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Edited Transcript of ORDS.QA earnings conference call or presentation 30-Oct-18 11:00am GMT

Q3 2018 Ooredoo QPSC Earnings Call

Nov 2, 2018 (Thomson StreetEvents) -- Edited Transcript of Ooredoo QPSC earnings conference call or presentation Tuesday, October 30, 2018 at 11:00:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Ajay Bahri

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

* Andreas Goldau

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

* Waleed Mohamed Ebrahim Al-Sayed

Ooredoo Q.P.S.C. - Deputy CEO of Ooredoo Group & CEO of Ooredoo Qatar

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Conference Call Participants

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* Dalal Darwich

* Dilya Ibragimova

Citigroup Inc, Research Division - VP

* Herve Drouet

HSBC, Research Division - Head of EEMEA Telecoms, Media and Technologies Equity Research

* Madhvendra Singh

Morgan Stanley, Research Division - Executive Director

* Omar Maher

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

* Talal AlKhamis

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Presentation

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Operator [1]

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Ladies and gentlemen, welcome to Ooredoo Group Quarter 3 2018 Financial Results Investor Call.

I will now hand over to Mr. Andreas Goldau, Ooredoo Group Investor Relations. Sir, please go ahead.

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

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(foreign language)

Hello, and welcome to Ooredoo's financial results call. My name is Andreas Goldau, and I'm in charge of Investor Relations. As part of today's discussion, I am pleased to introduce Waleed Al-Sayed, Deputy CEO of the Ooredoo Group and CEO of Ooredoo Qatar; Ajay Bahri, our Group Chief Financial Officer; Mansoor Al-Khater, Chief Strategy Officer; and Sara Al-Sayed from the Investor Relations team.

As always, we 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 Waleed.

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Waleed Mohamed Ebrahim Al-Sayed, Ooredoo Q.P.S.C. - Deputy CEO of Ooredoo Group & CEO of Ooredoo Qatar [3]

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Thank you, Andreas. (foreign language) Ladies and gentlemen, thank you for joining today's call. Our 9-month 2018 financial results show a continuation of the trend we have seen in this year with decline in our top line and bottom line. Our results were significantly impacted by the overall foreign exchange weaknesses in emerging markets as well as the market situation in Indonesia following the new SIM card registration resolution and regulations.

Group revenue was QAR 22.8 billion, and EBITDA margins stood at 41%. Indonesia remains our biggest revenue generator after our home market [in Qatar]. However, I am pleased to say that we are starting to see early signs of improvement for the third quarter of 2018, sequential top line growth and returning in Indonesia with improvement in quarterly revenue and EBITDA, we are beginning to see the impact of the SIM registration regulation subdue and a positive shift in market dynamics.

We have appointed a new CEO, Mr. Chris Kanter, who has the right skills and experience to lead Indosat to return into profit.

Beyond the difficulties we are seeing with some of our [marked opcos], which are operating in challenging market environments, we are also impacted by the rapidly changing consumer landscape and structural changes in the telecom industry. Consumer and businesses are becoming increasingly digital, and the telecom sector needs to adapt faster than ever before. I am pleased to say that Ooredoo is world pioneer in this area. During the period, we are first telecom operator to test the world's first self-driving, 5G-connected aerial taxi. 5G technology is now a reality in Qatar, and being the first in the world to launch commercially where we have more than 80 live 5G sites and continuing. Digital enablement is future, and we are making the right investment in our business to capture future growth and enrich our customers' digital life. This is fully in line with our mission to support Qatar's digital transformation vision.

As such, data continues to be centric to our businesses. We have seen a significant increase in demands from our customers and enterprises customers, with this revenue now accounting for 46% of total group revenue.

Operationally, we have had a number of achievements during the quarter, especially on the digital front. In Qatar, 99% of Ooredoo's consumer customer migrated to e-bill, in line with our digital drive initiatives to support Qatar's vision to go green. This has also benefited us financially, reducing our CapEx. In Oman, 94% of our corporation is now population is now covered by a major 4G network, and customers are also benefitting from the launch of Saeed, this first chatbot in Oman, to provide world-class digital customers experience. Ookla, the global leader in internet testing and analysis, confirmed Ooredoo's data leadership and fastest mobile network in Qatar, Algeria, Oman and Myanmar.

