Financial and Subscriber Highlights
- Gross Revenues of BD304.7m ($808.2m) for the year;
- EBITDA of BD101.8m ($270.0m) representing a 33% margin for the full year; adjusted EBITDA normalised for one-offs was BD123.0m ($326.0) at 40%;
- Consolidated Net Profit of BD60.3m ($160.0M) for the year;
- Subscriber base of 7.8 million, an increase of 18% YoY, when normalized. This includes 17% growth in mobile customers and 52% growth of the broadband subscriber base;
- Continued diversification of Group revenues with 41% of revenues and 39% of EBITDA now sourced from markets outside Bahrain;
- Successful execution of growth strategy with announced plans to acquire equity interest in Cable & Wireless Communications' (CWC) operations across 11 new markets to support greater diversification, revenue and subscriber growth;
- Progress on cost leadership, with the launch of restructuring programme, which will drive savings of BD20m annually from 2014 onwards;
- Significant cash and bank balances totaling BD95.0m ($252.0M) at year end and low debt;
- Recommended cash dividends of BD36.0m ($95.5m) for the full year, equivalent to 25 fils per share, marking ongoing ability to deliver value to shareholders; and 10% bonus share issue, awarding one extra share for every 10 shares currently held by the Company's shareholders.
- A sound overall financial position as affirmed by a continued Investment Grade Credit Ratings from Fitch and Standard & Poor's Ratings Services.
For 2012, the Group reported Net Profits of BD60.3m ($160.0m) from BD80.0m ($212.2m) for 2011. EBITDA for the year was BD101.8m ($270.0m), representing 33% margin, versus EBITDA of BD126.0m ($334.2M) for 2011.
The decline was attributed to aggressive competitive conditions in Bahrain, restructuring costs for 2012 and 2013 and a number of one-off adjustments. Adjusted EBITDA normalised for one-offs was BD123.0m ($326.0) at 40%.
The Group's Gross Revenues stood at BD304.7m ($808.2M) for the year versus BD327.0m ($867.4m) in the previous year. In line with the Group's continued diversification, 41% of revenues and 39% of EBITDA are now generated from markets outside of Bahrain where the Group continues to focus on strengthening its performance and reach.
The Group ended the year with a strong balance sheet and financial position. As of 31 December 2012, net assets were BD520.2m ($1,379.8M) with net debt of BD18.4m ($48.8m) and cash and bank balances of BD95.0m ($252.0m).
The Group also reported that the Board of Directors would recommend to the Annual General Assembly of Shareholders a full year cash dividend of BD36.0m ($95.5m), at a value of 25 fils per share, of which 15 fils per share was already paid during the third quarter of 2012 with the remaining 10 fils to be paid in cash following the AGm in February. In addition, the Board of Directors will also recommend a 10% bonus share issue, awarding one extra share for every 10 shares currently held by the Company's shareholders.
The soundness of the Group's financial health and performance were further underscored by the affirmation of its Investment Grade Credit Rating by leading global ratings agencies Fitch and Standard & Poor's Ratings Services in November and December of 2012, respectively.
This effectively positions Batelco to continue to pursue and support its growth and strategy for further diversification including its recently announced plans for the strategic acquisition of Cable & Wireless Communications' (CWC) Monaco and Islands Division, which was approved by the shareholders of both companies in early January 2013, and which remains on track to close during the first quarter of the 2013.
Batelco Group Chairman, Shaikh Hamad Bin Abdulla Al Khalifa, announcing the 2012 financial results following a meeting of the Board of Directors at the Group's Bahrain Headquarters, said: "For 2012, Batelco Group continued to deliver sound financial results in line with the guidance provided and expectations for the year. As was noted in previous quarters, beyond aggressive competition in the Bahrain market and elsewhere in the region, our results for 2012 were also impacted by a number of one off charges including expenses associated with an extensive restructuring and cost rationalization programme at our Bahrain operations, the benefits of which include BD20m in annual savings starting 2014, which will help us to further strengthen our performance and financial results as we go forward. That said despite the decline in revenue and income year over year, our profits remained healthy as did our ability to deliver adequate returns to shareholders."
"For 2012, we are pleased to announce the Board's recommendation to the General Assembly for a sound shareholder dividend. Our strategy and ongoing efforts to achieve operational excellence and growth continue and ensures the Group provides shareholders with some of the highest dividend yields in our industry region wide."
Shaikh Hamad added: "The actions we've taken over the past year, both in streamlining our operations and planning for further growth will also ensure this continues well into the future. Towards this end, we were delighted to have announced in December 2012 our intention to make a transformative acquisition. With the addition of CWC's Monaco and Islands Businesses, Batelco Group is poised to emerge as a regional company of international reference with an innovative portfolio of services and a more diversified revenue stream. We are confident that combined with our continued organic growth, this acquisition, which will be accretive from the outset, will help to even further bolster profitability and our ability to deliver value for shareholders.
