U.S. Markets open in 19 mins

Edited Transcript of ORDS.QA earnings conference call or presentation 14-Feb-19 11:00am GMT

Q4 2018 Ooredoo QPSC Earnings Call

Feb 19, 2019 (Thomson StreetEvents) -- Edited Transcript of Ooredoo QPSC earnings conference call or presentation Thursday, February 14, 2019 at 11:00:00am GMT

TEXT version of Transcript

================================================================================

Corporate Participants

================================================================================

* Ajay Bahri

Ooredoo Q.P.S.C. - Group CFO

* Andreas Goldau

Ooredoo Q.P.S.C. - Head of IR

* Hans Anthony Kuropatwa

Ooredoo Q.P.S.C. - Group Chief Mergers & Acquisitions Officer of Ooredoo Group

================================================================================

Conference Call Participants

================================================================================

* Dilya Ibragimova

Citigroup Inc, Research Division - VP

* Nishit Lakhotia

Securities & Investment Company BSC, Research Division - Head of Research

* Omar Maher

EFG Hermes Holding S.A.E., Research Division - VP of Telecom

* Ziad Itani

Arqaam Capital Research Offshore S.A.L. - Associate Director

================================================================================

Presentation

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

Ladies and gentlemen, welcome to Ooredoo Group Full Year 2018 Financial Results Investor Call and Webcast. I will now hand over to Mr. Andreas Goldau. Sir, please go ahead.

--------------------------------------------------------------------------------

Andreas Goldau, Ooredoo Q.P.S.C. - Head of IR [2]

--------------------------------------------------------------------------------

Assalamu Alaikum. (foreign language) Hello, and welcome to Ooredoo's financial results call. My name is Andreas Goldau, and I am in charge of Investor Relations. As part of today's discussion, I'm pleased to introduce Hans Kuropatwa from our strategy team; and Ajay Bahri, our Group Financial Officer; and Sara Al-Sayed from the Investor Relations team. We'll start with an overview of the group results followed by the Q&A session. The presentation is available on our website at ooredoo.com as well as on the webcast. Please do note the usual disclaimer on Slide #2.

So to begin, I will now hand over to Ajay.

--------------------------------------------------------------------------------

Ajay Bahri, Ooredoo Q.P.S.C. - Group CFO [3]

--------------------------------------------------------------------------------

Thank you, Andreas. And thanks to everyone for joining today's call. During 2018, we've made good progress with our strategic initiatives, driving forward our digital transformation. Technological advances have been made possible to connect more people than ever before. With the rise of mobile, data is connecting a greater number of people and businesses to the global economy, including those we are proud to serve in the emerging markets we operate in.

While we see tremendous opportunities in these changes, they have put pressure on traditional revenue streams, such as voice and SMS. For our business to succeed in this rapidly changing market environment, we need to evolve. Therefore, I'm proud to say that we have taken a leadership role in technological deployment. Our digital transformation is enriching our customers' digital lives, and is also helping us capture more value from the market and paving the way to long-term growth.

In Qatar, in 2018, we launched the world's first commercially available 5G network and became the first telecom operator to test self-driving 5G connected aerial taxis. In Algeria, we maintained our data leadership, providing the greatest 4G coverage in the country, reaching 48% of the population and all 48 wilayas. In the Maldives, we launched our SuperNet service in 11 new islands, with a total coverage of 20 islands. These are just a few examples.

Data continues to be centric to our business. We've seen significant increase in demand from our customers and enterprise consumers with data revenue now accounting for 47% of total group revenue. Our business has the right setup to capture the growth of demand of data.

During 2018, we also made good progress expanding beyond our traditional telecom business and have unlocked new revenue streams from ICT and end-to-end solutions, when actually we are impacted by challenges in some of our key markets putting pressure on our business performance.

Group revenue for the year was QAR 29.9 billion, and EBITDA margins stood at 41%. Our results were impacted overall by foreign exchange weakness in emerging markets as well as the changing market dynamics in Indonesia resulting from new regulation to requiring -- to require SIM card registrations. Indonesia remains our second biggest revenue generator after our home market in Qatar, and I am pleased to report that we are beginning to see the first sign of recovery in Indonesia with 2 consecutive quarters of quarter-on-quarter revenue growth in Q3 2018 and Q4 2018. This is a testament to the fact that our new strategy in Indonesia is starting to pay results.

To oversee and support the implementation of our strategy, we appointed Mr. Vikram Sinha as an adviser to Indosat Ooredoo's Chief Executive Officer. Mr. Sinha brings his wealth of knowledge and experience for his time as CEO of Ooredoo Maldives and Myanmar.

Finally, I am pleased to share that Wataniya Mobile in Palestine was successfully branded to Ooredoo Palestine, enabling it to benefit from group-derived synergies, leading to improvements in Ooredoo Palestine's commercial and technical operations.

So let's move on to Slide #5, revenue and EBITDA. This quarter, we have made some changes to our investor deck. Since most of the questions in the past have been based on sequential quarterly results, we've optimized the slide layout. Hopefully, this will make it easier for you to see the trends and then lay the results.

