Financial and Subscriber Highlights
- Gross Revenues of BD155.3m ($ 411.9m) for the period;
- EBITDA of BD55.8m ($ 148.0m) representing a 36% margin;
- Consolidated Net Income of BD34.6m ($91.8m);
- Group subscriber base of 7M across the MENA region;
- Launch of 3G services by Umniah, the Group's Jordanian subsidiary;
- Continued diversification of Group revenues with 39% of revenues and 33% of operating profit now sourced from markets outside Bahrain;
- Low debt and substantial cash and bank balance of BD87.4m ($231.8m); and
- Earnings per share of 24 fils and an approved interim cash dividend of 15 fils per share.
For the first six months of the year, the Group reported Net Profit of BD34.6m ($91.8m) versus BD38.8m ($102.9m) for the corresponding period in 2011, a decrease of 11%. EBITDA for the period was BD55.8m ($148.0m), representing a healthy 36% margin, compared to EBITDA of BD64.7m ($171.6m) for the corresponding period in 2011. The Group's Gross Revenue for the period, which stood at BD155.3m ($411.9m), was steady quarter over quarter and down 5% from BD163.2m ($432.9m) year over year. Operating Profit for the period was BD38.5m ($102.1m) versus BD46.0m ($122.0m) for the corresponding period in 2011. In line with ongoing efforts to diversify revenues and maximise investments, the Group continued to see an increasing contribution from overseas markets. For the first six months of 2012, 39% of revenues and 33% of Operating Profit was attributable to the Group's operations outside of Bahrain.
The Group's balance sheet remained very strong. As of 30 June 2012, there was low debt at BD27.5m ($72.9m) and substantial cash and bank balances of BD87.4m ($231.8m). Earnings per share were 24 fils and the Board of Directors approved an interim cash dividend for shareholders of 15 fils per share for the six month period.
Batelco Chairman, Shaikh Hamad Bin Abdulla Al Khalifa, announced the results following a meeting of the Board of Directors at Batelco Group Headquarters, stating: "We are pleased to report another period of good financial results and operating performance. Throughout the first six months of 2012, the Group has been successful in implementing its strategy aimed at maintaining market leadership at home whilst building on our investments in overseas markets. Despite the impact of ongoing and intense competition in Bahrain and across the MENA region overall, the Group continued to generate steady cash flows, maintain a very strong balance sheet and, importantly, retain our ability to deliver value to both our customers and our shareholders. We are delighted once again to announce a healthy interim dividend for the first half of 2012 of 15 fils per share."
Shaikh Hamad added: "We also continue with efforts to build efficient business operations focused on customers and innovation by further expanding the scope of our services and our subscriber base. In all the existing markets we operate in we remain focused on growth and capturing greater synergies.
In our home market, Bahrain, we continue to face significant competition from other operators coupled with lack of any significant growth. As a priority, we are implementing various initiatives to improve efficiencies, lower our operating cost structure and be more responsive to our customers with a full service portfolio."
For the first six months of 2012, the Group's operating performance remained steady with progress made in key operations abroad. In Bahrain, market leadership was maintained through an ongoing focus on value, innovation and customer service.
Commenting on the highlights for the period, Group CEO, Shaikh Mohamed bin Isa Al Khalifa, said: "Throughout the first half of the year, the Group-wide focus was on improving our competitive position through marketing new offers to customers, introducing new services and ensuring we delivered superior quality of service and customer care.
While intense competition naturally continues to impact us in Bahrain, we remain pleased with our ability to maintain market leadership and with the overall retention rates for our mobile, broadband and enterprise customers.
Looking across our regional operations, there was additional progress made in a number of key markets especially Jordan and Yemen. A significant investment was made in Jordan with the launch of the Umniah 3.75G service late in June and strong customer take up of mobile data services is anticipated."
Shaikh Mohamed continued: "We ended the period with 7M customers across six markets. We are working to build on this. Further organic growth is expected in our overseas operations during the second half of 2012. We are also actively pursuing opportunities to build our network through strategic acquisitions, which will add value and enhance our operational capabilities as we go forth."
