Earnings call transcript: Vodafone Qatar Q1 2025 shows revenue growth

Vodafone Qatar reported a strong performance in the first quarter of 2025, with total revenue reaching 855 million QAR, a 6.1% increase year-over-year. The company’s net profit also grew by 8.1% to 162 million QAR. The earnings per share (EPS) came in at 0.036 USD, contributing to a positive market reaction, as the stock price increased by 3.29% to 2.20 USD. According to InvestingPro data, the company maintains an impressive "GREAT" overall financial health score of 3.31 out of 5, with particularly strong marks in profit (3.77) and price momentum (4.18). This performance aligns with Vodafone Qatar’s strategic initiatives and market expansion efforts.

Key Takeaways

• Revenue increased by 6.1% YoY, reaching 855 million QAR.
• Net profit rose by 8.1% YoY to 162 million QAR.
• Stock price surged by 3.29% following the earnings announcement.
• The company launched a new loyalty program and revamped its IPTV service.
• Operational expenses remained flat, improving efficiency.

Company Performance

Vodafone Qatar demonstrated robust growth in Q1 2025, driven by strategic expansions and service diversification. The company maintained its competitive edge by expanding its fiber network and introducing innovative services, such as a new loyalty program and an enhanced IPTV experience. These efforts contributed to a 6.1% increase in total revenue compared to the same period last year. The telecom market’s reduced pricing aggression and increased focus on enterprise solutions also played a role in the company’s performance.

Financial Highlights

• Total Revenue: 855 million QAR (+6.1% YoY)
• Net Profit: 162 million QAR (+8.1% YoY)
• EBITDA: 358 million QAR (+6.1% YoY)
• EBITDA Margin: 41.9%
• Operating Cash Flow: 282 million QAR (+22% YoY)
• CapEx: 43 million QAR (5% intensity)

Market Reaction

Following the earnings announcement, Vodafone Qatar’s stock experienced a positive reaction, with a 3.29% increase in price, closing at 2.20 USD. This surge reflects investor confidence in the company’s growth strategy and financial health. The stock is currently trading near its 52-week high of 2.21 USD, indicating strong market sentiment. Based on InvestingPro Fair Value analysis, the stock appears slightly overvalued at current levels. Investors seeking detailed valuation insights can access 14 additional exclusive ProTips and comprehensive analysis through InvestingPro’s detailed research reports, available for over 1,400 stocks.

Outlook & Guidance

Vodafone Qatar projects full-year revenue growth of over 4%, with an EBITDA margin expected to remain stable around 42%. The company anticipates net profit growth between 8% and 10%, supported by continued expansion in fixed, managed services, and ICT offerings. Capital expenditure is forecasted to be between 13% and 14.5%, aligning with ongoing infrastructure investments.

Executive Commentary

Mathur Anjum, CFO of Vodafone Qatar, highlighted the company’s strategic advancements, stating, "We have made significant strides in expanding fixed, managed services, and ICT services." Anjum also emphasized the importance of the new loyalty program, "iPoints is designed to be more than just a rewards program," reflecting the company’s focus on customer engagement and retention.

Risks and Challenges

• Market Saturation: Continued growth may be challenged by market saturation in core mobile services.
• Economic Conditions: Macroeconomic pressures could impact consumer spending and business investments.
• Competitive Landscape: Increased competition in the telecom sector could affect pricing and market share.
• Regulatory Changes: Potential regulatory changes could influence operational costs and strategic initiatives.
• Technological Advancements: Rapid technological changes may require ongoing investments in innovation.

Q&A

During the earnings call, analysts inquired about the company’s growth drivers and ARPU fluctuations. Vodafone Qatar confirmed that growth was driven by market share gains and service diversification. The company also addressed equipment sales growth, attributing it to ICT contracts, and emphasized its focus on operational efficiency.

Full transcript - Vodafone Qatar (VFQS) Q1 2025:

Angela, Conference Moderator: Hello, and welcome to Vodafone Qatar Conference Call. Please note that this call is being recorded. You will have the opportunity to ask questions for our speakers later on during the Q and A session. Thank you. Now I would like to hand the call over to Bobby.

You may begin.

Bobby Sarkar, Head of Research, QNB Financial Services: Thank you, Angela. Hi. Hello, everyone. This is Bobby Sarkar, Head of Research at QNB Financial Services. I wanted to welcome everyone to Vodafone Qatar’s first quarter twenty twenty five results conference call.