Let's move to Slide #5 for more information about the group revenue and EBITDA. Similar to the results for the first 9 months of 2018, group revenue for the year was impacted by a weak performance in Indonesia where the regulation on SIM card registrations continued to impact our top line performance. As mentioned in last quarter's call, in Indonesia, we've changed our strategy from a push to a pull distribution strategy. We're starting to see a positive impact from this change and, sequentially, top line growth is returning in Indonesia. Revenue growth generated in Kuwait and Oman was offset by reductions in Algeria and Myanmar. Revenue from Qatar, Iraq and Tunisia remained flat.

OpEx was maintained through tight cost control with group efficiency. However, due to lower revenue, EBITDA decreased. EBITDA margin is solid at 41%. We will continue to focus on cost management and efficiencies.

Let's move to Slide 6. The decrease in group net profit was mainly caused by the market adjustment in Indonesia and the challenging market conditions in Algeria as well as FX losses in Myanmar. The net impact of FX losses amounted to QAR 346 million during the year. That said, it's important to note that we continue to make good progress with our efficiency program and reported a net profit attributable to shareholders of QAR 1.6 billion. On a quarterly basis, net profit increased 40% in Q4 2018 compared to the same period last year. The increase was mainly due to lower taxes, regulatory provisions and foreign exchange gains in Q4 2018.

Next slide please. CapEx was up 7%, in line with our guidance. Our investments have positioned the company for future growth, mainly 5G deployment in Qatar and 4G deployment and digitization across other key markets. Furthermore, our global sourcing strategy enabled us to optimize CapEx by taking advantage of Ooredoo group scale. Free cash flow declined 20% to QAR 4.9 billion, impacted by lower EBITDA and the increase in CapEx.

Slide 8, total customers. Group customer number decreased to 115 million, mainly driven by Indosat. However, we recorded strong growth in Palestine, Iraq, Kuwait, Tunisia and Myanmar. We expect customer numbers to begin stabilizing as the SIM card registration process in Indonesia has now been finalized.

Slide 9, net debt. I am pleased to report that we have a healthy and well-balanced debt profile. Net debt continues to decline, down 11% in 2018. Our net debt-to-EBITDA ratio is at 1.8x, which is at the lower end of our long-term guidance of between 1.5x to 2.5x. Group debt remains mainly at a corporate level, largely in Qatar, followed by Indonesia, then a smaller percentage allocated to the other opcos. As a reminder, debt at the opco level is kept primarily in local currency.

Let's move to Slide 10, performance summary and 2018 guidance. With regard to 2018 guidance, as previously discussed, 2018 has been a very challenging year for the group impacted by regulatory changes, new taxes and difficult market conditions. Especially in the second half of the year, intensified price war and aggressive market in Algeria and Myanmar adversely impacted revenues, resulting in revenue and EBITDA guidance miss. Capital expenditures supported by group-wide sourcing initiatives are in line with guidance, growing 7.3% year-on-year.

Regarding 2019 outlook, on the revenue side, we remain cautiously optimistic about the recovery in Indonesia market, which has a significant impact on our top line and bottom line results. We expect local currency revenue growth in 2019 in most of our markets. However, potential currency depreciation in emerging market countries will impact Qatari riyal reported figures. Overall, we expect a minus 3% to 0 revenue year-on-year in 2019.

On the EBITDA side, our guidance is excluding the IFRS 16 impact as the new accounting standard for accounting for leases. Excluding that impact, we expect a minus 7% to minus 4% EBITDA decline year-over-year in 2019, mostly due to lower revenue. Another point to highlight is that in 2018, the EBITDA included one-off benefits from share of associates, which are not likely to materialize again in 2019. And that's why you see a high decline in EBITDA compared to the revenue.

On the CapEx side, we maintained disciplined CapEx approach supported by group-wide purchasing efficiencies. In 2019, Indosat and Algeria continue to invest in network supporting revenue recovery. Overall, we expect CapEx in 2019 to be between QAR 5.5 billion to QAR 6.5 billion. In addition, we will update you on IFRS 16 impact in 2019 in the following quarters.

Please turn to Slide #12 for an operational overview of our opcos. Qatar. In our home market in Qatar, we maintained our #1 position supported by our leading network infrastructure, which is ranked amongst the fastest globally. We've continued to lead the global race to provide 5G services with 90 5G sites live across the country. Financially, revenue was slightly down due to reduced handset sales. However, underlying service revenue remained stable during the year. EBITDA increased 2% supported by cost optimizations and our digital consolidation program. Sequentially, while revenue remained steady, EBITDA margin improved. We continue to diversify our revenue with Ooredoo tv growing its customer base by 4% quarter-on-quarter.

Slide 13, Indonesia. As already discussed, Indosat Ooredoo top line performance continues to be impacted by the new regulation. However, sequentially, we are seeing top line growth from quarter 2 onwards. Q4 EBITDA temporarily under pressure due to investment with network expansion and one-off marketing expenses. We've changed our strategy to focus on pull strategy rather than push marketing. This is designed to increase revenue from bundles and packages. We expect this to lead to a more loyal customer base, lower churn rate and eventually higher margins. Churn on our customer base has already stabilized, and revenue improved by 12% quarter-on-quarter, supported by both mobile and fixed business. We expect to see improvements to continue in 2019.

