Batelco Group Announces Third Quarter 2016 Profits of BD32.5 Million (US$86.2 Million)

Batelco Group (Ticker: BATELCO), the international telecommunications Group with operations across 14 countries, today announced its results for the nine-month period ended 30 September 2016 (“the Period”). Despite competitive pressure, the Group was able to maintain stable revenues and a robust EBITDA margin.

Financial and Subscriber Highlights

• Gross revenues of BD273.0M (US$724.1M) for the period;
• EBITDA of BD105.2M (US$279.0M) representing a 39% margin;
• Consolidated net profit of BD32.5M (US$86.2M) for the period;
• Markets outside of Bahrain contribute 59% of revenues and 55% of EBITDA;
• Substantial cash and bank balances of BD163.9M (US$434.7M); and
• Earnings per share of 19.5 fils.

For the nine-month period, the Group’s Gross Revenues are down marginally by 2% YoY to BD273.0M (US$724.1M) mainly due to competitive pressures in key markets. Gross Revenues declined by 4% in Q3 2016 compared to the same quarter in 2015 and 2% since Q2 2016.

EBITDA for the period was BD105.2M (US$279.0M), a 2% decline year over year.  EBITDA decreased by 8% in the third quarter of 2016 compared to Q3 2015 and 6% since Q2 2016. Throughout the period, the Group was able to continue its successful cost containment programmes resulting in a 3% YTD reduction in expenditure compared to the same period last year. The Group continues to sustain its robust EBITDA margin of 39%.

Results from operating activities for the period were BD52.8M (US$140.1M), reflecting a 7% decrease year-over-year and 21% decrease QoQ compared to Q3 2015.  This decline is attributed to increased depreciation charges for higher capex as a result of significant network expansion throughout the Group.

The Group ended the nine month period with Net Profit of BD32.5M (US$86.2M), a 21% decline compared to the corresponding period in 2015.  Q3 2016 net profit reported a decrease of 27% over Q3 2015. The reduced net profits for the period are impacted by increased finance costs due to borrowings in the Group’s operation in Jordan, one-off items recorded in 2015 and share of loss of the Group’s investments.

The Group’s balance sheet remains strong; as of 30 September 2016 net assets were valued at BD548.1M (US$1,453.8M) with cash balances of BD163.9M (US$434.7M). This includes the impact of the interim dividend (10 fils per share) announced and paid during the quarter. Earnings per share for the period stood at 19.5 fils.

The Q3 financial results were announced following a meeting of the Board of Directors at Batelco Group Headquarters on Wednesday November 2nd.

The Board noted that the Group’s efforts are focussed on transforming operations to achieve a competitive edge and long-term operational excellence. The communications world is shifting due to a thirst for more content and digital transformation; Batelco is paving the way to be positioned as a leading digital solutions and services provider.

Group Operational Review

The Batelco Group’s operational performance during the first nine months of 2016 reflects the intense competition faced across the Group, which operates in very diverse markets each with their unique needs. Accordingly, efforts are continuing to undertake significant investments depending on the various needs of the individual operations, for the benefit of the Group as a whole.

Across the Group, the overall subscriber numbers are down by 6% year on year, mainly as a result of decreases in Batelco Bahrain and Sabafon mobile subscribers due to market pressure. However Broadband subscriber numbers have increased by 16% YoY with particularly strong input from the home market of Bahrain, which has seen a 29% year-on-year increase in subscribers. This growth is mainly attributable to the take up of fibre services which are now widely available across Bahrain.

During the period, a number of overseas markets delivered positive results due to the rollout of new and enhanced solutions to exceed their customers’ expectations. Overall, Batelco’s key overseas operations performed well and at the end of the nine month period, 59% of Revenues and 55% of EBITDA were attributable to operations outside of Bahrain.

Jordan: Umniah continues to demonstrate a significant presence in the Jordanian telecom market due to its strategy of offering high quality services, with the best value, while keeping abreast with sector developments and customers’ various needs and expectations.  In the first quarter of 2016, the company launched its 4G high-speed Internet services for individuals and its LTE fixed services for households and businesses which have contributed to a 13% increase YoY and a mobile subscriber base of 3.3 million.  Umniah’s broadband subscriber base is also making positive gains with 11% increase YoY and 7% since Q2 2016.