So on this call from Vodafone Qatar management, we have Masrul Ranjum, who is the CFO of Vodafone Qatar. So as usual, we will conduct this conference with management first reviewing the company’s results followed by a Q and A. I would now like to turn the call over to Pauline Saab, who is the Head of Investor Relations at Vodafone Qatar. Pauline, please go ahead.

Pauline Saab, Head of Investor Relations, Vodafone Qatar: Thank you, Babir. Good afternoon, everyone, and welcome to Vodafone Qatar financial results call. Today’s presentation is accessible on our website at vodafone.qa with the usual disclaimer on Slide number two. Before we begin, I would like to apologize on behalf of Sheikh Hamad bin Abdallah Al Fani, our Chief Executive Officer, who is unable to join us today. Mathur Anjum, our Chief Financial Officer, will be presenting the quarterly performance highlights on his behalf in addition to the financial performance.

So to begin, I now hand over to Matsur.

Mathur Anjum, Chief Financial Officer, Vodafone Qatar: Okay. Thank you, Poli. Thank you, Bobby, and thank you, Q and D, for organizing this conference. Good afternoon, and welcome to our Q1 earnings call. Today, we will review another quarter of steady growth and strategic execution where we advanced our key priorities while delivering consistent financial performance.

I would like to begin by sharing our financial results for the first quarter of twenty twenty five. We delivered strong growth both on top line and bottom line. Total revenue reached R855 million dollars marking a 6.1% year on year increase, while net profit increased 8.1% to 162,000,000. This solid performance reflects the deliberate execution of value creating initiatives across all segments coupled with continued cost discipline and operational efficiencies. The second point I want to highlight is the successful launch of our new loyalty program.

This initiative adds to a series of customer experience enhancements rolled out over recent quarters across our mobile and home portfolios, including instant SIM activation, a complete revamp of our IPTV experience through partnership with OSN and postpaid portfolio refresh that introduced several market first features. The loyalty program was developed in direct response to customer feedback and aims to offer a rewarding and engaging experience with added value through partnerships with well known brands. Third, I would like to provide an update on our diversification efforts. While maintaining the strength and momentum of our core business, we have strategically focused on building new growth avenues to future proof our operations. Five years ago, over 80% of our Q1 revenue came from mobile services.

Since then, we have made significant strides in expanding our fixed managed services and ICT services, enhancing competitiveness in handsets market and launching new ventures such as Fintech. These collective efforts have significantly improved our revenue mix and positioned us for sustained growth. Finally looking ahead, we see compelling opportunities particularly in enterprise solutions. More broadly, we are well positioned to contribute meaningfully to the ongoing digital transformation of our country, supporting businesses, individuals and national initiatives through both our direct services and partnerships with leading entities. Moving on to the next slide, as mentioned earlier, we have recently launched our new loyalty program, iPoints and this slide provides a closer look at what it offers and why it’s significant milestone for us.

High Points is designed to be more than just a rewards program. It’s a seamless, engaging and customer friendly platform that truly reflects our commitment to putting customers at the center of everything that we do. Customers can earn points through a variety of channels making it easy and natural to accumulate rewards as they interact with our services. One of the key strengths of iPoints is the breadth of redemption options. We have partnered with a strong network of well known brands allowing customers to use their points across retail, lifestyle, timing and entertainment creating a tangible and diverse value proposition.

We have also ensured the program is easy to access and navigate through our app with a simple intuitive interface that makes tracking and redeeming points hassle free. Overall, iPoints is an important part of our broader customer experience strategy aimed at enhancing engagement, increasing satisfaction and building long term loyalty. Now taking a deep dive into our financial performance for quarter one, let’s start by highlighting some key aspects on Slide number seven. The positive momentum in our top line growth has continued driven by our focus on delivering exceptional customer value. This strategy has translated into strong revenue growth of 6.1% year on year with positive contributions across all our core revenue segments prepaid, postpaid and fixed services.

At the same time, we have been focused on keeping our costs lean by implementing smart cost saving initiatives. We have been able to unlock resources and fuel growth across different areas. Despite growing top line, expanding our subscriber base and robust network growth, our operational expenses remained flat year on year. This resulted in a record low OpEx intensity of 21.9% this quarter representing a significant decline of 1.6 percentage points year on year. With strong top line performance and disciplined cost management, our profitability continues to strengthen.