"Our growth strategy and the further development of the Group are a reflection of the strong leadership by our executive teams, supported by tremendous efforts by our employees across all markets to retain our customers' loyalties and improve the way we develop and deliver services. The continuous focus by all our people on improving the way we serve our customers coupled with financial discipline, will enable us to pursue growth and meet our long term objectives," concluded Shaikh Hamad.
Review & Highlights
Commenting on the Group's operational performance across the network, Group CEO, Shaikh Mohamed Bin Isa Al Khalifa, said: "We are extremely pleased with the strides we have made during 2012 and the foundations we have set for further building our operations, subscriber base and presence in both existing and new growth markets. We ended the year on a strong note throughout our operations. Our total subscriber base grew to more than 7.8 million across six markets (excluding results from Indian operations) representing 18% growth year on year with especially strong results from Jordan and Yemen during the year and fourth quarter in particular. We are working hard to support organic growth whilst continuing to identify opportunities to acquire new cash generative businesses with a strong and growing base of customers.
"Despite ongoing challenges in the MENA markets and difficult market conditions worldwide, we successfully identified and announced a major acquisition which will see the size, scale and reach of the Group expand significantly. Through the synergies we hope to achieve by the pooling of resources, technologies and expertise, we will also further enhance our competitiveness and the strong presence we have already built and progressed in 2012 across our existing markets of operation. This includes reinforcing our market position in Bahrain, where we remain the leaders across a significant spectrum of communications services, as well as the strengthening of our operations in overseas markets, where we are continuing to grow and build market share."
Continued Growth of the Mobile and Broadband Subscriber Base
Mobile subscriber numbers grew 17% year over year and 5% quarter on quarter. This increase was supported by strong performance in Jordan and Yemen as well as success in Bahrain in maintaining market share, despite aggressive competition. The fourth quarter in particular saw important gains with Bahrain reporting a 3% increase in its mobile subscriber base, underscoring the success of its promotions and customer retention efforts, in addition to growth and steady results from Yemen and Jordan, respectively. Broadband customers for the year also increased by an impressive 52% year over year and by 18% since the third quarter with results again supported by progress in Bahrain and Jordan and steady results from Kuwait and Saudi Arabia.
Ongoing Growth and Diversification Overseas
In 2012, as noted, the Group companies in overseas markets continued to perform well, grow and support the strategy of diversification being pursued. For the year, contributions from operations outside of Bahrain increased both as a percentage of revenues and EBITDA. At year end 2012, 41% of revenues and 39% of EBITDA were sourced from overseas markets, helping to partially offset the effects of intense competitive pressures in Bahrain.
Jordan: 2012 was a landmark year for Umniah, in Jordan, which delivered 3% growth in its mobile subscriber base, following the launch of 3.75G services across the Kingdom. Exceeding plan and expected customer demand, more than 122,000 3G subscribers were added during 2012, bringing the company's mobile subscriber base to 2.4 million customers. Even greater uptake of the service is expected through 2013 with the continued rollout Kingdom-wide. These results not only served to reinforce Umniah's growing market leadership but also affirm the Group's belief and commitment to the Jordanian market where it has made significant investments including the purchase of the 3G license for which it paid JD50m ($70m) in January of 2012. Similarly positive results were reported by Umniah for fixed and wireless broadband subscriber growth. The company posted an impressive increase of 521% year over year and a 62% rise 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. In 2012, it maintained market share and position delivering steady results and ending the year with some 39,000 customers.
Other JVs: Sabafon (Yemen), in which the Group has a minority shareholding, returned to growth in 2012 following stabilization of the country's political situation and the rationalization of the customer base, which was completed in the first quarter and served to excluded non-active sim cards. The company ended the year with a subscriber base of more than 4.1 million users. This represents an impressive 33% increase year over year and 9% growth quarter on quarter. Further growth is expected throughout 2013 and beyond.
Atheeb (Saudi Arabia), in which Batelco holds a 15% stake, made progress in its strategy and the shift in its business model during 2012, focusing on the high margin business segment. While the near term results of this shift saw a year over year decline of 11% in voice and data services customers, the company was successful in adding a significant number of new business customers to keep numbers steady on a quarter-on-quarter basis and in terms of enabling the company to grow revenues as a result of higher value business subscribers coming to represent a greater percentage of its customer base.
Batelco Bahrain - Innovation, Excellence and Efficiency in Focus
In Bahrain innovation, excellence and efficiency remained the core focus. At year end 2012, the company maintained its market leading position with a 41% share of the mobile market.