We have also received several awards which recognized Ooredoo for its leadership position in our markets of operation. I would like to highlight that in Oman, Telecoms World Middle East recognized Ooredoo Oman with two distinct awards for the Best National Network Operator and the Best Digital Content. In Iraq, Asiacell was awarded the CARE Award of excellence in customer services.

I would like now to hand over to Ajay to give you more details on the financial results. Thank you.

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Ajay Bahri, Ooredoo Q.P.S.C. - Group CFO [4]

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Thank you, Waleed, and welcome to everyone on the call today. Let's move to Slide #5 for more information about the group revenue and EBITDA.

As mentioned, similar to what we saw at first half year 2018, group revenue for the first 9 months of the year was impacted by the weak performance in Algeria and Indonesia, while the regulation on SIM card registrations continued to impact our top line performance.

As mentioned on the last call, in Indonesia, we have changed our strategy from a push to a pull distribution strategy. We are starting to see a positive impact from this change, and sequentially, top line growth is returning in Indonesia.

Revenue growth was generated by Kuwait, Oman, Iraq and Myanmar. Offset by reduction in Indonesia and Algeria, Qatar revenue was flat quarter-on-quarter. OpEx was maintained through tight cost control and group efficiency. However, due to lower revenue, EBITDA and EBITDA margin decreased to 41%. We will continue to focus on cost management and efficiencies.

Let's move to Slide 6. As discussed, the decrease in group net profit was mainly caused by the market adjustment in Indonesia and the changing market conditions in Algeria as well as foreign exchange losses in Myanmar. That said, it's important to note that we continue to make good progress with our efficiency program and reported net profit attributable to shareholders of QAR 1 billion. As Waleed mentioned, data revenue accounts for 46% of total group revenue. What this means is that digital growth can also help to sustain the company's profitability.

During the quarter, net profit benefitted from certain one-off items. Let me explain this further. Under other income, foreign exchange losses of QAR 278 million were offset by one-off other ancillary services income of around QAR 378 million. This income is noncore and was not included in the revenue or the EBITDA calculations, but it should be seen more as a one-off item.

[Share of] results of associates benefited from sale of a Myanmar tower company where we invested in and also (inaudible) gains from our investment in Rocket Internet, total about QAR 260 million there. This was offset by certain impairments in our investments, also including certain investments in Rocket Internet as well as certain old WiMAX CDMA investments. The net position after these impacts is a positive impact of QAR 190 million. This was also offset partially by the provision and estimates on IFRS 9 provisions for receivables. So compared to the 13% lower net profit during the quarter, if these one-off items were not there, it would be down another 22%.

Let's move on to the next slide and look at CapEx and free cash flow. CapEx is higher due to the investments we're making into our business to position it for future growth, mainly 4G+ external investments in Indonesia and further 4G deployment and digitization across key markets. Impacted by lower EBITDA and the increase in CapEx, the free cash flow also declined.

Moving on to the next slide, customers. Group customer numbers decreased to 120 million, mainly driven by Indosat. We recorded some growth in Iraq, Kuwait, Tunisia and Myanmar. We expect customer numbers to start stabilizing as the SIM card registration process in Indonesia is now being finalized.

Next slide, please. Net debt. I'm pleased to report that we have a healthy and well-balanced debt profile. Net debt continues to decline, down 12% at 9 months 2018. Our net debt to EBITDA ratio is at 1.8x, which is in line with our long-term guidance of between 1.5 to 2.5x. Group debt remains mainly at a corporate level, largely Qatar, followed by Indonesia, and then a small percentage allocated to the other opcos. As a reminder, debt at the ARPU level is kept primarily in local currency.

Next slide, please. Performance summary and 2018 guidance. As previously discussed, 2018 has been a very challenging year for the group, with regulatory challenges, new taxes and difficult market conditions driving revenue down and EBITDA as well. Excluding the foreign exchange impact, both revenue and EBITDA numbers are 2 percentage points better. We are cautiously optimistic about the international market, which has a significant impact on our top line and bottom line results. We maintain the disciplined CapEx approach, a high-performing efficiency program and strict cost management.

Please turn to Slide 12 for an operational review of our opcos. Starting with Qatar, our home market. We had a number of firsts in our home market in Qatar. We tested the world's first self-driving, 5G-connected aerial taxis. We've rolled out 5G and now have more than 80-plus live 5G sites, as Waleed has already pointed out. We also successfully tested the first live eSIM in a world-class Supernet network. Financially, revenue was at a good level. EBITDA margin was strong at 51% due to cost efficiency. On a sequential quarterly basis, revenue was slightly up in Q3 2018 with growth coming from Ooredoo TV and higher sales of devices, which diluted margins for Q3.

