customers, it also enhances the country’s global position and competitiveness by providing advanced telecommunications services required for businesses and service industries. Similarly in broadband, the company also introduced a number of innovations including a new super fast speed broadband package of 100Mbps for home broadband use.
This has been made possible through the roll out of fibre optic (GPON) technology, which delivers superfast speed access to the Internet. These and other services were showcased at Batelco’s first Tech Show, also held during the period, where the company’s wide range of the latest communications products and services including ICT products, services and solutions were exhibited for customers.
“Innovation remained a constant focus during the quarter as highlighted by the numerous new services, offers and enhancements to speed, reliability and care across the full spectrum of services we offer. Our roll out of the much awaited 4G LTE service is not only a significant innovation for our customers, it also underscores Batelco’s ongoing commitment to investment in the Kingdom’s infrastructure. This commitment to both customers and the markets in which we operate will continue to support our market leadership at home and throughout our growing network,” said Shaikh Mohamed.
Commitment to the Community
Strong commitment to Corporate Social Responsibility in the Kingdom of Bahrain also continued in the period with more than BD350,000 being provided to support sports, social, health and education related initiatives and charitable organisations.
Specifically, during the period, Batelco renewed its partnership with the Crown Prince Scholarship Programme pledging a total of BD1m to be paid over the next five years. Support was also extended to the Muharraq Social Welfare Centre for the elderly and a pledge of BD350,000 was committed for the Riffa Bridge Project, which will see a walkway linking the Southern Governorate and Central Governorate developed.
Maximising the Value of New and Existing Assets
Concluding, Batelco Group CEO, Shaikh Mohamed, said, “Building on the positive momentum of the first quarter, we enter an exciting new phase for the Group. We will focus in the months ahead on maximising the value of our new and existing assets and leveraging our added size, scale and reach in order to achieve further growth, realize synergies and ultimately deliver more value to all of our stakeholders, and, in particular customers and shareholders.”
“While we are a transformed company, with a global presence, our vision, principles and focus remains unchanged. Working together with all of our new and existing management teams and colleagues, we remain dedicated to delivering innovation, customer service and value and to operating market leading brands across our expanded network. We are confident that in doing so, we will also be better placed to achieve growth, strengthen financial performance and emerge a more profitable and cash generative communications Group,” he added.
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