Batelco’s profit hit by price war

Updated 23 January 2013
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Batelco’s profit hit by price war

MANAMA: Bahrain Telecom-munications Co. reported a 10th profit drop in 11 quarters as domestic competition and one-off charges from a cost-cutting program hurt the bottom line.
Batelco made a net profit of 17.75 million dinars ($ 47.1 million) in the three months to Dec. 31, down from 23.5 million dinars in the year-earlier period, according to Reuters calculations.
Two analysts polled by Reuters forecast Batelco would make a quarterly profit of 38.05 million dinars.
These estimates included an expected gain from the agreed sale of Batelco’s 43 percent stake in Indian affiliate S Tel to its Indian partner, which the Bahraini firm had expected to be completed in the fourth quarter.
Prior to the results announcement, Nishit Lakhotia, a telecoms analyst Securities & Investment Co. (SICO) in Bahrain, estimated this gain would be 19.3 million dinars based on the difference between the agreed sale price — $175 million — and the book value of S Tel on Batelco’s accounts as of Sept. 30.
Batelco is now suing its India partner for non-payment. Accounting rules would allow the firm to book the sale gain in the fourth quarter as a receivable item. However, the company declined to comment on whether it had done this.
S Tel was one of eight Indian mobile operators stripped of licences in February 2012 as part of a corruption probe.
Batelco’s fourth-quarter revenue was 77.16 million dinars, it said in a statement. This compares with 81.5 million dinars a year ago.
“Beyond aggressive competition in the Bahrain market and elsewhere in the region, our results for 2012 were also impacted by a number of one off charges including expenses associated with an extensive restructuring and cost rationalization program at our Bahrain operations,” said chairman Sheikh Hamad Al-Khalifa in the company’s results statement.
The firm proposed a 25 fils per share dividend, plus a 10 percent bonus share issue.
Batelco competes with units of Kuwait’s Zain and Saudi Telecom Co. in Bahrain, while it also owns Jordanian telecoms operator Umniah, 27 percent of Yemeni mobile operator Sabafon, minority stakes in Internet providers in Kuwait and Saudi Arabia and is also active in Egypt.
The operator has expanded abroad to offset declining domestic margins, in December agreeing to buy Cable & Wireless Communications’ assets in Monaco and some islands in a deal worth up to $1 billion.
Full-year net profit for 2012 was 60.3 million dinars, down from 80 million dinars in 2011.


Brighter Saudi economic outlook boosted by reforms

Updated 58 sec ago
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Brighter Saudi economic outlook boosted by reforms

LONDON: Saudi Arabia’s “ambitious” reform program is set to accelerate the Kingdom’s economic growth this year, according to the International Monetary Fund (IMF).
Following discussions with Saudi officials, an IMF team led by Tim Callen reported that growth was expected to pick up this year and over the medium-term “as reforms take hold.” 

It added: “The primary challenges for the government are to sustain the implementation of reforms, achieve the fiscal targets it has set, and resist the temptation to re-expand government spending in line with higher oil prices.”

The report said considerable progress was being made to improve the business climate. Recent efforts had focused on the legal system and business licensing and regulation. The public procurement law that
is being updated had a key role to play in strengthening anti-corruption policies, said the IMF.
Saudi Finance Minister Mohammed bin Abdullah Al-Jadaan said that the statement “confirms the progress made by the Kingdom’s government in implementing economic and structural reforms.”
Jean Michel Saliba, Middle East economist at Bank of America Merrill Lynch, expressed some concern that higher oil prices could encourage the government to take its foot off the fiscal prudence accelerator.

 

He said: “The IMF report is in line with our views that, while oil prices allow the Saudi government to support a pick-up in economic activity while minimizing the impact on fiscal balances, the key risk that higher oil prices bring is that medium-term (spending targets) are not adhered to.”
However, the IMF identified several encouraging KSA initiatives. The introduction of value-added tax was said to be a “milestone achievement” in strengthening the tax culture and tax administration of the country. Energy price reforms and the introduction of citizens’ accounts to compensate the less well-off for higher energy/VAT costs were also welcomed.
The IMF said that the Kingdom’s privatization and public and private partnership program, recently approved, should be accelerated.
It said: “A balance is needed between pursuing financial development and inclusion and financial stability. Increased finance for smaller businesses, more developed debt markets and improved financial access especially for women as envisaged under the Financial Sector Development Program will support growth and equality.”
Targeting a balanced budget in 2023 was lauded as being “appropriate,” and the Saudi government was advised to focus on delivering on this objective. “Limiting the growth of government spending would be necessary to achieve fiscal targets,” said the IMF.
Reforms to strengthen the budget process and the fiscal framework, increase fiscal transparency, and develop macro-fiscal analysis were said to be making good progress.
But broadening the coverage of fiscal data beyond the central government would ensure a more complete assessment of the government’s impact on the economy.
“While the public sector can be a catalyst for the development of some new sectors, it is important that it does not crowd out private sector involvement, nor remain a long-term player in markets where private enterprises can thrive on their own,” the IMF said.
The IMF recommended that government policies should focus on sending clear signals about the limited prospects for public employment, easing restrictions on expatriate worker mobility, further strengthening education/training, and continuing to support increased female participation. While progress had been made in increasing data availability, “more needs to be done to ensure that an accurate and timely assessment of economic developments is possible.”
Earlier this month, the ministry of finance published first quarter fiscal indicators that showed the Kingdom — which is making concerted efforts to diversify its oil-reliant economy — has projected a deficit of SR195 billion ($52 billion), or 7.3 percent of gross domestic product (GDP), this year, down from SR230 billion last year. It plans to balance the budget by 2023.
First-quarter revenues reached SR166.3 billion, up 15 percent from the same period last year, the ministry said in a statement.
Non-oil revenues jumped 63 percent to SR52.3 billion, partly due to a 5 percent value-added tax (VAT) that the government introduced in January.
Oil revenues rose 2 percent but the low figure was a result of a change in the way dividends are distributed and a stronger number is expected in the second quarter.
The IMF expects Saudi economic growth to hit 1.7 percent in 2018 after falling into negative territory last year.
A number of big-ticket infrastructure projects such as Jeddah’s new $7.2 billion King Abdulaziz International Airport are expected to bolster economic expansion.
In global energy markets, with crude trading at close to $80 per barrel, leading investment banks have forecast prices could go higher.
Supplies are being squeezed by the collapse of production from OPEC member Venezuela as well as worries about Iranian supplies following President Donald Trump’s decision to reimpose sanctions on Iran.

FACTOID

The IMF expects Saudi economic growth to hit 1.7 percent in 2018 after falling into negative territory last year.