As stated earlier, we appointed Mr. Vikram Sinha, who was previously the CEO of Ooredoo Maldives and Myanmar, as an adviser to Indosat Ooredoo's CEO. We're confident that the depth of knowledge and experience that he brings from his previous postings will be an asset to Indosat Ooredoo.

Operationally, we expanded our 4G plus network into the fourth province in North Sumatra with the 4G network coverage reaching 80% of the population. In Indonesia, we deployed smart city initiative to manage public services, which is recognized as the most innovative smart city project by Telecom Asia in 2018.

Moving on to the next slide, Iraq. In Iraq, we continue to see the benefits of the improvement in security situation. Excluding the impact of IFRS 15, the full year revenue grew 3.3%. Year-on-year, EBITDA increased by 6% due to prudent management and stringent cost control. Quarter-on-quarter, revenue was lower due to seasonality and increased competition. Q3 is normally seasonally better because of certain festivals. Similar to previous year, Q4 EBITDA was lower due to revenue impact and also due to one-off provisions related to year-end. Q4 EBITDA margin was similar to that of previous year. We've continued to restore connectivity in liberated areas, and by doing so, we contribute to the economic growth of the people of Iraq. We also launched our B2B service during the quarter and received Logic Manager's Risk Maturity Model Award.

Moving on to the next slide, Oman. Ooredoo Oman continues to report good financial results with growth across the board. Growth was supported by our focus on digital enablement as we cater to the changing needs of both business and consumers across Oman. To maintain our digital competitiveness, we launched new services and products designed to elevate customers' digital experience. We received approvals for the renewal of our Ooredoo Oman's mobile license for 15-year period starting Feb 2020. The renewal fee of OMR 75 million is to be paid in 2 installments in 2020 and 2021. Excluding IFRS impact, year-on-year revenue increased 3%, including overall EBITDA. Revenue and EBITDA performance was stable quarter-on-quarter.

Let's move to Slide 16, Kuwait. In Kuwait, we reported a strong revenue increase for the year, up 9% compared to previous year. Growth was mainly driven by increased handset sales, which also impacted our margins. The market continues to be very competitive, but I'm pleased to report a 4% increase in customer numbers, indicating good demand for our products and services. Quarter-on-quarter, revenues was up 9%, driven by service revenue as well as device sales. EBITDA margin also improved to 31% in quarter 4 from 23% the previous quarter. The improvement was driven by higher revenues and one-off adjustments of cost provision in Q4. We expanded our B2B offering by partnering with SAP to provide enterprise cloud services, leveraging our existing state-of-the-art data centers. The partnership will enable us to provide end-to-end IT solutions to strategic enterprise clients, creating a new revenue stream for the business. We're also providing a disaster recovery center for Boursa, the Kuwait's stock exchange. Ooredoo Kuwait has been recognized by winning various awards, including employer of choice by LinkedIn.

Moving on to the next slide, Algeria. You'll see that the situation in Algeria continues to be challenging with difficult economic condition, including the devaluation of the Algerian dinar, persistent price war and overall market shrinkage. As a result, Ooredoo's total revenue in local currency terms decreased 15% year-on-year and 4% quarter-on-quarter with corresponding impact on EBITDA. Operationally, we maintained our mobile data leadership by providing the greatest 4G coverage in the country, reaching 48% of the population and 48 wilayas. Ookla has once again recognized our leadership in terms of network speed in 3G and 4G in Algeria. We also increased our brand equity through target corporate communications, product marketing and football sponsorships.

Moving on to the next slide, Tunisia. Tunisia delivered another robust set of results this quarter. We maintained our leadership in the mobile market and grew customer numbers by 8% during the year. Revenue grew 9% year-on-year in local currency. From 2018 onwards, the revenues are to be grossed up for royalty tax, and the full year impact was reflected in Q4 2018. On a normalized basis, revenue grew by 4%. This is offset by Tunisian dinar depreciation of 9% year-on-year. Growth was driven by mobile data and VAS services as well as fixed revenue and handset sales. EBITDA decreased as a result of higher interconnect commission and acquisition cost as well as increased OpEx due to change in royalty accounting.

Moving on to Slide 25 (sic) [Slide 19] Myanmar. In spite of Mytel's entry as fourth operator in June 2018 and aggressive price competition, Ooredoo's revenue remained flat year-on-year. With the exception -- with the exclusion of IFRS 15 impact in 2018, revenue would have grown by 5%. With careful cost control measures and digital transformation, EBITDA margin improved year-on-year from 11% to 15%. However, Myanmar currency depreciated by 18% -- 16% year-on-year. Quarter-on-quarter revenue are down 6% due to intense competition. Q4 EBITDA margin was impacted due to lower revenues. Ooredoo Myanmar increased its customer base by 21%, supported by strong brand recognition, as is evidenced by the fact that we remain the most recommended brand by users in Myanmar. Operationally, our digital initiative is yielding results with My OML App monthly active users reaching 15% of our monthly data users.

This concludes the presentation. I will hand you back to Andreas.

