Batelco Chairman - Shaikh Hamad bin Abdulla Al Khalifa

Batelco Group Announces Third Quarter Results Marked By Continued Diversification and Growth of Regional Customer Base

Batelco Group (Ticker: BATELCO), the regional telecommunications operator of reference with operations across seven countries, today announced its results for the nine-month period ended 30 September 2011(“the Period”), which were marked by the continued growth and diversification of its customer and revenue base from across the MENA region and India.

Financial and Subscriber Highlights

Gross Revenues of BD 245.5M (US$ 651.2M) for the period;

EBITDA of BD 93.0M (US$ 246.7M) representing a 38% margin;

Consolidated Net Income of BD 56.5M (US$ 149.9M);

Group subscriber base that now surpasses 11 million, an increase of 8% and 41% QonQ and YoY, respectively;

Continued diversification of Group revenues with 37% of revenues and 29% of operating profit now sourced from markets outside Bahrain; and

Cash and bank balance of BD 86.8M (US$ 230.2M).

For the period, the Group reported Net Income of BD 56.5M (US$ 149.9M) versus BD 66.0M (US$ 175.1M) for the corresponding period in 2010, down 14%. EBITDA for the period was BD 93.0M (US$ 246.7M), representing a 38% margin, versus EBITDA of BD 110.7M (US$ 293.6M) for the corresponding period. The Group’s Gross Revenues stood at BD 245.5M (US$ 651.2M) for the period, down 4% from BD 256.1M (US$ 679.3M) year over year. In line with the Group’s continued diversification, 37% of revenues and 29% of Operating Profit are now generated from markets outside of Bahrain.

Additionally the Group reported Gross Revenues for Q3, 2011 of BD 82.3M (US$ 218.3M) down by 4% against BD 85.3M (US$ 226.3M) in Q3, 2010. For the same time frame, Net Revenues were down by 7% to BD 60.3M (US$ 160.0M) for 2011 in comparison to BD 65.1M (US$ 172.7M) for 2010. The Group additionally reported an operating profit of BD 18.9M (US$ 50.1M) for Q3, 2011 against BD 26.6M (US$ 70.6M) in 2010 and EBITDA of BD 28.3M (US$ 75.1M) in Q3, 2011 versus BD 36.5M (US$ 96.8M) for 2010.

The Group continues to strengthen its presence and customer base, which grew overall to more than 11 million subscribers by the end of Q3 up 41% from the corresponding period in 2010.

The Group’s balance sheet continues to remain strong. The Group is free of debt and as of 30 September 2011 had substantial cash and bank balances of BD 86.8M (US$ 230.2M) reflecting 65% increase over the same period last year. This includes the impact of interim dividend (20 fils per share) announced and paid during the quarter. Earnings per share for the period stood at 39.2 fils.

Batelco Chairman, Shaikh Hamad Bin Abdulla Al Khalifa, announced the results at a Board Meeting held at Batelco Headquarters, stating that the Batelco Group had continued to deliver solid financial results and operating performance throughout the first nine months of 2011.

“Since the end of Q2, we have added more than 800 thousand new subscribers to our customer base, which now exceeds 11 million across the MENA region and India. This increase underscores the ongoing growth of our business and the strength of our offering despite a year over year decline in the Group’s revenues and profitability, which in line with market guidance have continued to be impacted throughout 2011 by significant and ongoing competitive pressures in Bahrain.”

“During Q3, the Group generated strong cash flows, maintained a solid balance sheet and continued to pay substantial dividends to our shareholders. We continue to support the expansion of our network and investments across the region as we seek to add further scale to our operations and deliver even greater value for our shareholders,” Shaikh Hamad added.

Operational Highlights

Commenting on Batelco’s operational performance, newly appointed Group CEO, Shaikh Mohamed Bin Isa Al Khalifa, said that operationally, Batelco continues to effectively execute its strategy.

“Despite the intensely competitive nature of the market in Bahrain and the challenges that have faced the MENA region throughout the period, we have retained both our market leading position at home whilst also successfully continuing to strengthen our competitiveness and the performance of our subsidiaries both geographically and by segment.”

Growth in Mobile and Broadband

Key to the Group’s strategy is the growth of its mobile and broadband customer base and at the end of the period the Group successfully reported growth in total mobile subscribers of 8% quarter on quarter and 43% over Q3 2010. Whilst broadband subscriber figures across the network remained stable from Q2, they have nevertheless shown strong double-digit growth of 14% when compared to the corresponding period last year.