Let's move to the next slide, Indonesia. As already discussed, Indosat Ooredoo's top line performance continues to be impacted by the new regulation. However, sequentially, we are seeing top line growth of 6% in local currency. As a reminder, we have [changed], are starting to focus on postsales activities rather than just push marketing, designed to increase the revenue from bundles and packages. We expect this to lead to a more loyal customer base, lower churn rates going forward and, eventually, higher margins. Churn on our customer base was already stabilized, and we expect to continue to see improvements in Q4 2018.

We're also seeing increases in prices reported by our peers in the industry, which is also expected to lead to a better market environment. Increases in our data prices have led to better data monetization for the period. Operationally, 2018 ex-Java network expansion is on schedule. Job grading and improving of the 4G+ network experience have been completed in 3 provinces. This new network expansion of the new 4G+ network and upgrades from 3G to 4G in Lampung, South Kalimantan and South Sulawesi regions have advantages in network speed and stability so that customers can enjoy a faster and more stable internet. Our outlook on Indonesia is cautiously optimistic.

Moving on to the next slide, Iraq. In Iraq, we continue to see the benefits of the improved security situation with quarter-on-quarter growth in revenue, EBITDA and customer numbers. However, we remain mindful of the fact that we are operating in a difficult market with an unstable political situation, and hence, we exercised prudent management and continue to have stringent cost control approach. EBITDA went up 8% ahead of the 3% growth in revenue, which shows good efficiency management. We continue to restore connectivity in the liberated area, and by doing so, we contribute to the economic growth of the people of Iraq. Asiacell received the prestigious CARE Award for its excellence in customer care service.

Moving on to Oman. Ooredoo Oman continues to report robust financial results with growth across the board. We are also supported by a focus on digital enablement as we cater to the changing need of both business and consumer customers across Oman. To maintain our digital competitiveness, we launched new services and products designed to elevate customers' digital experience. Ooredoo Oman relaunched its award-winning app with a new look and feel, launched the country's first chat bot, Saeed, and provided digital training to customer service representatives, all of which cater to the increasingly digital requirements of consumers and business in the Sultanate. We have now extended 4G coverage, and well over 90% of the population can experience of its fast, reliable network.

Moving on to Slide 16, Kuwait. In Kuwait, we reported a strong increase year-on-year in revenue, mainly driven by handset sales, which also impacted the margins. Quarter 2 to quarter 3's revenue decline was due to lower handset sales where our EBITDA margin was improved, and absolute EBITDA was flat. The market continues to be very competitive, but I'm pleased to report a 2% increase in customer numbers, indicating good demand for our products and services. During this period, we ran various promotional campaigns and offers to maintain our competitiveness in the market. We also continued to make advances in the digital front, with data revenue increasing further.

Next slide, please. Algeria. You'll see that the situation in Algeria continues to be challenging with difficult economic conditions, including the devaluation of the Algerian dinar and the persistent price war. Having said that, we are seeing improvement quarter-on-quarter with a 6% growth in revenue in local currency, supported by promotional and marketing activities. Operationally, we've done well. We maintained our mobile data leadership, and 4G users have increased 56% quarter-on-quarter, driving record usage. During the period, Ookla confirmed Ooredoo Algeria's data network leadership for its 3G and 4G networks for second half of 2018.

Next slide, please. Tunisia. Tunisia delivered another robust set of results this quarter. We maintained our leadership in the mobile market and grew customer numbers by 5%. Growth was driven by mobile data and VAS revenues as well as fixed revenues in handset sales. As a reminder, Ooredoo Tunisia is building its business model by rebalancing its revenue mostly to data and VAS instead of voice and estimates to ensure margin prediction. Quarter-on-quarter, revenue was up 7.2% in local currency as Q3 is seasonally better in Tunisia. Margin improved by almost 10% due to revenue increase, lower handset sales, and lower marketing spend in the quarter. The hand sales benefit to the margin is about 6%, so you can talk about a 4% or 5% improved margin in quarter 3. If you look at quarter 3 of last year as well, you will see quarter 2 to quarter 3 improvement in absolute EBITDA and EBITDA margin due to seasonality.