--------------------------------------------------------------------------------

Andreas Goldau, Ooredoo Q.P.S.C. - Head of IR [4]

--------------------------------------------------------------------------------

Thank you, Ajay. Before we move on to the Q&A part, 2 further points on the Investor Relations team. First of all, we would like to thank everyone who voted for us in the Qatar Exchange IR Awards. This year, we won Best CEO, Best CFO, IRO, Best overall IR and a silver medal in the IR website category. We highly appreciate your continuous support.

On a different topic, we haven't posted a Capital Market Day for some time, but now we are looking into an event probably on the 19th of June and potentially in Oman. Further details to be confirmed, but please already save the date in your calendars.

And now we're going to start the Q&A session. If the operator could please explain how to ask questions, you can ask questions over the phone and also on the webcast. Operator, please.

================================================================================

Questions and Answers

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

(Operator Instructions) Our first question comes from Nishit Lakhotia with SICO.

--------------------------------------------------------------------------------

Nishit Lakhotia, Securities & Investment Company BSC, Research Division - Head of Research [2]

--------------------------------------------------------------------------------

Nishit Lakhotia from SICO. I have 2 questions. One on the miscellaneous income for Ooredoo. It has been very significant this year. I know you've given 2 points, gain and loss of control of subsidiary and compensation received for performance of the one-off ancillary services in Qatar. But around QAR 0.5 billion is from this ancillary services in Qatar. So exactly how sustainable is it? And if you can share more color on what exactly was this component? That would be very helpful. That's my first question. Second is on the guidance. Given that you had almost QAR 700 million plus in miscellaneous income, which is not that sustainable, and you are guiding at a lower EBITDA as well for next year, so how should we look at the bottom line for 2019?

--------------------------------------------------------------------------------

Ajay Bahri, Ooredoo Q.P.S.C. - Group CFO [3]

--------------------------------------------------------------------------------

Thank you for the question. See, as far as miscellaneous income is concerned, during the quarter, the only difference on a large basis was that we had a foreign exchange gain this year compared to a very low foreign exchange gain last year. And during the quarter, if you look at certain tax provisions, which we did, were lower this quarter compared to last year's quarter 4. The question you've asked is more from quarter 3. And like we explained last year, these are -- the income that you see from ancillary services was a one-off. The income is not expected to repeat. It's related to historical discussions, so it was more settlement of certain one-off ancillary services. So that will not repeat in the coming quarters or next year. As far as the guidance is concerned, the guidance we normally give is for 3 line items, which is revenue, EBITDA and CapEx. And we don't give guidance on net profit. However, you can obviously translate the EBITDA impact with your own analysis of the bottom line.

--------------------------------------------------------------------------------

Operator [4]

--------------------------------------------------------------------------------

Our next question comes from Dilya Ibragimova, Citi.

--------------------------------------------------------------------------------

Dilya Ibragimova, Citigroup Inc, Research Division - VP [5]

--------------------------------------------------------------------------------

I had a couple of questions, please. First is on your M&A strategies -- actually, 2 on M&A. First on Indonesia. In the past, you have commented that the regulatory regime was an obstacle for in-market consolidation. And also in terms of in-market consolidation, you mentioned that you -- in the past that you prefer to be -- rather than being an active participant, you would rather be taking a potential benefit from consolidation happening. Just considering the comments this morning from the minister that the rules may be changing and the spectrum transfer rule specifically may be relaxed, how does that affect your position on M&A in the market? So that's question number one. Whether you would reconsider participation in consolidation potentially? Second question on M&A is more on the strategic footprint. In the past, you commented that you see Middle East and Asia as your strategic area for the operations. Is it still the same? Or do you see an opportunity for rebalancing footprint and maybe be more focused on Middle East? So these are the 2 questions on M&A. I have 2 other questions, but I can ask them later or straight away. What's the better way?

--------------------------------------------------------------------------------

Andreas Goldau, Ooredoo Q.P.S.C. - Head of IR [6]

--------------------------------------------------------------------------------

Yes, maybe we'll cover the M&A questions first. Hans, do you want to comment on it?

--------------------------------------------------------------------------------

Hans Anthony Kuropatwa, Ooredoo Q.P.S.C. - Group Chief Mergers & Acquisitions Officer of Ooredoo Group [7]

--------------------------------------------------------------------------------

Yes. I think certainly the moves that were announced yesterday by the minister of Indonesia are helpful in 2 ways. I think, one, is it shows that the administration are thinking about this matter and are generally supportive of consolidation; and b, I do think they have some practical merit for those considering consolidation. So I think it's helpful. And as has been reported in the press, there have been many discussions between various players in Indonesia over time. I don't think there's anything more I can say on any specifics of any transactions in Indonesia. But the general environment, I think it's a helpful development. On the second point, strategic footprint, no, I don't think there's any change from our stated position of being -- having an important footprint both in the Middle East and Asia. And we're not considering any significant change in that portfolio balance.

--------------------------------------------------------------------------------

Dilya Ibragimova, Citigroup Inc, Research Division - VP [8]

--------------------------------------------------------------------------------

That's very helpful. Maybe just on the in-market consolidation, to clarify whether your position has changed in the way how would you consider, whether you'd consider participating or it would depend on opportunities or you'd rather take a passive role?

