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Mobily To Maintain Double-Digit Profit Growth – CEO

Mobily to maintain double-digit profit growth – CEO; May host MVNO; $2.7 billion loan refinancing to be completed by end-Feb; Voice price war hurt margins, but stemmed rise of VoIP

January 21, 2012 6:31 by



Saudi Arabia’s Etihad Etisalat (Mobily) will maintain double-digit profit growth as mobile contract and data revenues rise, the telecom firm’s chief executive said, helped by the kingdom’s healthy economy.

Mobily on Wednesday posted a 16 percent rise in quarterly profit, markedly above analyst forecasts.

“We will sustain double-digit growth in our bottom line for the coming years,” said Khaled al-Kaf, chief executive of Mobily, an affiliate of the UAE’s Etisalat, told Reuters on Friday.

Quarterly earnings from Saudi Telecom Co and Zain Saudi also beat estimates, with the kingdom’s bullish economy and mega government spending helping operators dodge much of the gloom engulfing their counterparts.

Mobily had 8.5 million data bundle subscribers at end-December, up from 6 million in the third quarter, al-Kaf said. Data accounted for 22 percent of total revenue last year, compared with 18 percent in 2010.

“I think we will be in the same acceleration mode (for data revenue) – we will not slow down,” said al-Kaf.

Revenue from contract mobile subscribers, which typically spend more and are less likely to switch operators, rose 21 percent last year to provide 28 percent of Mobily’s revenue.

“I believe … that will hit 30 percent or above (in 2012),” said al-Kaf.

Earnings from its corporate segment rose 85 percent in 2011 and al-Kaf forecast it would achieve “high double-digit growth” this year, supported by Saudi Arabia’s buoyant economy, which is forecast to expand 4 percent in 2012.

Mobily will complete a 10 billion Saudi Arabia riyal ($2.7 billion) loan refinancing “hopefully by the end of February”, al-Kaf said.

MVNO HOSTING?

In December, Saudi Arabia’s regulator said it would issue three mobile virtual network operator (MVNO) licences in 2012 and Mobily could host one on its network.

MVNOs, which are common in Europe, are mobile service providers which lease excess network capacity from telecoms operators.

“An MVNO depends on the brand they bring, what type of segment they will address and how they will differentiate from us,” al-Kaf said. “If it’s a pure MVNO that will compete on wholesale prices without adding value, Mobily will not be able to host an MVNO of that nature.”

PRICE WAR

Saudi operators have been embroiled in a price war, with international calls costing an average 0.65 riyals per minute, according to a recent HSBC note, down from 0.90 in the first half of 2011 and the second-lowest in the Gulf after Qatar.

About a quarter of Saudi Arabia’s population is foreign, so international calls are a major source of revenue for operators.

“We found ourselves forced into price competition on international (calls),” said al-Kaf. “The ARPU (average revenue per user) from prepaid (subscribers) has dropped a little bit, but the number of customers has increased, giving us a good elasticity in our margins.”

These cuts have been in part due to VoIP calling, which is not officially allowed in Saudi Arabia but is becoming more widespread as smart phone handset prices fall, giving lower income residents access to cheap or free international calls.

“It’s about time VoIP will be regulated,” said al-Kaf. “VoIP, in reality, is increasing year after year.”

Yet the price war has helped slow VoIP’s rise, al-Kaf said, with conventional international calls often preferable because they are more convenient and higher quality.

Data tariffs have also tumbled, with Mobily and Zain Saudi slashing the prices of some of their bundles by up to 50 percent, HSBC wrote.

Yet Al-Kaf said data customers were more concerned about good service than price cuts.

“This is an area where you create value through quality.”            (Editing by Helen Massy-Beresford)

By Matt Smith



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