Omantel: Q3 Mixed picture, investment gains drive earnings
Domestic operations: Margins show sequential improvement, moderating growth
Omantel’s initial nine-month trading update showed continued domestic revenue growth but margin compression, although the implied Q3 figures suggest an encouraging reversal of these trends. Nine-month domestic revenue grew 8.5% to OMR535m, while EBITDA declined 2.9% to OMR124m, reflecting higher operating costs and enterprise impairment provisions. Q3 revenue growth moderated to 2.8%, principally due to slower wholesale growth and a 1.6% decline in ICT revenues, following strong H1 growth. Mobile growth improved to 3.4%.
More encouragingly, Q3 EBITDA was flat at OMR43.5m, with margins recovering 300bp sequentially to 24.6%. The moderation in wholesale revenue growth to 6% from 17% in H1 may have contributed to the improvement, given the lower margins associated with wholesale hubbing revenues. The impact of higher operating costs and impairment provisions may also be easing. With Q4 typically the strongest quarter for margins, the OMR51m EBITDA required to meet our FY26 forecast of OMR175m looks achievable.
Zain: Regional instability a headwind, growth vertials robust and investment gains
Zain delivered modest Q3 growth, with revenue up 2% and EBITDA up 1%. Regional instability affected roaming and enterprise activity, while currency depreciation in Sudan diluted the benefits of network restoration and customer growth. Growth in Saudi Arabia and Kuwait remained subdued, partly offset by stronger performances in Iraq and Bahrain. Growth verticals remain a bright spot, with nine-month revenue up 30% to $759m, including 46% growth at Zain Omantel International (ZOI), the group’s international wholesale connectivity business, and 17% at ZainTECH.
Investment performance: Substantial gains boost group earnings
Omantel’s nine-month group net profit attributable to shareholders increased 52% to OMR84.8m, already ahead of our FY26 forecast. However, reported earnings benefited substantially from Zain Ventures’ USD501m of strategic investment gains, which contributed OMR193m to consolidated group profit of OMR406m, up 56%. While these gains demonstrate the value being created by Zain’s investment portfolio, they are not recurring operating earnings and should not be extrapolated into future forecasts.
