Good day and welcome to the Vodafone Qatar ’s Second Quarter 2022 Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Bobby Sarkar. Please go ahead, sir. Thank you, Elaine. Hello, everyone. This is Bobby Sarkar, Head of Research at QNB Financial Services. I want to welcome everyone to Vodafone Qatar's Second Quarter Fiscal Year 2022 Results Conference Call. On this call from Vodafone Qatar’s management, we have Sheikh Hamad Abdulla Jassim Al -Thani, who is Vodafone Qatar's CEO, and Masroor Anjum, who is the Chief Financial Officer. We will conduct this conference with management first reviewing the company's results, followed by a Q&A. I would like to turn the call over now to Pauline Saab, who is the Head of Investor Relations at Vodafone Qatar. Pauline, please go ahead. Thank you, Bobby. Good afternoon, everyone, and welcome to Vodafone Qatar Q2 2022 financial results call. The investor presentation is available on our website, vodafone.qa. The usual disclaimer on slide number 2. To begin, I now hand over to Sheikh Hamad Abdulla Jassim Al Thani, our Chief Executive Officer. Thank you, Pauline, and thanks to QNB for organizing this call. Salaam alaikum, and welcome to everyone who is attending this call this afternoon. Would you please turn to the page that's titled Key Messages. It's number three in the pack. As noted in the first point, we are very pleased with the overall performance of the business. We continued our growth momentum for the 18th consecutive quarter on a year-over-year basis, reaching a record total revenue growth of 23.5% on a year-over-year basis. Another record was the net profit growth of 61.3% on a year-over-year basis, reaching QAR 260 million for the first half of the year. Other pleasing KPIs for us is that we continue to improve our net profit margin, EBITDA, return on capital employed, and return on equity, which recently reached 9.2%, which is two percentage points above the full year results of 2021. The second point I want to highlight today is our competitive strengths. We gained revenue market share of approximately 2.9 percentage points year-on-year on a trailing 12-month basis. Also, I would like to highlight that this is the fourth consecutive quarter of revenue market share gain on quarter-on-quarter basis. In addition to that, for the last three years also, we started benchmarking ourselves to the region, including the GCC. According to the published results of the publicly listed telecom companies in Q1 2022, we were among the fastest growing in terms of revenue, EBITDA and net profit performance. Alhamdulillah, these results come after a very careful and precise implementation of our strategy since 2018. I'm very happy to see the transformation of the company over the last four years. To mention few key points, the adopted data-driven approach, which resulted into more accurate decision-making, cost reduction, margin increase, and smart CapEx implementation. Also, the investments on our mobile and fixed network. For example, our mobile sites has increased more than 61% till H1 since 2018. This has made it possible for us to target and provide a superior service to high value segments that we were not able to penetrate sufficiently before. We have swapped and upgraded more than 85% of our IT stack and system, which enables us, for example, to do or to be able to react to the market faster, improving customer experience and the deployment of artificial intelligence, machine learning, and RPA. We started focusing more on customer experience while implementing the best-in-class journeys. Also, we have been focused on the diversification. We are aiming to lead in IoT and big data solutions. Also many other managed services that we started getting into it, which resulted in a healthier revenue mix for us. We might be able to share more in the next call, hopefully, Inshallah, in the upcoming quarters. The last point I want to touch is that in the second quarter of the year, we saw an increase of approximately 6.1% of the total population compared to the second quarter of 2021, although we have seen a seasonal decline of 6% versus previous quarter. In terms of the global environment, the ongoing disruption in the supply chain, chip shortage, chipset shortages, the commodity prices hikes, and the overall inflation pressures, we see an increasing importance of a strategic risk management and business continuity. We constantly evaluating these developments and adjust our action accordingly. All in all, again, and we have very strong quarter for Vodafone Qatar. I will now hand over to Mr. Masroor, our CFO, to cover the financials in details. Thank you. Okay. Thank you, Hamad, and good afternoon, everyone. Let's move to key highlights on slide number five. The momentum that we saw in Q1 is continuing with strong financial performance in the first half of 2022. Total revenue is 23.5% higher year-on-year, led by 14% service revenue growth and revenue from projects which we discussed in Q1. Pleasingly, we have outperformed the last year numbers in all revenue segments, including prepaid, postpaid, enterprise, and also fixed IoT and managed services. Despite higher