Moving on to Slide 25: Myanmar. Ooredoo Myanmar increased its customer base by 23% year-on-year and reported another strong set of results with growth across the board. Quarter-on-quarter, however, revenue declined by 6.6% due to price competition from the (inaudible) player, MYtel. Year-on-year revenue was up almost 10%, with growth generated from service revenue, wholesale revenue, fiber to the home, and digital revenue. OpEx optimization initiatives have benefitted EBITDA, which is up more than 90% for the 9 months 2018 period. Operationally, 4G coverage was extended, developing an almost 86% LTE penetration on addressable devices.

This concludes the presentation. I'll now hand you back to the IR team.

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Andreas Goldau, Ooredoo Q.P.S.C. - Head of IR [5]

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Thank you very much, Ajay. Now we can start the Q&A part. Questions can be asked on the webcast or over the phone. Operator, can you please explain how to ask questions to the participants?

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Questions and Answers

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Operator [1]

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Ladies and gentlemen, we will now start our Q&A session. (Operator Instructions) Our first question comes from Talal AlKhamis, MBK Capital.

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Talal AlKhamis, [2]

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I just have a question -- a couple of questions, actually. So, we'll start off with the, like, is there any potential new licenses in any of the markets that you are operating in, like Oman, Iraq, anything that you have heard of that's imminent? And second, in Indonesia, so if we look at the Q4 of 2017, you had around 108 million customers in prepaid, and in Q3, you have around 62. So what does the clean, call it, customer base that you think -- like, a lot of these might have been just people that signed up for SIMs and not a real user. So what are you expecting in terms of the actual user that where things will go back to?

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

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Okay, as far as the new licenses are concerned, the talk has only been in Oman and Iraq so far. And in Oman, we don't have any latest updates after what happened last year, so we're still waiting for an official update on the third license in Oman. Similarly, in Iraq as well, there have been talks of a fourth license, but no new developments since the last quarter, this quarter.

As far as the Indonesian customer numbers are concerned, like we've explained in the previous quarters as well, that it's a combination of (inaudible) the base and SIM registration requirements, which were stringently enforced in the previous quarter. As a result of that, a lot of inactive customers and customers with no proper registration documents were cleaned up. I would say we are probably almost done with that process. Sometimes, the customer cleanup happens after a suspension period, so that's why you see a delay and see some churn happening in Q3 as well. But going forward, we believe the customer base is already in a much more cleaner and stable basis now in Q3 2018.

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Talal AlKhamis, [4]

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So in Q3, the 62 million, you think these are the-there isn't more churn to be expected, at least? Like, these are the clean customer base? Anything from there would be growth in market share?

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Ajay Bahri, Ooredoo Q.P.S.C. - Group CFO [5]

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That's what the expectation is. Of course, the market itself, as you know, has high churn in the market itself, which is a different thing from the clean base. So the base cleanup is more or less behind us now.

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Operator [6]

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Our next question comes from Dilya Ibragimova, Citi.

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Dilya Ibragimova, Citigroup Inc, Research Division - VP [7]

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I have three questions, please, if I may. First is on normalized numbers. It appears there are a couple of one-offs in this set of results. First is the gain on sale of associate, which seems like it's below EBITDA, and also one-off compensation for some projects in Qatar. I just wanted to confirm what -- it's over QAR 300, and it's around QAR 380 million. I wanted to -- if you could confirm which one is included in EBITDA, if any, and whether Qatar EBITDA, reported EBITDA, has any of these one-offs included.

The second question is on Indonesia, please. What is your currency on the market? Considering the decline in the revenues for the whole of the market, presumably, the synergies from in-market consolidation could be more valuable now. How do you -- in the past, you said that Ooredoo is supportive of when market consolidation, but rather get the benefit of that via not participation in that, in the process. Has that changed, possibly because the value of synergies is now -- or could now be higher?

And also, maybe you could clarify on the plans, investment plans, in Indonesia. There were press comments suggesting that the new management is planning some transformational investments into the network, which imply a higher spend that what has been spent by the company historically. Maybe you could comment on those plans as well.

And thirdly, on Algeria, you mentioned that there is a price competition ongoing. Could you please clarify on the price wars that you mentioned? Is it a new cycle that you're seeing going into second half? And when do you think it would, in your view, the revenue trends are likely to turn for the better?