EBITDA reached R358 million dollars reflecting a year on year growth of 6.1% and net profit for the quarter stands at R162 million dollars representing a solid year on year increase of 8.1%. Lastly, our liquidity and financial strength remains robust as evidenced by operating cash flow reaching R282 million dollars in the current quarter, a 22% increase year on year. This achievement stems from our effective collection strategies and successful working capital optimization initiatives. Notably, we maintained a net debt level below last year’s despite an increased dividend payout this year. Let’s turn our attention to slide number eight.

This slide showcases our key financial performance metrics for the quarter allowing us to compare our progress year over year. Total revenue grew by R49 million dollars representing a solid 6.1% growth year on year. This growth was driven by 2.5% increase in service revenue coupled with the impact of higher equipment sales. Despite higher revenue ongoing network expansion, we have successfully maintained stable expenses highlighting the effectiveness of our cost optimization efforts. OpEx has slightly decreased year on year and remains stable in absolute terms over the past three years even as our business continues to grow.

Year on year increase in direct cost is primarily driven by higher equipment cost in line with increased equipment sales. Excluding this impact, direct cost remains consistent with the prior year. And driven by a higher service revenue and cost optimization EBITDA grew 6.1% year on year maintaining a robust margin of 41.9% that is consistent with the last year’s performance. This momentum helped us deliver 8.1% year on year growth in net profit reaching R162 million further reinforcing our profitability. Now let’s move to the next slide and take a closer look at the service revenue, Slide number nine I am resting to.

As I mentioned before, all our service revenue segments continue to show growth year on year. In postpaid segment, our efforts all through last year have been centered on upgrading our base and minimizing discounted offerings to existing customers. This strategy actually helped us increase ARPU. However, this also led to consolidation in post 2P movement resulting in slight decline in our postpaid base last year. I’m pleased to report that our new postpaid plans with enriched unlimited plus and postpaid plus portfolio alongside continuous focus on enhanced customer experience has helped us increase our postpaid base by 1.4% during Q1 twenty twenty five.

This together with higher ARPU resulted in growth in our postpaid revenue by 1% year on year. Having said that, we continue to encounter a highly competitive pricing environment in enterprise segment as mentioned in previous quarters. While we recognize the potential for enhanced market discipline, we adopt a selective approach in responding to competition offers ensuring we maintain our overall competitiveness within the market. Moving to prepaid segment, prepaid revenue has recorded a growth of 3.2% year on year and this growth is driven by both the increase in ARPU as well as the subscriber base. As mentioned before, we have seen a noticeable reduction in market pricing aggression in prepaid segment by customers receiving a good value but at a reasonable price.

This has resulted in year on year increase in prepaid ARPU by 4.4%. In addition, as we continue to drive innovative new products into the market, we were able to grow our prepaid base to 1,554,000 at the end of Q1 twenty twenty five. Lastly, managed services, wholesale and fixed revenues continue to be an integral part of our service revenue growth drivers in this quarter also. Our commitment to expanding our fiber network is paying off. We are adding new customers nationwide which has led to a steady increase in year on year revenue.

Overall total service revenue increased by 2.5% year on year. Turning our attention to slide number 10 now, let’s review the efficiency and profitability margin trends. In this slide, I will focus on the underlying trends represented by solid lines while the reported numbers are depicted by the dotted lines. Our commitment to operational efficiency continues to deliver positive results. As illustrated in the first graph, OpEx intensity has further declined by 1.6 percentage points versus last year reaching 21.9%.

Moving to the center graph, growth in service revenue combined with our focus on cost optimization continues to drive margin expansion. We achieved a reported EBITDA margin of 41.9% reflecting 0.1 percentage points improvement versus last year on an underlying basis. Notably EBITDA margin excluding equipment business and one offs which accurately reflects our core business performance reached 48.3% marking a significant increase of 2.5 percentage points compared to last year. The final graph highlights our exceptional performance in net profit margin which increased by another 0.6 percentage points on an underlying basis versus last year. Now turning our attention to Slide 11, let’s take a closer look at the CapEx and investors returns.

Our CapEx for the period stands at R43 million representing an intensity of five percent. Capital expenditure in Q1 is seasonally low following substantial deployments in Q4 twenty twenty four. CapEx is expected to increase in the subsequent quarters in line with the planned investment cycle. We maintain a steadfast commitment to expanding our fixed and mobile network infrastructure. This ongoing pursuit aims to deliver comprehensive coverage and leverage cutting edge digital capabilities ultimately resulting in superior customer experience.