Growing Contributions from Overseas Operations

In line with the Group’s diversification strategy, contributions from across its overseas operations, which continue to grow in absolute terms as well as a percentage of revenues and profits, helped to partially offset the effects of intense competition in Bahrain.

Jordan: The Group’s 96% owned subsidiary in Jordan, Umniah, delivered solid performance. At the end of Q3 its mobile subscriber base reached over 2.3 million, reflecting a 2% increase since Q2 and an impressive 31% increase year over year.

Kuwait: Batelco’s subsidiary Qualitynet, delivering total ICT solutions remains the market leader in Kuwait’s Data Communications and Internet Services industry with continued steady growth resulting in 6% growth in broadband customer numbers since Q3, 2010.

Other JVs: Sabafon, STel and Atheeb, companies in which Batelco owns minority stakes, continue to deliver customer and revenue growth. Most notably Sabafon (Yemen) registered growth in its mobile customer base, which has grown to 4.1 million, STel (India) now delivers mobile services to 3.5 million customers and Atheeb (Saudi Arabia) delivers voice and data services to over 115,000 customers.

Maintaining Leadership and Excellence in Bahrain

Batelco retains its position as the market leader for mobile services in Bahrain although its total subscriber numbers declined slightly since Q2 and 10% year over year. This is an expected consequence of the third mobile operator’s entrance into the market and subsequent aggressive offers and market competition. It is also a reflection of the Bahrain market itself which is characterized by high levels of penetration for mobile (over 140%) and for fixed broadband (0ver 100% of households and businesses).

Wireless broadband services continue on a strong growth trajectory, up 13% quarter-on- quarter with impressive overall gains of 75% when compared with the corresponding period last year. Conversely, fixed line services in the Kingdom, as elsewhere globally, have continued to decline as more and more customers migrate to mobile services.

“Batelco’s ability to maintain its market leadership in mobile services and broadband in the face of aggressive competition can be attributed to a sharp focus on delivering greater value, choice and service to our customers,” said Shaikh Mohamed.

“We have pursued this strategy by working to enhance our competitiveness through effective cost management and operational efficiency as well as through ongoing product and service innovation to support customer retention and to encourage higher usage per customer.”

Towards this end, Batelco introduced a number of attractive new mobile and broadband offers during Q3. These included initiatives such as the launch of B-Lite, the first Batelco branded phone for prepaid customers, which delivers in-demand features such as camera, radio, advanced music player, internet access and Bluetooth. Other key initiatives included the release of further “Nice Numbers” and the launch of weekly BlackBerry® for SimSim service, a first for Batelco and the Kingdom of Bahrain, providing more choice, flexibility and savings for customers and roamers with heavy demand for data usage with an option to pay as they go.

Batelco has also added a number of new international operators to its unified local data roaming line-up, extending savings for customers when roaming beyond the Middle East region to new countries including the United Kingdom, Ireland, Czech Republic (O2) and Spain (Moviles Espana).

Similarly, innovation in broadband also continued with enhanced service and packages offering higher speeds and higher usage thresholds at no additional price increase. This is in addition to the introduction of complementary broadband services such as the launch of the CCTV and IPTV, one of the most innovative products to be delivered to residents in the Kingdom, which will allow users to access digital television channels via Batelco’s broadband lines as well as gain access to other advanced and interactive services including Video on Demand content.

Supporting the Community

In addition to working hard to deliver a full range of products and superior customer care in the Kingdom, Batelco also serves Bahrain through its dedication to the community. During Q3, Batelco continued its involvement with and support for local groups and initiatives aimed at enhancing education, training, health services, entrepreneurship and social development across the Kingdom as well as support for underprivileged segments of society. So far in 2011, Batelco has paid out approximately BD 2M as part of its CSR programme, which it continues to grow in line with its position as one of the largest employers and investors in the Kingdom for the past 30 years.

Continued Focus on Scale and Profitable Growth

Batelco Group CEO Shaikh Mohamed continued by saying that further to progress being pursued at home and in its existing overseas operations, the Group also continues to explore additional opportunities for expansion.

“Acquisitions of mobile and broadband operators in MENA and India are important strategic growth drivers which would allow Batelco Group to grow and diversify its revenues and gain synergies across an increased customer base.”

“Similarly, acquisitions and partnerships with other operators to grow our scale and investments in ICT related opportunities are also important priorities for the Batelco Group,” Shaikh Mohamed concluded.

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