GCC Telecom Sector Results Review - FY2009

The year 2009 witnessed a marginal decrease in profitability of the GCC Telecom
companies. The aggregate net income of GCC Telecom companies for the fiscal year of
GCC Telecom Sector Results Review - 2009

2009 was US$7.64bn, a 1.86 percent drop from the 2008 level of US$7.79bn. This study
covers 11 locally listed companies, of which 3 companies are from Saudi Arabia, 2 from
Kuwait, 2 from UAE, 2 from Qatar, 1 from Oman, and 1 from Bahrain. Out of those 11
companies, two companies witnessed a decline in their annual earnings, while 2 firms
incurred losses greater than the year before. In the meantime, 7 telecom companies
managed to increase their annual profitability.

Table 01: GCC Telecom Companies Annual Results:

Net Profit/Loss
Market Cap.
Company Name RIC Country 2008 %Change
31/12/2009 (US$mn) 2009 (US$mn)
(US$mn)
Saudi Telecom <7010.SE> Saudi Arabia 23,509.71 2,895.63 2,942.14 -1.58%
Emirates Telecommunications Corp. <ETEL.AD> UAE 21,511.21 2405.253 2316.649 3.82%
Zain (Mobile Telecommunications Co.) <ZAIN.KW> Kuwait 15,148.36 675.20 1,117.25 -39.57%
Etihad Etisalat Co <7020.SE> Saudi Arabia 8,097.79 803.35 557.56 44.08%
Qatar Telecommunications (Q-Tel) <QTEL.QA> Qatar 5,841.56 762.89 632.95 20.53%
Mobile Telecommunications Saudi (Zain Saudi) <7030.SE> Saudi Arabia 3,787.68 (826.13) (607.25) -
Emirates Integrated Telecommunication Co. <DU.DU> UAE 3,168.41 71.89 1.12 6304.56%
National Mobile Telecommunications Co. <NMTC.KW> Kuwait 2,693.21 375.74 286.00 31.37%
Oman Telecommunication <OTL.OM> Oman 2,519.74 338.88 278.3 21.76%
Bahrain Telecommunications Co. <BTEL.BH> Bahrain 2,246.43 277.74 275.53 0.80%
Vodafone Qatar! <VFQS.QA> Qatar 1,948.83 (136.00) (10.96) -
Total 90,472.92 7,644.44 7,789.32 -1.86%
! Nine months figures (Company's financial year ends on March 31, comparative earnings figure is for period from June 23 to Dec. 31, 2008)

On quarterly basis, GCC Telecom sector’s profitability dipped by 5.36 percent in 4Q2009,
compared to 3Q2009. Meanwhile, results of 4Q2009 improved by 38.8 percent over
4Q2008. (Those results exclude Vodafone Qatar due to the lack of comparable figures).

Chart 01: GCC Telecom Companies Quarterly Earnings for 2009

Quar terly Ear nings for 2009

US$ mn

2,366.99
2,500 1,825.78
1,835.77
2,000 1,727.86

1,500

1,000

500
Faisal Hasan, CFA
Head of Research 0
fhasan@global.com.kw 1Q2009  2Q2009  3Q2009  4Q2009 
Phone No:(965) 2 295-1270

Quarterly results excluding Vodafone Qatar

Rasha Al-Huneidi
Assistant Vice President
huneidi@global.com.kw Country wise, the Saudi telecom sector contributed with 37.58 percent to the total profits of
Phone No:(965) 2 295-1285
the sector, with the aggregate profits of the three companies listed on Tadawul reaching
Dalia El-Shinnawy
US$2.87bn. Saudi Arabia's telecommunication services providers posted a 14 percent rise in
Senior Financial Analyst their 2009 revenues on higher sales from international operations and stronger demand for
dshinnawy@global.com.kw
Phone No. (965) 2 295-1286 high-speed Internet and mobile services. Total sales for telecommunications companies
jumped to SR67bn (US$17.9bn), from SR58.8bn in 2008, the Communication and
Information Technology Commission mentioned in a recently published report.
Subscriptions for mobile phones reached 44.8mn by the end of 2009 versus 36mn a year
earlier, while demand for broadband Internet more than doubled to 2.75mn subscribers.
 Global Market Report –Saudi Arabia
Revenues generated from international operations of Saudi telecommunication firms rose to
SR14.5bn last year from SR9.5bn in 2008.

That was closely followed by UAE, with its two telecom companies’ share in overall
profitability reaching 32.40 percent.