--------------------------------------------------------------------------------

Hans Anthony Kuropatwa, Ooredoo Q.P.S.C. - Group Chief Mergers & Acquisitions Officer of Ooredoo Group [9]

--------------------------------------------------------------------------------

I think it's something that everyone has given consideration to in the Indonesian market. I think we've commented as much in previous calls. I think the current move is -- their current announce move on spectrum that's helpful, but I don't think it's absolutely decisive in pushing anyone to make a decision.

--------------------------------------------------------------------------------

Dilya Ibragimova, Citigroup Inc, Research Division - VP [10]

--------------------------------------------------------------------------------

Okay, that's very helpful. And just a couple of questions outside of M&A, if I may. First is on just accounting question. You mentioned that some of the -- 3 of the opcos, I think, have been affected. The revenue there has been affected by the accounting issues and that's netting off the revenue. May I just clarify, does that affect only 2018 revenue? So if we compare trends 2018 after netting off versus 2017, would that be not quite comparable because 2017 is still on the gross revenue, whatever change in accounting was? So maybe the 2017 versus 2018 is not quite comparable. So that's one. Second is on -- you commented that the TV subscriber growth in Qatar was very strong. And I was just wondering what's driving that's specifically in Q4 there. Is it pricing, is it advertising, or is it maybe the Asia Cup events? Yes, so if you could comment what's driving that and what are your expectations there. And the third comment is on dividends. If you could comment what is behind the decision to reduce dividend this year. Is it the performance this year? And would you consider -- and how are you planning to deploy the cash that you will have available from reducing the dividend? Are you planning to use that to continue deleveraging or maybe some financial support will be required to some of the operations? Or maybe the decision to cut the dividend reflects your outlook for 2019?

--------------------------------------------------------------------------------

Ajay Bahri, Ooredoo Q.P.S.C. - Group CFO [11]

--------------------------------------------------------------------------------

Thank you for the questions, especially the one on IFRS 15, because I think my comment may have caused some confusion there. So IFRS 15 impact, you can actually see in the financial statements notes. And the overall revenue impact is not material compared to 2017, if you want to see. However, a certain amount of impact was recorded in quarter 4 for the full year, so the 3 opcos that we talk about. So my first comment is on total revenue for the group. So if you look at total revenue for the group, the reported versus what was last year on a total basis is more or less comparable. However, individual opcos have a different situation. So 3 opcos where we made the adjustment is because in quarter 4, we had passed an adjustment relating to the full year. So in the reported numbers that you see in the press release and the financial statement, it is in quarter 4. However, the opco schedules that we've given you in the presentation and in the supplementary schedules, we've distributed that impact to each quarter for quarter 1, quarter 2, quarter 3 and quarter 4. So the total revenue number that you will see in the supplementary schedules for quarter 4 will be higher than the quarter 4 revenue that we reported in our press release. So the idea was that you can actually see the quarter-on-quarter developments, which is like-to-like. For these opcos, the last year numbers of revenue are not adjusted as allowed by the accounting standard. The only adjustment is done to opening retained earnings. So when you look at year-on-year numbers, for these opcos, you will see a lower revenue in 2018 because you'll see higher revenue in -- you'll see lower revenue in '18 compared to '17. And compared to certain competition, like in Iraq, also you might see that impact. But going forward, '18 to '19 comparison will be on a like-to-like basis. And if you come to the Ooredoo tv, of course, the growth has been very promising. And in fact, we've been growing quarter-on-quarter starting from the beginning of the year itself. And it's a combination of the content that we're providing. The content has improved over time as well as a combination of pricing, which is also a function of negotiations that we do, so the combination of these 2 things. And at the same time, we've been rolling out the network -- fiber network as well to new areas also where also we get new customers. The last question was on dividend. So the dividend payout ratio is not very dissimilar from what we did last year. So the profit, as you know, is down compared to last year. So the dividend cut in a way is reflecting that. And you also know from the previous question that a lot of one-off items in the net profit, excluding which the net operational profit is lower for the year. So once you look at the dividend payout more from the perspective of performance for this year and more you can say in line are the payout ratios, which we've done historically.

--------------------------------------------------------------------------------

Dilya Ibragimova, Citigroup Inc, Research Division - VP [12]

--------------------------------------------------------------------------------

That's helpful. And may I just ask on the support to opcos Myanmar and Indonesia, whether you still see them as self-sustained in terms of funding or whether you see a need to offer some financial support from the group?

--------------------------------------------------------------------------------

Ajay Bahri, Ooredoo Q.P.S.C. - Group CFO [13]

--------------------------------------------------------------------------------

See, Indosat has historically been self-funding and they intend to continue to access the debt capital market and the bank loan market for their debt financing needs. That's business as usual for them. Myanmar, on the other hand, we have been funding from the group. And we expect that at least for this year, that will still continue. But we expect things to be changing after 1 year.

--------------------------------------------------------------------------------

Operator [14]

--------------------------------------------------------------------------------

Our next question comes from Ziad Itani from Arqaam Capital.

