• Dividend payment remains stable despite net loss Omantel booked a net loss of OMR40 million versus our estimate of a profit of OMR30 million. The miss was mainly due to a number of one-offs including:  i) full impairment of the company’s subsidiary in Pakistan, WorldCall Telecom (WTL) resulting in a OMR75 million expense; ii) a OMR19.4 million FX loss arising from WTL’s impairment; and iii) a OMR12.6 million expense for voluntary early retirement. Excluding these one-off expenses, earnings would have been OMR28 million. The results did not impact 2H2015 dividends, which came in at OMR0.065/share bringing the total dividend to OMR0.115/share (yield: 8%), exactly in line with our estimate. We reiterate our Buy rating on the stock given its strong FCF generation and attractive dividend yield and upside potential.
• In line with our view, no change in royalty expected soon Management stated that it does not expect any change in the royalty scheme in Oman, particularly following the recent corporate income tax rate hike from 12% to 15%. The Omani budget has been announced and nothing regarding this issue was raised. We believe the market has been pricing in a royalty hike – which we see as unlikely – and we believe the stock is undervalued at current levels because of that.
•Revenue generation still solid, backed by fixed-line and wholesale Top-line growth remained resilient at all levels, with total revenue growing by 6% Y-o-Y and 4% Q-o-Q at OMR131 million (the highest since the company’s inception). Growth was backed by strong fixed-line and wholesale revenues which jointly grew by 9% Q-o-Q. This has more than offset the stagnation in mobile revenues, which remained unchanged Q-o-Q (-13 bps).

Omar Maher
Karim Riad