Mobile and Broadband Segments
For the first six months of the year, the Group reported a decline in mobile subscribers of 34% when compared to the corresponding 2011 period. This is largely due to the adjustment for the exclusion of STel operational and customer data. As announced previously, the sale of STel is expected to be completed by the end of October 2012.
Normalising for the exclusion of STel, mobile subscriber numbers across the Group for the six-month period was stable year over year. This was in line with expectations and primarily the result of ongoing competitive pressures in Bahrain and the review of the subscriber base in Yemen, which was announced during the first quarter of the year.
On a quarter-over-quarter basis, however, mobile subscriber numbers grew by 2%. This positive trend was supported by progress in Jordan and Yemen in particular, where the Group's operations continued to strengthen their performance.
Broadband customer numbers for the period were stable for the first six month of the year, growing by 1% year over year and by 2% since the start of 2012.
Progress in Overseas Operations
The first six months of the year saw sound performance for the Group in key overseas markets, where the value of recent investments are being realized and serving to positively impact results.
Jordan: Significant strides were made at Umniah, the Group's 96% owned subsidiary in Jordan, where 3.75G services were successfully launched in mid-June 2012. Customer response, in just a few short weeks, has exceeded demands for the service. 11,000 new customers have already been added, bringing the Group's total subscriber base in Jordan to more than 2.3 million. This accounts for 1% growth year over year and a 2% increase quarter over quarter. With the continued rollout nationwide of 3.75G services during 2012, which will ensure faster and more reliable transfer of data as well as well instant Multimedia Services (MMS), even stronger uptake and an increase in subscriber numbers is expected.
Growth was also achieved by Umniah in its broadband customer base. The company posted a strong increase of 33% compared to the corresponding 2011 period and has grown its subscriber numbers by 17% since the start of the year. With the solid uptake of WiMax further expansion of Umniah's broadband user base is expected to continue.
Kuwait: Batelco's subsidiary Qualitynet, which delivers total ICT solutions to the Kuwait market, maintained market leadership and steady subscriber numbers for the first six months of 2012 when compared to the 2011 period and quarter over quarter. This totalled approximately 40,000 users of the company's Data Communications and Internet Services.
Other JVs: Sabafon (Yemen), in which the Group has a minority shareholding, continued to make progress throughout the six month period. Year over year, its customer base of more than 3.5M subscribers remained stable. Importantly, the company registered 4% growth quarter over quarter, effectively reversing a decline in subscriber numbers during the first quarter of 2012 as a result of revisions to its customer base to exclude non-active sim cards. With a marked reduction in conflict in the country and the return to almost normal operating conditions, further expansion of the customer base is anticipated throughout the remainder of 2012.
Atheeb (Saudi Arabia), in which Batelco holds a 15% stake, reported a 15% decline in voice and data services customers for the first half of the year when compared to the corresponding 2011 period and 9% decrease quarter over quarter.
Despite a lower number of subscribers, which now stands at 102,000, the company's revenues increased as a result of the addition of a number of new higher value business customers. This is in line with Atheeb's recently announced strategic shift which has seen the company turn its focus to the business sector where considerable opportunities exist for customer and revenue growth in the coming periods.
Market Leadership Maintained in Bahrain
"While tough competition continues, Batelco successfully remains the leader across the full spectrum of telecommunications services in the Kingdom of Bahrain. Providing value, innovation and exemplary customer care continues to place Batelco at the forefront for high value residential and enterprise customers," explained Shaikh Mohamed.
At the end of the first half of the year, Batelco continued to maintain a strong share of the mobile market in the Kingdom. Whilst subscriber numbers decreased minimally when compared to the previous year period, the operation witnessed 74% year-on-year growth in mobile data subscribers.
"We have continued to work hard to retain our high value residential and business mobile, data and broadband customers and are pleased with the results our efforts have yielded over the past six months. We are especially pleased to see customers utilising our value added services as evidenced by the growth of mobile data subscribers across the Kingdom during the period. This is an area of focus and expected growth for us and we will continue to look for ways to both expand and enhance the user experience for our customers," said Shaikh Mohammed.