--------------------------------------------------------------------------------

Ziad Itani, Arqaam Capital Research Offshore S.A.L. - Associate Director [15]

--------------------------------------------------------------------------------

Just a couple of questions. First of all, on the Iraqi market. It seems now this is your second biggest EBITDA contributor. So I'm just looking at the numbers, and you mentioned that the revenue was negatively impacted on IFRS 15. Is it possible to quantify the impact because you added 10% of your subscriber base year-on-year, but your revenue is down almost 1% in Q4. And also on that same market, any news for the bid for a fourth license? And when does your actually mobile license expire?

(technical difficulty)

--------------------------------------------------------------------------------

Ajay Bahri, Ooredoo Q.P.S.C. - Group CFO [16]

--------------------------------------------------------------------------------

I was talking with the mute on. So that's why there's a delay in responding. So as far as Iraqi market is concerned, you will see that in quarter 4, we've done the adjustment for previous quarter revenue numbers. So if you look at quarter 3, quarter 2 numbers, what we reported this quarter with what we reported last year, you would see the adjustment there. That will give you the indication of what the IFRS 15 adjustment is approximately. That's as far as the adjustment is concerned. As far as the performance itself is concerned, in this quarter, there has been some intensity in price competition and that has impacted the performance. However, quarter 3 normally is very good in Iraq, Arba'een there, which is a festival where a lot of people come from outside the country. So quarter 3 normally is better. So the decline quarter-on-quarter is more seasonality rather than any decline in performance. So when you compare performance against competition, I think it will be good to take into account the IFRS 15 adjustment for like-to-like comparison. And your last question, if you can remind me? The fourth entrant license. Yes, the fourth entrant license, we don't have any update on that as yet. We've heard talks about that in the past, but nothing has been announced as yet. As far as our license is concerned, I think it was 15 years license. We still have maybe 5 years to go, but let's reconfirm that offline to you.

--------------------------------------------------------------------------------

Ziad Itani, Arqaam Capital Research Offshore S.A.L. - Associate Director [17]

--------------------------------------------------------------------------------

And why aren't you investing much in Iraq? Your CapEx intensity is almost 3%?

--------------------------------------------------------------------------------

Ajay Bahri, Ooredoo Q.P.S.C. - Group CFO [18]

--------------------------------------------------------------------------------

I think there's more delay in terms of moving equipment from different regions to Sulaymaniyah. The customs controls, which were implemented this year, made it difficult for some of the equipment to move around. Some projects are in progress. So there is no conscious effort to not invest. It's just a question of timing. In fact, we're a market leader there, and we want to retain that leadership through having the best network.

--------------------------------------------------------------------------------

Ziad Itani, Arqaam Capital Research Offshore S.A.L. - Associate Director [19]

--------------------------------------------------------------------------------

Can you repatriate money out of Iraq?

--------------------------------------------------------------------------------

Ajay Bahri, Ooredoo Q.P.S.C. - Group CFO [20]

--------------------------------------------------------------------------------

Yes, we can.

--------------------------------------------------------------------------------

Ziad Itani, Arqaam Capital Research Offshore S.A.L. - Associate Director [21]

--------------------------------------------------------------------------------

There is no limit on that? So you have been taking the dividend out.

--------------------------------------------------------------------------------

Ajay Bahri, Ooredoo Q.P.S.C. - Group CFO [22]

--------------------------------------------------------------------------------

Historically, it really depends on the liquidity of dollars in the market. So there have been times, especially last couple of years, where it was difficult to get dollars out. It seemed a little better recently. So it comes and goes in terms of the availability of dollars. But historically, I probably mentioned that in some calls a long time back, we've pulled out up to $1 billion over this 10-year period of time. So...

--------------------------------------------------------------------------------

Ziad Itani, Arqaam Capital Research Offshore S.A.L. - Associate Director [23]

--------------------------------------------------------------------------------

Sorry, how much?

--------------------------------------------------------------------------------

Ajay Bahri, Ooredoo Q.P.S.C. - Group CFO [24]

--------------------------------------------------------------------------------

Almost $1 billion we've pulled out, including the repayment of loan or something which we've given for the license. We've been talking about over a 10-year period, right? So Iraq doesn't normally have issues with dollars, given that it's an oil-based economy. It was because of the political instability the last couple of years where we've had issues. Things recently have been very positive. We've been able to upstream some of the funds, which were not moving earlier.

--------------------------------------------------------------------------------

Ziad Itani, Arqaam Capital Research Offshore S.A.L. - Associate Director [25]

--------------------------------------------------------------------------------

Okay. And when can we expect 4G in that market?

--------------------------------------------------------------------------------

Ajay Bahri, Ooredoo Q.P.S.C. - Group CFO [26]

--------------------------------------------------------------------------------

That's a combination of what the regulator wants to do and the user frequency and the extra spectrum. So we'll have to wait for public announcements for that.

--------------------------------------------------------------------------------

Ziad Itani, Arqaam Capital Research Offshore S.A.L. - Associate Director [27]

--------------------------------------------------------------------------------

Okay. Second question on Tunisia. You mentioned EBITDA decline because of higher OpEx, but also a change in royalty accounting. Can you shed some color on this?