This was supported by strong rates of customer retention, especially among high value post-paid residential and business customers, and a strong 3% increase in mobile subscriber numbers during the fourth quarter. Nevertheless, year over year, mobile subscribers saw a 5% decline as a result of ongoing and aggressive competition and a challenging regulatory environment. With regard to mobile broadband subscribers, the year also saw positive results with year over year growth of 56% and 8% increase quarter on quarter.
Demand for fixed services, as in previous periods, continued to decline. Fixed broadband and fixed line subscriber numbers reduced by 8% and 5%, respectively, year over year whilst remaining stable since last quarter. These results are in line with industry trends, particularly in the MENA region where users continue to migrate from fixed broadband and telephony to wireless and mobile technologies.
"Batelco's market leadership is rooted in our ongoing efforts to remain as competitive as possible both from an innovation and customer service stand point as well as in terms of our operational efficiency. As announced in the third quarter of the year, we have initiated an extensive restructuring, which as we go forward will help to further streamline and strengthen our business and in turn ensure that we are always able to deliver the best products, promotions, service and overall value to customers. That we continue to maintain market share and the loyalty of our high value post-paid residential and business subscribers, quarter after quarter, and despite tough competition means we are succeeding and that the value added products, services and care we give is still the best in the market," said Shaikh Mohamed.
Underscoring its focus on innovation, in 2012, Batelco inaugurated its ideas Centre, a first of its kind facility in the Kindom, giving users an advanced look into the future of Information and Communication Technologies (ICT).
The new ideas Centre features the latest communication technologies and emerging services still in development as well as showcasing a broad range of smart services being developed and which will add value to Batelco's offering.
During 2012, Batelco also launched numerous promotions and new services in addition to undertaking operational enhancements.
Importantly, it completed the upgrading of its Command Centre and Network Operations Centre (NOC) located at the company's Hamala headquarters to ensure business continuity and the uninterrupted provision of services to customers in case of disaster or emergencies.
Innovation in mobile also saw enhancements to and rollout of new packages and solutions for smart phone and data usage as well as exciting new promotions such as an SMS competition giving mobile customers the chance to win significant cash gifts and prizes. New packages, enhancements to speed, reliability and service also supported mobile and mobile broadband growth during the fourth quarter and retention throughout the year.
For business customers, a key segment, a range of new services and facilities were also launched. Among these was the opening of a state-of-the-art Customer Experience Centre, another first of its kind in Bahrain, aimed at supporting customers and ensuring they can readily gain advice and access the best and broadest range of customized, integrated solutions to meet their business requirements. Other enhancements for business customers came through key partnerships including the launch of MPLS IP VPN interconnectivity in partnership with Omantel, which facilitated the availability of our IP Services to more locations regionally and globally.
"Our commitment to service is underscored by each of these initiatives among a host of others. In recognition of these efforts, we were delighted in 2012 to be presented with the Best Business Service award for the MENA region at the annual CommsMEA Awards. This prestigious award recognises the operator that has provided unmatched services for its customers throughout 2012. For us, there is no better honour than one that highlights the significant investments we continue to make in our network and the development of world class products and services to ensure that residents of the Kingdom of Bahrain have access to the latest communications tools."
Batelco's Commitment to CSR Recognized
The Group's commitment to Corporate Social Responsibility also continued throughout 2012. More than BD1.6m was provided in support to sports, social, health and education related initiatives and charitable organisations in the Kingdom. Additionally, putting its talent and market leadership to use, Batelco also continued to support technology and other related entrepreneurs in Bahrain through the holding of the second annual Start-up Weekend which presented the opportunity for aspiring entrepreneurs to launch new businesses. It also hosted CommTech during 2012, a first of its kind seminar and forum for SMEs that attracted over 600 business owners and technical experts, and which was held in order to foster business development in the Kingdom of Bahrain. In recognition of these and other community support activities Batelco was this year presented with the Gold Award for Excellence in CSR by the Arab Organisation for Social Responsibility and Tatweej Academy for Excellence at their 3rd annual awards ceremony.
Focused on Delivering Growth and Value in 2013
Commenting on the year ahead, Batelco Group CEO Shaikh Mohamed said: "Undoubtedly the combined efforts of our people and sound leadership from our executives and Board helped us deliver sound results in a turbulent operating environment in 2012. I am grateful to our teams for their collective efforts.
We have entered 2013 in a strong financial position, continuing to focus on customers and innovation. We remain committed to identifying new avenues for growth in order to leverage our strengths and allow for the expansion of our mobile and broadband subscriber base and enterprise solutions, for the benefit of customers, employees and shareholders alike."