revenue, subscribers, and significant expansion in mobile and fixed network, OpEx growth remained lower than service revenue growth. With higher revenue and optimized cost, it enabled us continuing growth in profitability. EBITDA is QAR 590 million, and that's a growth of more than 25% year-on-year with a reported margin of 41.1%. This led us to report the net profit of QAR 216 million for H1 this year, and that's a growth of 61.3% year-on-year. These are our highest profitability levels of our half yearly period. We have also seen strong subscriber growth. Our mobility subscribers grew 4.2% since December and 17.6% compared to June last year. Now, moving to slide number six, our financial performance for the first six months period compared to the similar period of last year. Total revenue growing by QAR 273 million or 23.5%, led by a very pleasing service revenue growth of QAR 152 million in addition to the projects revenue. Expenses increased by 22.3% year-on-year, mainly due to growth in direct costs corresponding to growth in revenues, especially for the projects. Other than equipment costs, direct costs remained largely flat year-on-year. This is despite growth in our service revenue. Increase in OpEx is mainly driven by network expansion to cater for the upcoming demands of the World Cup and beyond. It is notable that our OpEx intensity, which is OpEx as a percentage of revenue, has further declined by 2.1 percentage points to 24.7% in H1 2022. Now with increased service revenue and controlled costs, our EBITDA grew by 25.2% with a margin expansion of 0.5 percentage points year-on-year to 41.1%. Lastly, higher depreciation and the impact of Industry Fee, which is a function of net profit, partially diluted the EBITDA gains flowing through to net profit. Nonetheless, we still recorded a very healthy 61.3% growth in our net profit year-on-year. Moving on to next slide, presenting second quarter financial performance compared to seven. We continued with top-line growth momentum with total revenue growing by 22%, strongly supported by growth in service revenue of 13.7% or QAR 75 million. Again, growth is recorded across all core revenue segments. Expenses increased by 22%, mainly due to growth in direct costs corresponding to growth in revenues and increase in OpEx, reflecting expansion in network footprint. Again, it is notable that OpEx intensity remained 1.4 percentage points lower this quarter versus the last quarter, despite the impact of higher 5G and fixed related operational costs. With the increased service revenue, our EBITDA grew by 22% to reach QAR 289 million, and net profit grew by 60% or QAR 41 million, reflecting higher EBITDA, partially offset by higher Industry Fee. Now, moving to slide number eight and taking a closer look at our service revenue. Postpaid continuing its growth momentum, up 13.4% versus last year. This is mainly driven by higher subscribers. We continue to have good traction for our mid-value Evo plans. At the same time, our unlimited plans are selling well, helping us to increase our penetration into high-value segment. Prepaid has also increased by 7.8% year-on-year on the back of higher subscriber growth. There is a slight decline in prepaid revenue quarter-on-quarter, and this is due to seasonality impact, the lower recharges in Ramadan and the school holidays. Overall, total service revenue increased by 14.1% year-on-year, led by mobility and increasing contributions from fixed, managed services and IoT. Now looking at the efficiency and profitability margin trends on slide number nine. We continue to improve our operational efficiencies, resulting in reduction in our OpEx intensity to 24.7% in H1 2022. That's a reduction of another 2.1 percentage points year-on-year. This is despite significant expansion of mobility in fixed network. The next chart shows the growth of our EBITDA margin over the last few years on a comparison basis, with the red trend line being the reported EBITDA margin and the gray trend line being the EBITDA margin, excluding equipment business and the one-offs. As explained in previous slides, higher service revenue and rationalized cost enabled us to sustain 40% reported with a growth of 0.5 percentage points year-on-year. EBITDA margin, excluding equipment business, which is a true reflection of our core business, has increased by 3.4 percentage points to reach 46.4%. The final graph shows the growth trend of our net profit margin, which has increased by 3.5 percentage points compared to last year to 15.1%, and that's a more than 3x margin expansion since 2018. Now looking at the CapEx on slide 10. CapEx for the period is QAR 216 million with an intensity of 15%. This was primarily focused on coverage and capacity expansion. As mentioned by Hamad earlier, we have significantly expanded our fixed and mobile network, giving better coverage and also enhanced our digital capabilities for a superior customer experience. As you're aware, the CapEx intensity is high in the light of FIFA Qatar 2022 preparations, and we expect the full year CapEx intensity in there to be between 20%-23%. The increase in profitability, as explained in