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Ajay Bahri, Ooredoo Q.P.S.C. - Group CFO [8]

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Okay, so let me take the first question on the EBITDA calculation. So as far as EBITDA is concerned, anything under the other income line item is not included in EBITDA, so the one-off income that we talked about is not in the EBITDA for Qatar operations. On (inaudible) group EBITDA, we go by definitions that we have that our loan document, so EBITDA includes these results of the associates. So other income is not included in EBITDA, and that's why the one-off income was not included. And the results of associates need to be added to the EBITDA, but not for Qatar operations. The results of associates comes more at the corporate level in the EBITDA side.

As far as Indonesia is concerned, you're right; the market has changed over the last one year, and our view of consolidation has not changed. We've actively looked at the possibility of consolidation in the past, including looking at [netco] company as well, with some of the competitors. However, the regulatory approval did not forthcoming in the past, we are always open minded to look at ways to improve the industrial performance, and if there are practical and workable options, we'll definitely look at them going forward, yeah.

As far as the investment plans are concerned, yes, we are focused on getting our network quality better, and part of what you hear from the new management team in Indonesia is indicating that. So how this will be as to rolled out on each year will really depend on how things progress, but I think on the big-picture basis, you can see that we did get a lot efficiencies in CapEx (inaudible) pricing, benefits we did by having group (inaudible) run from end of 2016 onwards, and we want to leverage the benefit of that going forward now.

On the Algeria question, I think it's difficult to forecast how the market will develop. We haven't seen any abatement of price competition yet. Having said that, we have our own strategy, commercial strategy, to focus on (inaudible) trends and have value propositions in the market. But how that plays out really depends how competition also reacts. So, not in a position to predict how the market will evolve in Algeria.

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Operator [9]

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Our next question comes from Madhvendra Singh, Morgan Stanley.

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Madhvendra Singh, Morgan Stanley, Research Division - Executive Director [10]

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A couple of questions from my side. Firstly, in Qatar, the performance was actually quite strong, so just wondering what drove that and whether, you know, the one-off or ancillary service revenues you mentioned was included in the revenues or (inaudible) there in the OpCo level performance. Then secondly, just wondering on dividends, I mean, is there any way we could actually forecast (inaudible) for next [years], because I don't really think we have, like, a dividend policy linked to free cash flow or net income or leverage, as such. So I'm just wondering, you know, how should we actually think about dividends for 2019, '20, '21?

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

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I just talked about this. Other income is not included in the Qatar performance when you see OpCo performance individually. So what you see is the actual revenue, not the ancillary one-off items. On strong performance, maybe Waleed (inaudible).

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Waleed Mohamed Ebrahim Al-Sayed, Ooredoo Q.P.S.C. - Deputy CEO of Ooredoo Group & CEO of Ooredoo Qatar [12]

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Basically, on performance, the (inaudible) has recorded for the past years, and from the -- even before the [competition] start that it's worth always to satisfy customer needs and to bring the latest technology. Having said that, by itself, this year, when we launched the first in the world to launch 5G, and even though that we know that the handsets are not available, but we started using that to test all the use cases available. We have so far used three use cases. One is the (inaudible) with the cameras to, you know, broadcast live sporting and other activities. The second was virtual reality, where we have allowed, you know, analysts to sit in their studio, but to watch the 360 degrees the match from the stadium. And the last one was the flying taxi, which we have, you know, surprised the world, in fact, by having the first flying taxi in the sky in Qatar.

So I think we have-because of that, we have the customer confidence and we have, you know, maintained our revenue market share and customer market share for a long time, and we continue to gain more respect and more confidence of the customer going forward.

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

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From the dividend forecast [question], unfortunately, I can't give you a forecast for that. However, I think what we've said in the past is we do look at the performance of the company, its leverage lever, the free cash flow generation, and all this. And maybe, looking at (inaudible) ratios and dividend yield can give you some indication of how dividend would look going forward as well.

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Madhvendra Singh, Morgan Stanley, Research Division - Executive Director [14]

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Just on this, you know, 5G use cases you talked about, how many of these services are actually live and available commercially already? Is it still (inaudible) state or...

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Waleed Mohamed Ebrahim Al-Sayed, Ooredoo Q.P.S.C. - Deputy CEO of Ooredoo Group & CEO of Ooredoo Qatar [15]

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Yes, the 5G network is completely live, but you know, maybe the service that we can provide so far are CPEs, which basically provides text, you know, Wi-Fi. But on mobile itself, it is waiting, and the whole world is waiting for handsets to be available to use the frequency of 5G (inaudible). But for use cases, we are doing it significantly for the upcoming events that (inaudible) has, and in particular, 2022 FIFA World Cup, and what are the services we can provide. And, you know, (inaudible), as we said, was organizing -- or the people responsible about organizing the FIFA World Cup.

