Mobile services

Ooredoo Profits Tumble Despite Sub Growth

Qatari incumbent carrier Ooredoo has blamed a fall in profits on an array of challenges across its Middle Eastern and Asian markets, including the deteriorating security situation in Iraq, startup costs in Myanmar and currency devaluation in Indonesia.

Formerly known as Qatar Telecom QSC (Qtel) , Ooredoo saw net profit fall year-on-year by 17% in 2014, to 2.13 billion Qatari riyals ($580 million), and by 89% in the last three months of the year, to just QAR55 million ($15.1 million).

Full-year revenues were down by 2%, to QAR33.21 billion ($9.21 billion), while sales in the final quarter held steady at QAR8.37 billion ($2.3 billion).

The earnings disappointment came even though Ooredoo managed to add another 11.5 million customers across its various operations in 2014, finishing the year with 107 million customers in total.

Aggressive price-based competition in Iraq and the Indonesian currency situation seem largely responsible for Ooredoo's top-line troubles.

Like other state-backed Middle Eastern operators, Ooredoo has taken advantage of opportunities to expand outside its small domestic market, although it still generated about a fifth of its revenues in Qatar last year.

In a statement, the operator insisted that net profit would have fallen by just 8% in 2014 and by 22% in the October-to-December period were it not for the Indonesian currency devaluation, startup costs in Myanmar and one-off customer-acquisition expenses in Algeria.

Ooredoo became the first international player to launch a service in Myanmar in August, having received a license to provide mobile-phone services in the country in mid-2013, along with Norway's Telenor Group (Nasdaq: TELN). It claimed to have signed up 2.2 million customers there by the end of 2014, but flagged a net loss of QAR531 million ($146 million), on revenues of QAR189 million ($52 million), because of startup fees.

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In Algeria, meanwhile, Ooredoo has been attaching heavy subsidies to handsets in a bid to grab 3G market share. Largely as a result of that strategy, net profit dropped from QAR733 million ($201 million) in 2013 to QAR228 million ($63 million) in 2014.

While Indonesia's PT Indosat Tbk represented Ooredoo's biggest revenue generator, its sales fell by 12% in 2014, to QAR7.4 billion, due to unfavorable foreign-exchange movements.

The sales environment was similarly bleak in Iraq, Ooredoo's third-biggest market after Indonesia and Qatar, where the Asiacell Telecommunications Co. Ltd. business faced both security threats and rising levels of competition. Revenues fell by 11%, to QAR6.3 billion ($1.73 billion), in 2014.

Although Ooredoo reported strong growth in Qatar and Oman, it was also hit by revenue declines in Kuwait and Tunisia, where competition has been growing.

Ooredoo is currently focused on increasing revenues from data services, which generated about a quarter of its overall sales in 2014. It also claims to have rolled out 4G services in five of its nine markets.

— Iain Morris, Circle me on Google+ Follow me on TwitterVisit my LinkedIn profile, News Editor, Light Reading

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