previous slide, has resulted in significant improvement in our return on capital employed. We have been successful in cautiously allocating CapEx into growth areas at right times, bringing the best in technology for both consumer and enterprise segments while continuously controlling our expenses. This has helped us increase return on capital employed by another 1.7 percentage points this year to 8.5%. Now moving to the next slide and looking at cash flows and net debt. Together with the growth in top line and profitability, our operating cash flow has also shown strong growth with QAR 125 million or 47.5% increase year-on-year. Coming to the second graph on the right, the net debt has increased by QAR 91 million compared to December 2021, mainly due to disbursement of dividend. However, if you look at the trend over the last four years, the net debt is largely stable despite significantly higher CapEx intensity of around 21% for these four years and also the consistent payment of dividends that we increased to 6% for the financial year 2021. Third graph in the bottom left shows that our strong cash flow generation during the last four years enabled us to sustain higher CapEx intensity and the consistent and increasing dividend payout, keeping the net debt level stable. As a result, our net debt to EBITDA ratio has improved from 0.89 x to 0.48 x in FY 2022. We currently have a borrowing capacity agreed with the banks to avail financing up to 2.5x annualized EBITDA. However, with the current signed up facilities, we have additional drawdown headroom of QAR 850 million, a very healthy liquidity position. Turning to the full income statement, we have already covered the major year-on-year movements. Both consumer and enterprise and other revenue increased year-on-year. The earnings per share has also increased in line with the net profit. With these results, as mentioned by Hamad earlier, we believe we continue to be ranked as one of the best in the region in terms of top line and profitability growth. As usual, the balance sheet, detailed statement of income, ARPU and subscribers are included in the appendix. That concludes my review. Thank you everyone. Now back to Pauline. Thank you, Masroor. We can start now with the Q&A session. Operator, kindly explain to the participants how to ask questions. Thank you. Ladies and gentlemen, if you'd like to ask a question, please press the star or asterisk key followed by the digit one on your telephone. Please ensure that the mute function on your telephone is switched off to allow your signal to reach our equipment. If you find that your question has already been answered, you may remove yourself from the queue by pressing star two. Once again, to ask a question, please press star one. We will take our first question today from Madhvendra Singh of HSBC. Please go ahead. Your line is open. Yes. Hi, thanks for the call and taking my question. My question is on the service revenue performance. You know, 14% growth is very strong. Want to understand the driver behind it. It is like, is it more driven by economic activities in the country or you think you're taking market share or is it new people coming to the country, especially given that we have the World Cup later in the year? Is this revenue also reflecting part of that in any way? You know, if you could talk about that would be very helpful. Secondly, EBITDA growth has kind of aligned entirely with the revenue growth. Has there been some kind of, you know, cost pressure in the second quarter as well that you're not really getting much operating leverage it seems. Just want to understand the cost dynamics as well. Because in other markets there is a bit of inflation pressure, especially from fuel costs, but I presume that should not be the case in Qatar or am I wrong that there? Thank you. Okay. See, I'll just give you some flavor first of all around service revenue. See, we have been following a commercial strategy, whereby we have been focusing on high value customers and investment in our network and digitization. Most of the growth that you're seeing is driven by expanding and improving our network into areas and segments where either we were not present before or our network quality was not up to the standards. When we go there, we get more customers and gain market share. Secondly, at the same time, we have been focusing on diversifying our revenue stream. We have built our internal capabilities to tap into managed services and IoT markets, and we continue to grow revenue there. Definitely, the market is stable and we are gaining customers and revenue market share as we've already explained during the call. The second question about stable EBITDA margin. Yes, with the top-line growth, we have been able to sustain above 40% EBITDA, and that has to do with the continuous emphasis on the cost optimization program that we are running, whereby we keep on looking for all the opportunities to rationalize our cost structure. The inflation question that you asked, yes, like all other opcos, we also get impacted by inflation because we source a lot of our goods and services from outside the country. However, as