Our relentless focus on growth and profitability has yielded impressive results for our shareholders as evidenced by the significant improvement in our return on equity. Compared to FY24, our return on equity has increased by another 0.7 percentage points on an annualized basis. This translates to a remarkable growth in returns over the past five to six years. Now coming to cash flow and net debt on Slide number 12. We continue to prioritize working capital management as a key operational focus.

The first chart represents operating cash flow, a key metric representing cash generated from operations after accounting for capital expenditure, tax taxes and lease payments. With growing EBITDA and continued focus on working capital management, free cash flow registered an impressive growth of 22.3% year on year during Q1 twenty twenty five. Strong cash flow generation continues to drive improvement in our financial KPIs. Our net debt has reduced year on year by 12% even with increase in the dividend payout and net debt to EBITDA ratio has improved from 0.44 to 0.37 times well below the financing covenants of 2.5 times of EBITDA. Now looking at the statutory income statement on slide number 13, we have already covered major year on year movements.

We can see that both the consumer and enterprise and other revenue increased year on year. Increase in direct cost is in line with the higher equipment sales. Higher depreciation is driven by CapEx investments as well as accelerated depreciation on FDD to TDD migrated assets amounting to 6,500,000.0 for the quarter and lastly earnings per share has also increased in line with the net profit growth. To sum up my presentation today, let’s look at the five years trend view of our key financial performance indicators on slide number 14. Our top line growth continues despite largely stable market revenues.

Over the last five years, our top line has registered a very impressive compound annual growth rate of 7.8% in service revenue and 9.9% in total revenue underscoring our ability to navigate challenges and sustain robust growth in our revenues. Importantly, while expenses have increased, they have consistently remained lower than the growth in our top line. This strategic balance has resulted in substantial profitability growth. EBITDA has seen an impressive CAGR of 11.2% and net profit has soared with an extraordinary CAGR of 25.2%. These results underscore our strategic focus on sustainable growth, operational efficiency and prudent financial management.

As we continue to navigate challenges and capitalize on opportunities, we remain committed to delivering value to our shareholders. Lastly, the full year guidance. I’m on slide number 15. So for the full year management expects continuing top line growth based on our most recent forecast top line is expected to grow by 4% or more for the full financial year 2025. We also expect EBITDA margin to remain stable around 42%.

Net profit for the year is forecasted to grow between 8% to 10% driven by growing top line and stable costs. And lastly, the CapEx investments into profitable growth segments will continue and we believe the CapEx for the year will range between 13% to 14.5%. We will continue monitoring the performance and update the guidance in the coming few quarters as required. Thank you for your time today. As usual balance sheet, detailed income statement, subscribers and ARPU details are available in the appendix.

This concludes my review. Thank you very much and now back to Pali.

Pauline Saab, Head of Investor Relations, Vodafone Qatar: Thank you very much, Mathur. We will now move to the Q and A session. Angela, please can you explain to the participants how to ask questions?

Angela, Conference Moderator: All right. Thank you. We will now begin the question and answer session. Your first question comes from the line of Madi Singh

Madi Singh, Analyst: The performance in Qatar continues to be very strong. I just wonder if you could share what are the key drivers for now? And how much the consumer side growth which you have seen and whether that is sustainable? And then secondly, on the enterprise side, if you could share how much of the growth you are getting is coming from new market growth versus taking market share from your competition? Thank you.

Mathur Anjum, Chief Financial Officer, Vodafone Qatar: Okay. Regarding your first part of the question, the key growth drivers, definitely this includes gaining market share within the traditional telecom sphere as well as we have been highlighting in the past few quarters that we are diversifying our revenue beyond core telecom revenue into more into ICT and managed services domain. So we are gaining customers and revenue there as well. So both combined together continue to contribute to our top line expansion. Regarding consumer growth, I mean the numbers are available in our income statement separately.

I mean we show the split of consumer revenue as well as enterprise and others. So you can refer our income statement for the split of the numbers. Regarding the growth going forward in consumer, so we continue to gain market share in consumer segment And both in prepaid and postpaid segment, we have seen this year as well. We have both the ARPU increase as well as the customers increase. So we expect that to continue going forward as well.