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Madhvendra Singh, Morgan Stanley, Research Division - Executive Director [16]

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And the air taxi you talked about, is that something which is live, or it was just a test flight you did?

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Waleed Mohamed Ebrahim Al-Sayed, Ooredoo Q.P.S.C. - Deputy CEO of Ooredoo Group & CEO of Ooredoo Qatar [17]

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No, it was a test flight, but we are ready, once, you know, we can understand that how we can use it, because it needs some preparation of from where to where it has to fly and to deliver a customer. But the service is ready, just waiting for the right time for the government to work with us to launch this service.

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

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Just to clarify, (inaudible), so we tested the service. We had the taxi up in the air. It's working on our 5G network. We've documented that, and videos are available. So maybe, when we hold our next capital market, say next year, we are able to pick you up in a flying taxi from the airport.

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Madhvendra Singh, Morgan Stanley, Research Division - Executive Director [19]

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That's amazing.

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Operator [20]

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Our next question comes from Dalal Darwich, Arqaam Capital.

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Dalal Darwich, [21]

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I have a couple of questions on [CapEx]. Can you please quantify how much the 23% [MTR] cut in July impacted your revenues (inaudible) Q3? And if there is any updates on getting a license extension, as Vodafone Qatar did, and if you can tell us how much spectrum you got in the 3.5 gigahertz? And if you can please give us any guidance on the CapEx associated with your 5G network rollout and expansion?

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Waleed Mohamed Ebrahim Al-Sayed, Ooredoo Q.P.S.C. - Deputy CEO of Ooredoo Group & CEO of Ooredoo Qatar [22]

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Okay, I'll start with the last question. On the frequency, we got exactly what we needed on 3.4 to 3.6 band, and this is 200 megahertz that we (inaudible). The future requirement, we have been promised by the regulatory that they are doing the complete study to allocate us more frequencies that we needed for the nationwide, you know, launch.

License extension, we are still in the negotiation period. We have seen a very positive side from the regulations, but still continuing to negotiate. And I think during the first quarter of next year, we should reach a conclusion.

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Ajay Bahri, Ooredoo Q.P.S.C. - Group CFO [23]

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On your question on the [MTR] reduction by 23%, the impact to us is based on a net basis, which means incoming and outgoing, which is not material for us at all because the net settlement is not a material number. As far as the CapEx forecast is concerned for 5G or otherwise, normally what we give is the guidance and the CapEx for the whole group, and as we get into next-year guidance, we will include the 5G requirements in that guidance as well.

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Operator [24]

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Our next question comes from Herve Drouet, HSBC.

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Herve Drouet, HSBC, Research Division - Head of EEMEA Telecoms, Media and Technologies Equity Research [25]

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Two question as well on my side. The first one is, with your guidance, I was wondering, in light with the Q3 numbers and we start to be in Q4, how confident you are in reaching, you know, your full year guidance, and especially on the EBITDA. Do you think, you know, that that will be in the sequential improvement momentum, you know, to reach that EBITDA guidance in particular?

The second question is, if you can, give us a little bit more color on the strategy in Indonesia, and especially you were mentioning the shift of strategy from push to pull. I was wondering, you know, for -- in your view, what will be the key performance indicator you will look at on Indonesia to track success of the turnaround? Thank you.

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

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Okay, so as far as the guidance is concerned, really, the guidance for Q4, to meet the guidance, we need Indonesia to perform better. And like we said, we are cautiously optimistic about quarter 4 for Indonesia. And also, it also depends on how foreign exchange evolves, because the guidance is based on riyal terms. So right now, (inaudible) if there is not much deterioration in FX rate and the trend that we today see in Indonesia continue where prices also went up in the market, I think we should be within the range that we've given you. However, there are a lot of variables here, so we'll have to see how that goes.

As far as the strategy in Indonesia is concerned, push and pull is only one piece of that, which is basically how we distribute our products to our customers. So there was an extreme push strategy in the country for a long time. The new regulation of SIM card registration necessitated the change which is taking place right now. Having said that, the whole impact in Indonesia is not just because of (inaudible) voice and SMS decline has been steep in the market. The incumbent also is suffering from that now. So the whole industry is in a transition phase right now.

So the KPI which we are looking at for success would obviously include operational KPIs, as well as financial KPIs, like we normally do in all operations. So it's not going to be anything unusual for Indonesia. It will be the standard KPIs you would use in any market to track operational performance.

