Muscat: Oman Telecommunications Company (Omantel) said its group revenue grew by 6.9 per cent to OMR514.5 million for the year ended 2015, against OMR481.2 million for the previous year. However, the group’s net profit fell to OMR50.3 million for 2015, from OMR122.4 million for the previous year.
The profit has been impacted due to impairment of investment in one of the subsidiaries and Voluntary End of Service (VEoS) programme. If these exceptional items are excluded, the group net profit would have been OMR118.2 million.
Group operational performance has been impressive as earnings before interest, tax and depreciation (Ebitda) has been increased to OMR254 millionfrom OMR243.2 million, an increase of 4.5 per cent.
Revenues recorded a growth of 7.3 per cent and now reached OMR503.7 million compared to OMR469.2 million for the corresponding period of year 2014. Ebitda is OMR256.8 million, an increase of 4.2 per cent and net profit excluding the impact of WTL impairment and VEoS is OMR127 million. EBITDA and net profit margin are 51 per cent and 25.2 per cent, respectively.
Omantel board has recommended a final dividend of 60 baisas per share, which will be subject to the approval of annual general meeting. This is in addition to the interim dividend of 55 baisas per share paid in August 2015. This is bringing the total dividend of 115 baisas per share for the financial year 2015, which is same as 2014 dividend. Based on average share price of OMR1.480 in January 2016, the dividend yield works out to be 7.8 per cent.
The revenue growth was mainly driven by parent company revenues, which has recorded a growth of 7.3 per cent and now reached OMR503.7 million compared to OMR469.2 million for 2014.Parent company contributes 98 per cent of the group revenues. The fixed and mobile business retail revenues grown by 8.3 per cent and 6.9 per cent, respectively.
The growth is mainly driven by broadband revenues, which witnessed an overall increase of around 24 per cent. All major segments – consumer, corporate and wholesale revenues - have recorded a growth over last year. International call revenue during July-December 2015 recorded a growth of 20 per cent compared to the first half of 2015 mainly due to introduction of segmented bundle offers.
Group operating expenses increased by 10.4 per cent to OMR387.3 million compared to OMR350.8 million for 2014. Cost of sales increased by 11.3 per cent mainly on account of mobile and other customer devices impacting marginally the gross margin. Gross margin for 2015 was 80.8 per cent compared to 81.5 per cent for the previous year. Most of the increase in administration costs are of non-recurrent nature, which includes payment to TRA and consultancy costs on new corporate strategy and spend optimisation initiatives. Depreciation growth of OMR12 million was due to increased investment in network expansion and modernisation of both mobile and fixed networks to meet the growing demand of broadband services.
The group’s net profit was impacted due to impairment of investment in WTL and VEoS programme. Notwithstanding the above, Omantel’s overall financial results shows a steadily increasing revenue base from its domestic operations and the wholesale business. Excluding the impact of impairment and VEoS programme, net profits for the operations remained robust at a net margin of 23 per cent, Ebitda margin of 49.4 per cent and a free cash flow of OMR84 million, an increase of 10 per cent over the previous year.
Voluntary end of service
As part of the cost optimisation strategy, the group has initiated the implementation of the fourth phase of the Voluntary End of Service (VEoS) programme covering 266 employees of its parent company. The total cost of the programme is estimated at OMR12.578 million, which has been provided in 2015 accounts in line with International Financial Reporting Standards.
The programme implementation will be spread over seven quarters starting from the first quarter of 2016.The programme is expected to have an annual saving on employee cost amounting to OMR6.4 million, when it is fully implemented.
The total domestic subscriber base as of December 2015 (including mobile and fixed businesses) has reached 3.384 million (excluding mobile resellers) compared to 3.341 million of the corresponding period of the previous year, recording a growth rate of 1.3 per cent over the last year. Broadband segment both mobile and fixed broadband services have been the key driver for the growth. Fixed and mobile broadband subscribers grew by 33 per cent and 10 per cent, respectively.
Commenting on the results, Omantel chief executive officer, Talal bin Said Al Mamari said: “Despite this challenging situation in domestic market, Omantel continue to show commendable performance, which clearly visible in parent company performance mainly driven by strong growth in mobile and fixed broadband services. We expect that this trend will continue to drive our growth in the coming few years. However, the net profit has been impacted by exceptional items as stated above. Our evaluation of our investment in WTL has indicated that given the financial situation of WTL, coupled with market challenges, it is not likely that turnaround can materialise without significant capital injection. Having taken all possible measures, it has been decided to provide full exposure in 2015 accounts as prudent measures.”
Omantel CEO confirmed that the decline in net profit will not have an impact on Omantel liquidity as well as the dividend distributed as the company's board of directors proposed to the annual general meeting of Omantel a dividend distribution of 60 baisas per share in addition to the interim dividend paid to shareholders on August 2015.