Gulf telecom firms post 5% revenue growth; 13% lower profit in 2014

The combined revenue of telecom companies operating in the Gulf countries rose 5 percent to $55.5 billion in 2014, led by Saudi Arabia and the United Arab Emirates, which represented 33 percent ($18.15 billion) and 30 percent ($16.62 billion), respectively of the total amount.

The companies, however, saw their lowest annual profit in five years, down 13 percent on foreign currency exchange volatility and losses reported by Mobily, Saudi’s second-biggest telecom company.

UAE telecom reported the highest increase in terms of revenue, accelerating 24 percent, followed by Kuwait at seven percent.

Saudi companies posted a five percent decline in revenue— the biggest drop among the region’s telecom firms.

Total profit decreased 13 percent to $7.3 billion last year, compared to the previous year.

UAE telecom firms represented 41 percent of the sector’s combined profit, followed by Saudi firms, which declined to 32 percent in 2014 from 44 percent the previous year on the back of Mobily’s losses.

Telecom companies in the UAE also posted the highest increase in profit, at 21 percent, followed by Bahrain at nine percent.

Saudi firms reported a 38 percent profit drop, the widest among the companies. Meanwhile, Qatar-based companies posted a 15 percent decline.

Last fiscal year’s total profit was the lowest the Gulf region had seen in five years mainly due to losses recorded by Mobily, which previously contributed 20 percent of total net income for the sector.

As many as seven companies boosted their profits in 2014; four companies narrowed their losses, while four other firms saw their net incomes decrease. One company made losses in 2014, compared to gains during the previous fiscal year.

Kuwait Telecommunication Co. (VIVA), which is 26 percent-owned by Saudi Telecom Co. (STC), recorded the most year-on-year growth, adding 66 percent in 2014 in terms of the number of customers and revenue.

Mobily, however, saw the biggest losses in 2014 among the region’s companies, posting $243 million in losses.

Average price-earnings ratio for the sector was 15.8. When excluding the loss-making companies, P/E will be 11.8.

Price-to-book ratio was 2.0 for 2014, and as of closing on April 30, 2015.

OmanTel price-earning was the lowest at 10.2, followed by Kuwaiti Zain at 10.8.

Mergers & Acquisition

UAE’s Etisalat bought French entertainment company Vivendi's 53 percent stake in Morocco's Maroc Telecom for $5.67 billion in May. Etisalat said it was planning to buy the rest of the company.

No other firms concluded any deals last year.

Dividends

Kuwaiti Zain topped the list of the highest dividend, posting 8.2 percent while OmanTel came in second place at 7.1 percent.

**For Q1-2014 

Argaam Reports