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Herve Drouet, HSBC, Research Division - Head of EEMEA Telecoms, Media and Technologies Equity Research [27]

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And just on the follow-up, I mean, for you in Indonesia, what you think is most important for the companies, I mean, is it you stabilize, you know, revenue, or starting to increase revenue? So is it more on the revenue side, or is it more on the margin side, or the return on invested capital side?

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

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Well, we would like all of them to improve, to give a simple answer. But having said that, I think the immediate focus, given that the revenue decline was [intense], I think stabilizing revenue and getting back to growth is a key focus in the company, at the same time maintaining EBITDA margin, cost optimization, and CapEx efficiency. So the balance is really making sure you invest at the right places and at the right time and monetize your investments. With the dynamics in the market, with competition, you have to balance it well. So like I said, not really different from what you would do in any other company. The KPIs are really very similar, but the targets set for management really change based on the timing and evolution of the company.

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Operator [29]

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Our next question comes from Omar Maher, EFG Hermes.

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Omar Maher, EFG Hermes Holding S.A.E., Research Division - VP of Telecom [30]

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Thank you, gentlemen, for the presentation. A couple of questions from my end, and sorry if I missed this, but I was wondering if you could give us clarification on the...

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Ajay Bahri, Ooredoo Q.P.S.C. - Group CFO [31]

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Sorry, Omar, can you speak up a little bit? The volume is a bit low.

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Omar Maher, EFG Hermes Holding S.A.E., Research Division - VP of Telecom [32]

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Yeah, is this better? Hello?

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Ajay Bahri, Ooredoo Q.P.S.C. - Group CFO [33]

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That's better.

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Omar Maher, EFG Hermes Holding S.A.E., Research Division - VP of Telecom [34]

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My question, again, was on the miscellaneous income that was booked below the line this year on the 78 million. I understand most of it is due to this one-off ancillary service in Qatar, but I was wondering if you could just clarify the nature of this one-off item and maybe explain to us why is it that it was not booked on the revenue line? I mean, at the end of the day, it's an income that was received for performing services, even if it was a one-off, you know, type of service. But, you know, I imagine it could have been booked on the revenue line. So if you could just clarify why it wasn't booked at the top end, was rather below the EBITDA line, and then explaining the nature of it as well would be really helpful.

And then my second question is if you could clarify as well what kind of loss was incurred in Indosat. Seems that there's something exceptional this quarter. I'm looking at EBITDA, seems fairly stable Q on Q, but then on the bottom line of Indosat, there seems to be a much bigger loss than you had last quarter. So if you could, also clarify the reason behind that.

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Ajay Bahri, Ooredoo Q.P.S.C. - Group CFO [35]

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Okay. As far as the booking of that one-off item is concerned, we obviously have aligned that with our [opco] as well. The nature of the income is not telecom services; directly, it's ancillary, and it's a one-off related to the noncore business. So conceptually, it’s not appropriate to record it as a revenue increase, an EBITDA increase. We did have questions from some of the other analysts wanting to understand that. So we want the EBITDA to be directly operational in nature, which is cyclic in nature as well. So that's why this booking has been done in this manner, and we don't expect this to repeat in the coming quarters either.

As far as Indosat's concerned, you saw some better performance in previous quarters because of a one-off benefit they got when one of their investments in a subsidiary was fair-valued when it became an associate. I think the details of that is available in previous quarter for Indosat. And you find, I think, of our financials, also you get details of that.

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Omar Maher, EFG Hermes Holding S.A.E., Research Division - VP of Telecom [36]

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Thank you, Ajay, and just one follow-up, if I may. So is this ancillary one-off related maybe to regional [KB] systems? Is that what it is?

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Ajay Bahri, Ooredoo Q.P.S.C. - Group CFO [37]

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Related to regional?

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Omar Maher, EFG Hermes Holding S.A.E., Research Division - VP of Telecom [38]

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I'm sorry?

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Ajay Bahri, Ooredoo Q.P.S.C. - Group CFO [39]

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Can you repeat, please? Related to regional what?

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Omar Maher, EFG Hermes Holding S.A.E., Research Division - VP of Telecom [40]

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Regional submarine cable systems.

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Ajay Bahri, Ooredoo Q.P.S.C. - Group CFO [41]

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No, it's not related to regional submarines.