The Group reported strong ongoing growth in its wireless broadband subscriber base - an area in which the company has continued to make ongoing enhancements. Batelco registered an impressive 74% growth in its wireless broadband subscriber numbers when compared to the first six months of 2011 and a 44% increase since the start of this year.
Looking at fixed services, fixed broadband subscriber numbers declined by 3% quarter over quarter, as a natural result of migration to wireless broadband services. Similarly, fixed to mobile migration - a global trend - also saw a decline of 2% since last quarter and 7% year over year for fixed line usage in the Kingdom.
"During the first half of the year, continued innovation and enhancements were achieved. This extends from the range and quality of our services to the care we give to our customers across the Kingdom. Innovation is at the heart of what we do and our ability to maintain our subscriber base. The first and second quarters of 2012 saw some exciting initiatives rolled out," added Shaikh Mohamed.
Important among these were efforts to ensure that Bahrain residents remain among the best conncected subscribers in the region. To this end, Batelco signed an agreement with Gulf Bridge International (GBI), the Middle East's first privately owned fibre optic cable operator, to connect Bahrain through International Capacity on GBI's new cable system. Batelco is the landing partner in Bahrain for the new cable system. The multi-million dollar deal provides Bahrain with better connectivity to the rest of the world and ensures that sufficient capacity is available to cater to expected future growth in data connectivity in line with the Kingdom of Bahrain's 2030 vision.
Other initiatives to enhance connectivity included additional partnership agreements with key regional players. The company signed a Memorandum of Understand with Qtel, Qatar's leading telecommunications provider, which will expand collaboration between the two providers in areas covering products and services including voice, internet, data, facility management and mobile, benefiting local and international business based in both Bahrain and Qatar. Similarly Batelco signed an agreement with Omantel allowing bi-lateral Data IP Services to be sold between Bahrain and Oman, as well as providing a one-stop-shop for transit services to Batelco's and Omantel's carrier partners, enabling both parties to extend corporate VPN solutions between their respective markets.
Batelco also signed a Memorandum of Understanding (MoU) with Gulf Air, the Kingdom's national carrier. This represented a first step of a major collaboration that will see both Batelco and Gulf Air extend benefits to their respective customers to enhance their telecommunications and travel experience.
A key part of Batelco's focus during the period also remained on the continued introduction of new service upgrades, offers and promotions both for postpaid and prepaid mobile and broadband subscribers. During the second quarter, the company ran a well received summer challenge which saw 60 lucky customers win cash prizes totalling $115,500. Batelco also introduced a number of new value enhanced packages featuring such benefits as unlimited Data bundled with the latest smart phones. Offers were also launched for fixed broadband customers to deliver higher download speeds, higher throttled speeds and higher usage limits at no extra costs.
Batelco and its Commitment to Corporate Social Responsibility
During the first half of the year, the Group's dedication to good corporate citizenship continued with contributions of more than BD400,000 extended to numerous community initiatives. These included projects relating to health, education and sports as well as those supporting further economic growth and development in the Kingdom.
Initiatives included the Gold Sponsorship for the Greener and Smarter ICT Seminar held at the Royal University of Women (RUW). The seminar's objective was to create awareness about environmentally friendly initiatives and how implementing a range of 'green' initiatives can positively change lives - a theory put into practice by the Group at all possible levels.
Focus for Second Half of 2012
Concluding, Shaikh Mohamed noted: "As set out at the outset of this year, our primary focus for the remainder of 2012 is remaining competitive and achieving growth. We are looking at all possible avenues to enhance performance across the Group. Efficiency is essential to our growth and our ability to perform operationally and financially. We have launched a significant cost leadership initiative to better align our competitive cost structure to face our competition. We are also focused on expanding our network and are pursuing all available avenues to build customer numbers and grow our subscriber base to a larger critical mass. Following our strategy and with the support of a solid financial and operational base, we have every confidence in our ability to build and deliver value in the months ahead."