Kuwait: Batelco Group holds a 90% shareholding in Qualitynet, which remains the clear market leader in the fixed Data Communications and Internet Services industry in Kuwait.  The Company was able to retain its broadband market share despite tough competition from fixed and wireless service providers.

Maldives:  Dhiraagu continued to perform robustly in the third quarter of the year.  During the quarter the Company successfully expanded its services and launched several promotional campaigns, providing the best value and customer experience in the market. Highlights include launching a new postpaid package with the highest data allowances, expanding its fibre network to an additional island and introducing special residential broadband packages. Both mobile and broadband subscribers witnessed a 12% and 15% increase year over year respectively.

Channel Islands and Isle of Man:  The overall performance of the Sure CIIM businesses is very pleasing, especially that of the Jersey and Isle of Man businesses which continue to demonstrate good momentum in their respective markets built on a solid foundation of capital investment and customer experience initiatives.  During the period Sure CIIM completed the upgrade of its retail stores to ensure a customer lead and digital experience.  The Guernsey business continues to see growth in international signaling contracts. Subscriber numbers continue to grow with a 2% and 4% year-over-year increases in mobile and broadband subscribers respectively.

South Atlantic & Diego Garcia:  It has been a challenging quarter for Sure S&D due to the end of the oil exploration phase in the Falklands earlier in the year, the delay in the launch of commercial flight operations in Saint Helena and an overall reduction in visitors across all operations.  Various initiatives have been implemented to minimize the impact of these events on performance. Despite the recent challenges, the South Atlantic businesses were able to grow mobile and broadband subscribers by 43% and 4% YoY respectively.

Other JVs: Sabafon, in which the Group has a 26.94% shareholding, experienced a decline in subscriber numbers.  Despite the drop in subscriber numbers and the difficulties operating in an environment with increased political challenges, the company continued to provide telecommunication services to its customers.  Atheeb, in which Batelco holds a 15% stake, reported an impressive 36% YoY improvement in subscriber numbers.

Batelco Bahrain – New Agreements

At Batelco Bahrain it was a very busy period marked by a number of key announcements and the signing of new agreements, including during GITEX, the major technology exhibition which took place recently in Dubai.

Batelco was delighted to have a strong presence as part of the prestigious Bahrain Pavilion where the Company was supported by a number of key partners including Ericsson and Sophos. During the week Batelco signed an MOU (Memorandum of Understanding) with Ericsson to collaborate on the development of 5G and Internet of Things (IoT) use cases. The MOU will help drive innovation and early IoT applications on 5G mobile network technology based on the market requirements in the Kingdom of Bahrain.

Batelco also announced a platinum partnership agreement with Sophos, a key IT security and data protection company. The signing with Sophos is in line with Batelco’s efforts to provide relevant security solutions for Bahrain’s enterprise sector.  Additionally, in collaboration with Ericsson and Net4Things, a leading company enabling end-to-end IoT solutions, a variety of Cloud and Sustainability Smart Solutions were demonstrated at the Batelco Stand including Connected Print and smart solutions for homes and hospitals.

Meanwhile, as part of Batelco’s network expansion plans to deliver super-fast Internet services all over the Kingdom, Fibre services were launched during the quarter for Durrat Al Bahrain.

While the mobile subscriber base has decreased in Bahrain, this has been off-set by growing Broadband numbers as customers continue to graduate to internet based services in line with global trends and as a result of the strong delivery of in-demand products and services.

        Looking Ahead

Batelco continues to give high priority to its Corporate Social Responsibility (CSR) programme which aims to support initiatives across the fields of Health, Education, Sports and Culture and in line with this has committed over BD1M during the first nine months of 2016.

Among the recent CSR highlights, Batelco was delighted to witness the official opening of the Batelco Pedestrian Bridge in Riffa which links the Southern Governorate and Central Governorate. The bridge, funded by Batelco is in line with the Company’s commitment to support initiatives that benefit the community.

Key among Batelco’s priorities for the last quarter of the year is a sharp focus on its customers at home and overseas to ensure that provisioning exceeds their expectations. Batelco’s teams throughout all operations at all levels are committed to working together to deliver on the Group’s strategic aims in order to strengthen performance and positively impact the bottom line.