--------------------------------------------------------------------------------

Ajay Bahri, Ooredoo Q.P.S.C. - Group CFO [28]

--------------------------------------------------------------------------------

Sure. So the company pays royalty, and it also has to pay VAT on the revenues. So in the past, the royalty was paid net of VAT, which the government has clarified that we have to pay a royalty on VAT as well. So what it means is you record your revenue on a gross basis. And then on gross basis, you pay your royalty. Your revenue goes up because of the grossing up, but your royalty payment amount goes up. So what comes back as expense is a higher number. So you end up paying higher royalty. And this whole adjustment for Q4 -- in Q4, the whole year adjustment if you take over the area.

--------------------------------------------------------------------------------

Ziad Itani, Arqaam Capital Research Offshore S.A.L. - Associate Director [29]

--------------------------------------------------------------------------------

And how much is the royalty?

--------------------------------------------------------------------------------

Ajay Bahri, Ooredoo Q.P.S.C. - Group CFO [30]

--------------------------------------------------------------------------------

See, the total impact adjusting is about TND 10 million for us. So on an EBITDA basis, that's the amount you have to consider as a one-off item, which has impacted us in quarter 4.

--------------------------------------------------------------------------------

Ziad Itani, Arqaam Capital Research Offshore S.A.L. - Associate Director [31]

--------------------------------------------------------------------------------

Only TND 10 million?

--------------------------------------------------------------------------------

Ajay Bahri, Ooredoo Q.P.S.C. - Group CFO [32]

--------------------------------------------------------------------------------

TND 10 million coming in quarter 4 as the extra cost because of this grossing up.

--------------------------------------------------------------------------------

Andreas Goldau, Ooredoo Q.P.S.C. - Head of IR [33]

--------------------------------------------------------------------------------

We have one more information for you with regard to the Iraqi license. That was indeed a 15-year license issued in August 2007, and it's going to expire at the end of August in 2022.

--------------------------------------------------------------------------------

Operator [34]

--------------------------------------------------------------------------------

(Operator Instructions)

--------------------------------------------------------------------------------

Andreas Goldau, Ooredoo Q.P.S.C. - Head of IR [35]

--------------------------------------------------------------------------------

Maybe we'll take one of the webcast questions. There's a question regarding Indosat. Any guideline for 2019? How are you going to fund the CapEx for the next year and 2020?

--------------------------------------------------------------------------------

Ajay Bahri, Ooredoo Q.P.S.C. - Group CFO [36]

--------------------------------------------------------------------------------

So the guidance for 2019 for Indosat will be given by Indosat. Andreas, do we have the dates for that as yet?

--------------------------------------------------------------------------------

Andreas Goldau, Ooredoo Q.P.S.C. - Head of IR [37]

--------------------------------------------------------------------------------

It's going to be sometime in March.

--------------------------------------------------------------------------------

Ajay Bahri, Ooredoo Q.P.S.C. - Group CFO [38]

--------------------------------------------------------------------------------

Sometime in March. So when they have their next call, I think they will share with you the guidance. As far as CapEx is concerned, we had a question earlier on about self-funding for Indosat, I think I've answered that question already.

--------------------------------------------------------------------------------

Andreas Goldau, Ooredoo Q.P.S.C. - Head of IR [39]

--------------------------------------------------------------------------------

Great. Thank you, Ajay. Any more questions from the telephone line?

--------------------------------------------------------------------------------

Operator [40]

--------------------------------------------------------------------------------

We have a question from Omar Maher from EFG Hermes.

--------------------------------------------------------------------------------

Omar Maher, EFG Hermes Holding S.A.E., Research Division - VP of Telecom [41]

--------------------------------------------------------------------------------

Just one follow up question on the miscellaneous income. I just wanted to check if my calculation is correct. The implied miscellaneous income for the fourth quarter only is around QAR 300 million, is that correct?

--------------------------------------------------------------------------------

Ajay Bahri, Ooredoo Q.P.S.C. - Group CFO [42]

--------------------------------------------------------------------------------

Could you repeat the question, please?

--------------------------------------------------------------------------------

Omar Maher, EFG Hermes Holding S.A.E., Research Division - VP of Telecom [43]

--------------------------------------------------------------------------------

So on the miscellaneous income line, the implied figure that I have for the fourth quarter is around QAR 300 million for 4Q only. And I was wondering if you could clarify whether this has more to do with the loss of control of the subsidiary or the ancillary services that you booked in Qatar?

--------------------------------------------------------------------------------

Ajay Bahri, Ooredoo Q.P.S.C. - Group CFO [44]

--------------------------------------------------------------------------------

Just to be clear, for some reason, the line is not very clear. Are we talking about quarter 4 miscellaneous income?

--------------------------------------------------------------------------------

Omar Maher, EFG Hermes Holding S.A.E., Research Division - VP of Telecom [45]

--------------------------------------------------------------------------------

Yes.