part of our cost optimization program, we have been able to manage the impact of inflation very well and maintain our EBITDA above 40%. Have you seen any positive impact from the World Cup event side yet? I presume your project revenue is probably at least partly driven by that. You know, on the consumer side, have you seen any positive activity there? No, I think the World Cup impact is still. We are yet to see that impact coming. Mainly towards the end of Q3 and Q4 mainly. Mm-hmm. Okay. Thank you. Thank you. As a reminder, to ask a question, please press star one. We take our next question from Ziad Aboujeb of Al Rayan Investment. Please go ahead. Your line is open. Thank you. Thank you, gentlemen, for the presentation. This is Zohaib Pervez from Al Rayan Investment. I've got one question on the prepaid segment. It seems after the revenues have peaked in the fourth quarter and in the first and the second quarter, the revenues for the prepaid have come down. Is there any specific reason for it, or was the peak in December a one-off? Thank you. We already explained in Q1, the Q4 to Q1 decline was mainly because of lower number of days. Q2 is a quarter where we seasonally get lower prepaid revenue. There are two major reasons for that. Ramadan comes during Q2, and the summer seasonality starts with June coming in, people starting leaving the country. These are the major factors causing the reduction in prepaid revenue. Our prepaid revenue continues to do very well, and we remain positive about its growth going forward. Sounds good. Thank you. One other question is on the depreciation. The depreciation in the first quarter was about QAR 97 million, and this quarter it was QAR 77 million. This is because there was a one-off in the first quarter. Is my understanding correct? Yes, correct. As we explained previously as well, as we are modernizing our network, certain elements are reviewed, and we provide accelerated depreciation. Higher overall depreciation in Q1 was mainly because of that. Would this QAR 77 million is a good indicator of, you know, the level it will be maintained at going forward? As we continue to increase our CapEx spend, it will slightly increase in line with the CapEx going forward. The accelerated depreciation impact that we were doing for the last couple of quarters was mainly driven by the modernization activity, as we explained previously, and majority of that is nearing completion. You should see a stable depreciation going forward impacted by the regular CapEx that we are spending. Sounds good. Thank you. Thank you. Next, we move to Faisal Abdullatif of NBK Capital. Please go ahead. Thank you, gentlemen, and congratulations on the strong set of results. My question is pretty much just on the market share side. Do you believe that you can keep up with the momentum that we have seen in terms of market share gain, either on the postpaid side or the prepaid side, going into the second half? My second question is it a fair assumption for us to annualize the first half profit till the second half? That's it. Hello? Faisal, our growth in RMS, as I explained earlier, we primarily focus on growing our business, our customers and revenue. When we go out there with that strategy, we definitely gain market share. We are doing that consistently for the last two to three years. As you've seen, we have seen significant expansion in our RMS as a result of our strategy, which is giving us higher customers and revenue. We have no doubt that we can continue to follow that strategy going forward as well. Yes, RMS, that is a byproduct of that, and we remain very hopeful that we can continue to expand our RMS and CMS going forward as well. Regarding your question number two of annualizing the half yearly net profit is very early to comment on that, because, you know, there are a lot of unknowns which are coming specifically in H2 of this year. The World Cup is coming up. There are a lot of unknowns about that, and we cannot work out the exact impact of that in our H2 financial results as of now. All right, that is clear. Thank you. Thank you. We take our next question from Mohamed Adel of AFII. Please go ahead. Hi, thanks for taking my question, and congratulations on the results. Basically, Vodafone has been doing very well for the last three to four years. My question is on growth. The population growth in Qatar has been muted over the last three to four years, and most of your growth will be coming from gaining market share. I wanted to ask on gaining market share again, but if the worst-case scenario, the population stayed muted, what would be the realistic growth rates for your profits and margins or let's say operating profit over the next five years? Thank you. See, there are two elements of our growth which we need to understand. As I explained previously in answer to a previous question, see, we have been investing heavily in our network. We are trying to expand our network, improve our network, improve our digital capabilities. As a result of that, we are gaining customers and customer market share in a market where the population is muted for the last three, four years, as you