Chart 02: Contribution Percentage to overall GCC Telecom Sector Profits by

Country
GCC Telecom Sector Results Review - 2009

Contribution % to overall profits by

Country
Oman Bahrain
Qatar 4.43% 3.63%
8.20% Saudi Arabia
37.58%

UAE Kuwait
32.40% 13.75%
Source: Global Research

In UAE, Emirates Integrated Telecommunication Company (DU) achieved the highest

increase in annual profits compared to its peers. DU’s FY2009 profits jumped by a
whopping 6,304.56 percent when compared to the corresponding period of the previous
year, on a surge in mobile users. Over the year, DU has added a further 1.01mn customers
with the total active subscriber base at 3.47mn as explained by the company’s Chief
Executive Mr. Osman Sultan in an issued statement commenting on DU’s 2009 annual
results.

Meanwhile in Kuwait, Zain announced that its 2009 net profit fell 39.4 percent to
KD195mn (US$675.2mn) from KD322mn (US$1,117.25mn) in the previous year. Earnings
per share for 2009 fell to 51fils from 88fils in 2008. In 4Q2009, the company reported loss
of KD0.7mn (US$2.4mn) compared with a net profit of KD86.8mn a year earlier. Revenues
for the year reached KD2.32bn, a 15.7 percent increase year-on-year. Commenting on
Zain’s results, Mr. Asaad Al Banwan, Chairman of the Board of Directors, was quoted
saying that “The 2009 fiscal year was the toughest in the company's history with the biggest
challenge coming from the sharp volatility in several currencies, which effectively cost the
Group KD38mn”. During the year 2009, Zain suffered losses from its Africa operations,
which the company disposed of later in the year 2010. Zain signed a final agreement on
March 30 to sell its African assets - excluding Morocco and Sudan - to India's Bharti Airtel
Ltd for US$10.7bn, realizing a net profit of US$3.3bn, which will be included in the
operator's 2010 second-quarter results .

On the other side of the spectrum, both Zain Saudi and Vodafone Qatar deepened their
annual losses. Zain Saudi reported an annual loss of US$826.13mn in FY2009 compared to
a loss of US$607.25mn in FY2008. Meanwhile, the company’s net loss in the fourth quarter
of 2009 narrowed by 29 percent to SR657mn (US$175.2mn) compared with the year earlier,
due to a rise in subscriptions and the profitability of its data packages. As for Vodafone
Qatar, which last year broke the monopoly of state-controlled Qatar Telecom, posted nine
month net loss of US$136mn in FY2009, compared to a loss of US$10.96mn in the
corresponding period of last year (company’s financial year ends on March 31, while
comparative figures are from June 23, 2008 to December 31, 2008). In March 2010, Qatar's
telecom regulator has decided to award the country's second fixed-line license to Vodafone
Qatar and not to the consortium that was supposed to be established by the
Vodafone/Qatar Foundation consortium that had won the license. The consortium wanted
to set up the new company in partnership with Qatari Diar which would own 35 percent of
it while the consortium's stake would be 50 percent and Qatari public sector corporations
15 percent .
 Global Market Report –Saudi Arabia

GCC Telecom Companies have been mostly generous in sharing their FY2009 earnings
with their shareholders. The following table shows the proposed distribution per company,
subject to the approval in their AGMs.

Table 02: GCC Telecom Companies Annual Distributions:

Cash Stock
Company Name RIC Country
Dividend Dividend
GCC Telecom Sector Results Review - 2009

Saudi Telecom <7010.SE> Saudi Arabia 30% -

Etihad Etisalat Co <7020.SE> Saudi Arabia 12.5%
Mobile Telecommunications Saudi <7030.SE> Saudi Arabia - -
Zain (Mobile Telecommunications Co.) <ZAIN.KW> Kuwait 170% -
National Mobile Telecommunications Co. <NMTC.KW> Kuwait 50% -
Emirates Integrated Telecommunication Co. <DU.DU> UAE - -
Emirates Telecommunications Corp. <ETEL.AD> UAE 60% 10%
Qatar Telecommunications (Q-Tel) <QTEL.QA> Qatar 70% -
Vodafone Qatar! <VFQS.QA> Qatar - -
Oman Telecommunication <OTL.OM> Oman 100% -
Bahrain Telecommunications Co. <BTEL.BH> Bahrain 50% -
Source: Respective stock markets websites and company announcements.
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