--------------------------------------------------------------------------------

Ajay Bahri, Ooredoo Q.P.S.C. - Group CFO [46]

--------------------------------------------------------------------------------

Only quarter 4. Okay. Quarter 4 miscellaneous income has 2, 3 elements in it. One, of course, is the foreign exchange gain. So this quarter, unlike previous quarters, we have had foreign exchange gain. So that's been a positive impact for us, if you look at Myanmar and indeed Indosat as well. That's one reason. The second reason is that in previous quarters of Q4 2017, we had several one-off provisions for taxes for previous years in a couple of our operations, which would be Algeria and Iraq, which was not there this quarter. And also, there were certain impairment provisions related to our investments in quarter 4 of last year. So it is -- in comparison to last year, you'll see a delta, which is because of these reasons.

--------------------------------------------------------------------------------

Omar Maher, EFG Hermes Holding S.A.E., Research Division - VP of Telecom [47]

--------------------------------------------------------------------------------

Sorry, Ajay, are we talking about miscellaneous income that is under other income, which is Note 9 in the financial statements?

--------------------------------------------------------------------------------

Ajay Bahri, Ooredoo Q.P.S.C. - Group CFO [48]

--------------------------------------------------------------------------------

That's right.

--------------------------------------------------------------------------------

Omar Maher, EFG Hermes Holding S.A.E., Research Division - VP of Telecom [49]

--------------------------------------------------------------------------------

Okay. Because in the financial statement, it says that this is mainly the loss of control of the subsidiary and the ancillary services in Qatar.

--------------------------------------------------------------------------------

Ajay Bahri, Ooredoo Q.P.S.C. - Group CFO [50]

--------------------------------------------------------------------------------

Okay. Maybe you're talking about the line -- specific line item there. So the gain and loss of subsidiary is actually the gain we got in Indonesia where one of their subsidiaries, Artajasa, was converted to associate. And when this happened, we had to do fair value accounting. So the fair value gain went to the income for the year. So that's a one-off item, you're right.

--------------------------------------------------------------------------------

Omar Maher, EFG Hermes Holding S.A.E., Research Division - VP of Telecom [51]

--------------------------------------------------------------------------------

Okay. And so there is almost QAR 300 million in additional one-off in the fourth quarter alone from this line, correct?

--------------------------------------------------------------------------------

Ajay Bahri, Ooredoo Q.P.S.C. - Group CFO [52]

--------------------------------------------------------------------------------

This is not in quarter 4. The quarter 4 -- the loss of subsidiary is actually more coming from previous quarters. We explained that in previous quarters.

--------------------------------------------------------------------------------

Omar Maher, EFG Hermes Holding S.A.E., Research Division - VP of Telecom [53]

--------------------------------------------------------------------------------

But the ancillary services is actually what contributed to the bulk of the gain in 4Q.

--------------------------------------------------------------------------------

Ajay Bahri, Ooredoo Q.P.S.C. - Group CFO [54]

--------------------------------------------------------------------------------

Again, the ancillary service is also from previous quarter we talked about. And maybe if you send your specific question in an e-mail to us, we'll definitely answer that. But just to take your point and link it to the dividend payment, I think the point really is there a lot of one-off items, which come this year, which are not going to be repeated. And if I understand your question in detail, offline, we'll definitely pick it up with you.

--------------------------------------------------------------------------------

Omar Maher, EFG Hermes Holding S.A.E., Research Division - VP of Telecom [55]

--------------------------------------------------------------------------------

Sure, sounds good. And if I may just have one more question. Could you maybe clarify what is the nature of the ancillary services in Qatar again?

--------------------------------------------------------------------------------

Ajay Bahri, Ooredoo Q.P.S.C. - Group CFO [56]

--------------------------------------------------------------------------------

Like we've explained last time as well, these are one-off non-telecom services in the nature of doing some mega projects, which are not -- which -- services are given along with those projects. So since these are not telecom services, this revenue is going as other income. If they were telecom services directly related to our business, it would have gone as revenue. So these are one-off opportunities, which were seen in certain projects.

--------------------------------------------------------------------------------

Andreas Goldau, Ooredoo Q.P.S.C. - Head of IR [57]

--------------------------------------------------------------------------------

If you have any follow-up questions there, shoot me an e-mail. And for the others, we will share that information in the transcript of this call that is available for everyone. Any other questions?

--------------------------------------------------------------------------------

Operator [58]

--------------------------------------------------------------------------------

We have no further questions. Mr. Andreas, back to you for the conclusion.

--------------------------------------------------------------------------------

Andreas Goldau, Ooredoo Q.P.S.C. - Head of IR [59]

--------------------------------------------------------------------------------

Excellent. Thank you very much, operator, and thank you all for joining today's call. Please refer to the Ooredoo Investor Relations website for additional updates. Follow us now on Twitter @OoredooIR, or feel free to contact the Investor Relations team for further information. We look forward to your future participation in our next update probably around the 29th of April. And do remember to save the date on the Capital Markets Day, June 19, probably in Muscat. Meanwhile, thank you again for your continued interest in Ooredoo.

--------------------------------------------------------------------------------

Operator [60]

--------------------------------------------------------------------------------

This concludes today's conference call. Thank you for your participation. You may now disconnect.