have mentioned. The second part of our growth is coming from diversifying our revenue into new areas. That is also giving us a very good sort of growth, and that you have seen in our results for the last three, four years. As I mentioned before, we intend to continue the same strategy. As we have demonstrated that with the muted population, we were able to not only grow our revenue and profitability but gain market share as well. We don't see any risk that in case the population remains muted, why we can't grow going forward. Thank you. We now take a question from Ziad Itani of Arqaam Capital. Please go ahead. Hi. Thank you for the presentation and congratulations on results. Just two questions from our end. The first question is on the ARPU specifically. What's the reason behind the small weakness? I would say year-on-year it's down around 5%. Sequentially also there's pressure even though on the mobile segment you're growing on the postpaid specifically, which typically has multiple times the ARPU of the prepaid segment. That's the first question. Basically, is there any sort of Sorry. Can you repeat this question? About the prepaid. The ARPU. Sorry. ARPU decline, and what was the second part of this question? Your growth on the mobile segment, it's being driven by the postpaid specifically. The postpaid has higher ARPUs than prepaid. Yes. Okay. Okay. Why are we seeing pressure on the blended ARPUs? Okay. Okay, and what is your second question, please? The second question is basically, when it comes to your plans on the ICT segment, if you can give us a bit more details, what are you doing? I mean, who's the main client that you're targeting? Is it the government-related entities? Is it the enterprise, generally speaking? What specifically are the plans with ICT? Is it on data centers? Is it on system integration? Is it on developing platforms in terms of digital solutions? Any insights would be appreciated. Okay. Regarding your first question. Yes. Postpaid ARPU is higher than the prepaid ARPU. You have seen our mobility ARPU coming down, and the reason for that is the significant increase in the mix of our mobility customers to the prepaid customers. Postpaid ARPU is stable year-on-year from last year to this year. Prepaid ARPU from last year to this year has slightly declined, but the overall mobility ARPU decline is because of the increase in the mix, as I just mentioned. Coming to your second question. I think we have been discussing this ICT revenue in the previous calls as well. I'll just explain that again. Basically, we are getting projects in both government and the semi-government sector. These are the projects whereby we are able to integrate our core telecom services with equipment, installation, and managed services. See, some of these projects are long-term in nature, whereby the revenue will be realized in cash over a period of more than one year. For some of these projects, there are two parts. The first phase is the build phase, followed by a second phase, which is managed services. The margin that we get on the build phase is typically between 10%-12%, and the managed services phase has higher margin, almost in line with our regular business. The increase in revenue, non-service revenue that we have seen from Q4 last year till Q2 this year is mainly driven by the build phase of these projects. I can tell you, the exact amount of the non-service revenue related to these projects that we have recognized. In Q1, it was QAR 66 million, and in Q2, it is QAR 43 million. As I said, very important to remember, it's a business with a margin in the range of 10%-12%. Perfect. That's very helpful. Thank you. Just one follow-up question. Is it possible to share the number of sites you have in Qatar? I mean, how many towers? Would you be open for a tower sale? Also, are there any talks with Ooredoo on optimizing the passive infrastructure specifically? Thank you. In terms of selling the towers, there is no discussion or there is no intention now to do this. However, there is an agreement for sharing agreement that it has been going on for the last few years between us, between Vodafone and Ooredoo. Which I believe it has been accelerated going forward to synergize the investment in towers and reducing cost base for both operators. The other question for you was, can you remind me? Which one, what was it? Yeah, the number of towers. Okay. We cannot comment on this now. However, at the end, maybe at the end of this year, we will be able to get you more details and share it, hopefully. All right. Perfect. Thank you. Thank you. We have no further questions at this time. Oh, yes. This is Bobby again. If we have no further questions, we can end the call today. I wanna thank Sheikh Hamad, Masroor Anjum, and Pauline for taking the time to answer our questions, and we'll pick this up next quarter. Thank you so much. Thank you, Bobby. Thank you everyone for joining today's call. If you have further questions, please do not hesitate to contact us. Thank you again. Thank you. Ladies and gentlemen, that will conclude today's conference call. Thank you for your participation. You may now disconnect.