Enterprise segment, it includes as I said before, it includes both the traditional telecom market as well as ICT managed services within the enterprise domain, which is contributing to our top line growth.

Angela, Conference Moderator: Your next question comes from the line of Wei Chao with Alrayan.

Wei Chao, Analyst, Alrayan Investment: This is Ahir from Alrayan Investment. I’ve got a question on your ARPU on your on Page number 21 of your presentation. Quarter over quarter, year over year, definitely ARPUs across all the segments have grown, but quarter over quarter, they have declined. Is this because of seasonality? Or is that a Ramdan effect?

Could you give us some color on that please?

Mathur Anjum, Chief Financial Officer, Vodafone Qatar: Yes. So it’s mainly seasonality plus prepaid is also sensitive to the number of days as well. So we have two less number of days in this quarter versus Q4. Plus Q4 there are certain events which happen and there is an influx of tourists as well which is high. So there are several factors which cause higher ARPU always in Q4.

Wei Chao, Analyst, Alrayan Investment: Okay. On your guidance, I think this is the first time you have provided a net profit guidance?

Mathur Anjum, Chief Financial Officer, Vodafone Qatar: No, we provided last year as well. EPS and net profit, net profit, exact number.

Wei Chao, Analyst, Alrayan Investment: Yes. And so the I mean, your revenue is growing 4% and the profit growth is higher than that. This is just led by margins or there is something below the EBIT margin that is also helping?

Mathur Anjum, Chief Financial Officer, Vodafone Qatar: I mean in absolute definitely the revenue, the top line is bigger numbers. The percentage 4%, five % increase in absolute will be I mean significant for net profit growth. Mean there is nothing which is I mean happening below EBITDA or anything like Yes, no unusual one offs there, except for there was there is a one off depreciation charge that we have in related to FDD to TDT migration of 6,500,000 below EBITDA in this quarter and that was a one off. It’s not going to repeat going forward in this year.

Wei Chao, Analyst, Alrayan Investment: Okay. On the equipment sales, so this quarter we saw some good equipment sales growth. This is led by new contract based or this is more of iPhone and accessories?

Mathur Anjum, Chief Financial Officer, Vodafone Qatar: So we have been explaining this. So when you enter into ICT and managed services domain, you get sort of contracts that result in equipment sales and then managed services usually follows after that. Some of the contracts include only the equipment sales. So some of this revenue has a non recurring nature, but we have a solid pipeline of customers. So we saw a one off non recurring revenue in Q4 as well.

So we have that in this quarter as well.

Angela, Conference Moderator: Your next question comes from the line of Mohit C with Leisha Bank.

Mohit C, Analyst, Leisha Bank: I have just one question regarding the operational expenses around RUB97 million. So how do we see this going forward in this 2025? Should we see this as like stable or does our scope for operational efficiency there? Thank you. So

Mathur Anjum, Chief Financial Officer, Vodafone Qatar: we have been highlighting the success of our cost optimization program that we run continuously for the last seven years now. As part of this program, we keep on identifying opportunities to rationalize our OpEx and we have been very successful in doing that. Over the last three years, you look at the quarter one numbers, our OpEx is largely flat and this is mainly because of the benefits of this cost optimization program. We very closely track one of the key parameters and that is OpEx intensity. Our target is to continue to reduce it.

It has come down. In this quarter, there is an impact of that one off, I would say, a nonrecurring equipment revenue on this intensity. But I mean, our target is to continue to reduce OpEx intensity going forward as well, not by like 1.6 percentage point, but continue to rationalize this.

Angela, Conference Moderator: There are no further questions. I would now like to turn the call back over to Bobby for any closing remarks.

Bobby Sarkar, Head of Research, QNB Financial Services: Okay. Thank you, Angela. If we have no further questions, we can end the call for today. I wanted to thank Surr and Pauline for taking the time to answer our questions, and we will again pick this up next quarter. Thanks, everyone.

Pauline Saab, Head of Investor Relations, Vodafone Qatar: Thank you, Bobby, and thank you all for joining today’s call. We will keep you informed on all our upcoming investor calls and roadshows. In the meantime, please feel free to reach out to our Investor Relations team if you have any further inquiries or visit our IR section on the Vodafone Qatar website. Thank you once again for joining.

Angela, Conference Moderator: Ladies and gentlemen, that concludes today’s call. Thank you all for joining.

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