R.O 100 Million Omantel Group Net Profit During First Half of 2020
Muscat: 19th July 2020: Oman Telecommunications Company S.A.O.G Group (MSM: OTEL) announces its financial results for the six-month period ended 30th June 2020 achieving a net profit of R.O 100.5 Million (before non-controlling interests) compared to R.O 126.5 Million in 2019, a decline of 20.5%. This decline on the business was mainly driven by a 27% year-on-year (YoY) decline in Group's net profit for the second quarter of 2020 due to the unavoidable impacts of COVID-19 pandemic, predominantly on the core mobile business. The Group recorded relatively stable consolidated revenues reaching R.O 1242 Million in first half of 2020 compared to R.O 1258 Million in 2019.
Omantel Group achieved these results despite the impacts of COVID-19 pandemic that virtually halted economic activity and travel across the region. Omantel’s management priority was to ensure its network was operating at optimal levels to provide vital connectivity to the Omani authorities and community, as demand for mobile and fixed broadband reached historic highs. Furthermore, through its proactive steps and focused strategy, management was able to mitigate the COVID19 impacts through a series of initiatives that included significant investments in digital infrastructure (Enhanced Mobile App, Portal and the Call Centre) which helped in ensuring that the digital channels were available for the customers to enjoy uninterrupted services. Moreover, Omantel earlier investments in 5G infrastructure helped to grow Home Broad Band revenue by 8.1% in the first half of 2020 compared to the same period of 2019.
Omantel domestic operations revenue witnessed an increase of 11% YoY reaching R.O 288 Million in the first half of 2020 compared to R.O 259 Million in the same period of 2019. This was mainly driven by increase in international transit international wholesale business and handset revenues, which are typically low margin revenue streams compared to the core mobile operation’s revenue. Adjusted for the above, core mobile related revenues for first half of 2020 was RO 221 Million compared to RO 232.5 Million in 2019, a decrease of 5% YoY which had a significant impact on EBITDA and net profit during the period.
On the international operations side, Omantel’s international wholesale business diversification strategy helped the Company to grow the international capacities business by 7.6% in the first half of 2020 compared to 2019 which continues to exhibit a high amount of resilience. Proactive Cost Optimization measures on both Opex and Capex which included contract renegotiations, cancellation and re-scheduling of some capex projects, efficient cash flow management among others have resulted in overall reduction of 6% in operating and administrative expenses YoY.
Zain Group contributed RO 94.8 Million to the net profit in the first half of 2020 (before non-controlling interest) of Omantel Group compared to RO 114.8 Million in 2019 a decrease of 17.4% YoY. After adjusting for non-controlling interest, Zain Group contributed RO 18.2 million in the first half of 2020 compared to RO 21.4 Million in year 2019.
Among the key elements that had an impact on the margins were the decline in the overall voice revenue on account of free airtime offer launched from 27th March to 15th April 2020 to support the community members to stay at home and maintain social distancing, further decline in enterprise voice revenue on account of the lock down, lock down resulting in closure of retail shops, partners outlets etc. leading to lower recharge, leisure and travel coming to a halt leading to reduction in roaming revenues, decline in Mobile Broad Band revenues on account of substitution effect with Fixed Broad Band revenues, increase in impairment charges (as required by IFRS 9) on the Enterprise and Government segment which is in line with the recent rating downgrades announced by the rating agencies in addition to the lower collection realized during the period.
Commenting on these results, Talal bin Said Al-Mamari, CEO of Omantel said, “There is no doubt that the Corona pandemic and the precautionary measures taken by the concerned authorities to alleviate its effects have affected all business sectors around the world. Omantel proactively sought to mitigate the impacts of this pandemic, first by focusing on providing vital connectivity to all to ensure access to essential medical, commercial and financial services. Second, our business continuity strategy saw the implementation of a number of innovative measures and initiatives to mitigate the effects of the lockdown on the business".
Al-Mamari continued, "We are pleased by the resilience of our business given that our domestic revenues grew by 11% and overall Group revenues were relatively stable. This would have not been achieved if it were not for our dedicated employees who made sacrifices throughout this time of crisis. Omantel ensured its employees’ safety by supporting and providing them the necessary equipment to efficiently and safely function.”
The fight against Covid19 initiatives implemented by Omantel:
- To support the national efforts to confront the pandemic led by the Ministry of Health, Omantel procured 24,000 COVID-19 test equipment and providing technical support to the parallel call center of the Ministry.
- Assisted various business sectors to ensure the continuity of their businesses especially during a period at which the economic activities were closed.
- Innovative ICT solutions enabled the acceleration of the digital transformation in different sectors and businesses. Among these initiatives were the free subscription to virtual collaboration platforms such as Webex, Microsoft team and Igtimaati platforms and reducing the burden of the pandemic on the SME sector such as the postponement of its monthly payments for a period of three months.
- Omantel worked through its existing partnerships with many international and local companies to facilitate the distance learning for governmental and private educational institutions in addition to the students in various school and university academic institutions.
- Provided free browsing of educational sites of the Ministry of Education, the Ministry of Higher Education, under EDU.OM domain.
- Launched a digital educational platform for all schools in the Sultanate in cooperation with Google.
- Provided 3000 free local minutes and 30 GB free for health workers, in addition to encouraging individuals to stay home to avoid the spread of the virus by giving them free local calls, doubling the speed of home internet and increasing the speed of wireless home broad band packages and 5G packages.
- Offered alternative innovative solutions to enable its customers to order services via digital channels namely, Omantel App, portal and the 24/7 call centre.
- Strengthened its networks to keep pace with the increased demand from individuals and businesses for various telecom services. Improvements included the expansion of the fixed and mobile networks (3G and 4G) by increasing the capacity of existing sites and adding new sites in addition to increasing Internet capacity. During the period February to end of June 2020, Omantel added 77 new sites to the 5G network, upgraded 42 sites from 3G to 4G. Omantel also added 26 new stations to 3G and 4G networks, and increased the capacity of 23 sites in the 4G network in various governorates across the Sultanate.
Omantel said that these preliminary results are unaudited and are subject to the approval of the Audit Committee and the Board of Directors in their next meetings which will be held within the statuary period as stipulated by Capital Market Authority.