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Waleed Mohamed Ebrahim Al-Sayed, Ooredoo Q.P.S.C. - Deputy CEO of Ooredoo Group & CEO of Ooredoo Qatar [42]

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It's not related to regionals. In fact, if it was income from submarine cable systems as an IRU, it would actually go into revenue (inaudible), so it's not related to that.

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

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Is there any way that you could clarify what it is, exactly?

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

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Since it's not a regular operating income, I think we needn't get into details of that. Like I said, it's a one-off opportunity we had in terms of projects not related to core revenue and it's not going to repeat, so it doesn't have relevance going forward also.

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Operator [45]

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We have a follow-up question from Dilya Ibragimova, Citi.

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Dilya Ibragimova, Citigroup Inc, Research Division - VP [46]

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Just a question, please, on your plans for the short-term debt, now that the year-end is approaching, have [provisions been] made or is there a better visibility on whether to repay the upcoming maturities, or whether you would now like to roll it over?

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Ajay Bahri, Ooredoo Q.P.S.C. - Group CFO [47]

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Sorry, Dilya, the question was not very clear. Can I ask you to repeat it once more?

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Dilya Ibragimova, Citigroup Inc, Research Division - VP [48]

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Yes, of course. Just a question on short-term maturities that are coming up in December. Now that we're approaching the time, perhaps you have better visibility on the plans, whether you would like to repay the upcoming maturities, or would you rather roll them over? I guess, our view was -- is that by repayments, you would release some of the -- finance some of the cash that is being paid as finance costs.

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Ajay Bahri, Ooredoo Q.P.S.C. - Group CFO [49]

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Okay. Now we got it.

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Waleed Mohamed Ebrahim Al-Sayed, Ooredoo Q.P.S.C. - Deputy CEO of Ooredoo Group & CEO of Ooredoo Qatar [50]

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I'll take it. Sure. I think the upcoming maturities for us accrue, which we are not intending to refinance in the bond market. So we have several standby facilities, and we're sitting on cash right now, and we already have some facilities in place which we will use doing the refinancing as we speak. But we're not expecting the bond market to refinance this [opco].

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Dilya Ibragimova, Citigroup Inc, Research Division - VP [51]

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Sorry. Just to -- maybe just to clarify. Are they expecting an idea that was to repay rather than refinance?

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Waleed Mohamed Ebrahim Al-Sayed, Ooredoo Q.P.S.C. - Deputy CEO of Ooredoo Group & CEO of Ooredoo Qatar [52]

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That's right, but what we repay, we use our existing cash funds as well as a certain standby facility which is already in place as we speak today. After today, we don't need to put any more facility in place for that.

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Operator [53]

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(Operator Instructions) We have a follow-up question from Dalal Darwich, Arqaam Capital.

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Dalal Darwich, [54]

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I have a couple more questions, one on Indonesia about the q-on-q recovery in prepaid RPU and local currency and what drove that, and if you find that recovery sustainable. And a question about the (inaudible) market, so what is the reason behind the 24% q-on-q jump in EBITDA, in spite of the foreign exchange devaluation. So are there any one-offs, or is it strictly on cost initiatives? If you can, clarify that, also.

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Ajay Bahri, Ooredoo Q.P.S.C. - Group CFO [55]

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The RPU recovery in Indonesia is a function of the cleanup of the customer base, to a large extent. A lot of customers were inactive or not doing much usage, or we're double -- [SIMmers]. As a result of the new regulation, they're either cleaned out of the documentation or not there, or they've chosen to have one SIM. So a lot of cleanup had happened with the base. So that, mathematically, is driving a higher RPU number. There is some minor benefit coming from increases in prices as well, but largely, this is driven by cleanup of the customers who were not initially contributing much RPU.

As far as Tunisia is concerned, Q3 generally is a good quarter in Tunisia every year. It's a seasonally better quarter with incoming roaming increasing with tourism increasing, and some holiday season there as well. So if you look at last year's quarter 3, the EBITDA increase was in excess of 25% actually. So every year, quarter 3, we see a jump-up in revenues without corresponding increase in cost.

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Operator [56]

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(Operator Instructions) We have no further questions at this time. Dear speakers, back to you for the conclusion.

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Ajay Bahri, Ooredoo Q.P.S.C. - Group CFO [57]

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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, or feel free to contact the Investor Relations team if you need further information. We look forward to your future participation in our next update, probably around middle of February 2019. Thank you very much for your continued interest in Ooredoo.

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Operator [58]

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