Omantel Conference call updates November 14, 2010

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1 Omantel Conference call updates November 14, 2010 The Management of Omantel had a conference call last Thursday to discuss on the Q3FY10 results; the key discussion points are, Mobile Subscriber base continue to grow Mobile subscribers of the company (along with resellers) have increased by 3.4% on a QoQ basis to million subscribers. The subscriber market share of the company stood at 55%. The resellers continue to concentrate on the low income segment, which is a volume play. Of the total subscriber base, the subscribers of resellers are about 365K, forming about 14.7% of the total mobile subscriber base of the company. While in revenue terms, the mobile revenue market share of Omantel stood at 59% (end of Sep 10). The mobile revenues for the quarter was down by 7.8% as the company has done a revenue reversal of RO related to Roaming charges and an additional RO 644K call revenue moving from fixed to Mobile. Graph 1: Mobile Subscriber Growth Quarterly Trend 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 1.0% 0.0% 7.4% 7.3% 6.4% 5.5% 5.6% 4.7% 3.4% 3.1% 3,000 2,500 2,000 1,500 1, Total Mob. Subscribers With Resellers QoQ (%) Source: Company Reports, Wholesale revenues declined on back of lower international gateway revenues Fixed line revenue growth of the company declined marginally by 0.4% sequentially. This is in line with our estimates. During Q3FY10, the Wholesale revenues of the company have declined sharply by 23.8% on a QoQ basis. This is mainly on back of Nawras started routing its international traffic through its own gateway. As per the management, the international gateway revenue could have an additional impact of about RO 2 million during Q4FY10. The overall revenue growth of the company got impacted mainly due to the opening up of competition in fixed line services especially the international gateway services. Broadband continue to show growth Mobile broadband segment continue to report stronger growth rate during the quarter. The company has about 156K unique subscriber base in this segment. Omantel continues to see huge opportunities in Oman telecom market especially in the broadband internet segment with the evolving technologies and increased usage of Smart phones in the coming years. In the same period,

2 the fixed Broad band showed a moderate growth of 2.3% on a QoQ basis. The fixed line broadband segment continues to report a consistent growth over the last six quarters. Capacity expansion to continue albeit at lower pace Omantel continued to invest its major capex towards the enhancement of 3.5G network services along with the development of next generation technology investments. The company has completed its installation of about 763 sites to provide wider coverage of 3.5G services in Oman. The total capital expansion plan for this fiscal year is expected to be about RO 75 million. However the company expects to maintain its capex to sales ratio of about 16 to 18% over the medium term. Graph 2: Capex Addition Quarterly Trend Capex Additions (RO million) Capex Additions (RO million) Source: Company Reports, Competition to continue As far as the entry of third Operator in Oman telecom sector, the company feels that there would be opportunities emerging with the concept of carrier of carriers. The company also expects the competition to remain healthy moving ahead. As measure of tackling the loss of international revenue to illegal VOIP calls, the company has planned to launch new products in this segment to cater to the international calling customer base. Presence of higher Operating Expenses The company has incurred higher operating expenses on back of enhanced investment activities done towards its 3.5G network along with the implementation of new technologies. Overall group 9MFY10 operating expenses increased by 18% YoY to RO 224 million. The previous Voluntary end of services scheme which was announced during previous year included about 130 employees (about 30 Senior Executives) opting for the scheme. This acted as a constructive move taken by the company towards cost rationalization measures. Q3FY10 PAT Below our estimates Omantel has reported Q3FY10 PAT (excluding minority interest) of RO 23 million, a decline of 19.6% on a QoQ basis, which is below our estimates. The decline in revenues on back of competition along with the presence of higher operating expenses led to fall in net profit for the quarter.

3 Graph 3: Operating Expenses Quarterly Trend 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% 5.0% 10.0% 15.0% 20.0% 20.4% 17.6% 11.0% 7.7% 0.9% 1.8% 0.5% 3.6% 0.5% 17.2% Operating Expenses (Inc. Depreciation) QoQ (%) Source: Company Reports, Strategy towards Worldcall Telecom The company s strategy towards Worldcall Telecom remains long term and expects improved performance over the next two to three years time frame. Omantel has planned to revamp the business division through effective cost rationalization measures. The company plans to call an EGM to approve giving third party guarantee to the funding requirement of the subsidiary company. As far the operating expenses of Worldcall Telecom is concerned, the company has seen a sharp increase in depreciation expenses (20% YoY) and other operating expenses (3% YoY) during the period. The company expects similar levels of expenses moving ahead. Outlook: Dividend policy to continue Provides dividend yield of 8.3% at the current levels At the current levels, the stock trades at 8.3X of P/E (FY10E EPS of RO 0.144). The company expects to follow the similar dividend policy for the current fiscal year. We expect the company to remain as a Dividend Play for the investors. Assuming a payout of RO for the current fiscal year, the dividend yield of the company works out to be about 8.3% levels. We would be revisiting our Valuation Model and update a detailed note soon.

4 Financial Highlights Quarterly Trend Omantel Revenue By segment Q1FY09 Q2FY09 Q3FY09 Q4FY09 Q1FY10 Q2FY10 Q3FY10 Mobile Subscribers Post Paid QoQ (%) 0.0% 1.9% 0.0% 0.5% 0.5% 7.0% 1.8% Pre Paid 1, , , , , , ,892.0 QoQ (%) 3.5% 2.3% 2.9% 1.8% 6.3% 4.9% 2.3% Total 1,762 1,793 1,839 1,870 1,975 2,077 2,124 QoQ (%) 3.1% 1.8% 2.6% 1.7% 5.6% 5.2% 2.3% Resellers QoQ (%) 59.0% 50.9% 20.0% 14.9% 10.3% Total Mob. Subscribers With Resellers 1,762 1,893 1,998 2,110 2,263 2,408 2,489 QoQ (%) 3.1% 7.4% 5.5% 5.6% 7.3% 6.4% 3.4% Fixed Line Subscribers QoQ (%) 1.1% 1.7% 0.7% 1.1% 6.5% 0.4% 1.9% Fixed Broad Band Subscribers QoQ (%) 9.4% 5.7% 5.4% 5.1% 2.4% 4.8% 2.3% Fixed line QoQ (%) 2.4% 9.9% 9.4% 8.1% 13.5% 0.4% Mobile QoQ (%) 9.0% 0.4% 1.8% 5.6% 1.2% 5.2% 7.8% Wholesale QoQ (%) 23.3% 4.2% 21.2% 1.6% 3.3% 9.2% 23.8% Total Revenue QoQ (%) 1.1% 1.0% 5.5% 3.0% 2.8% 9.5% Operating Expenses (Inc. Depreciation) QoQ (%) 1.8% 0.5% 17.6% 11.0% 3.6% 0.5% 0.9% EBITDA QoQ (%) 3.7% 2.4% 4.3% 3.8% 5.9% 3.7% 18.3% Net Profit QoQ (%) 159.6% 7.4% 6.6% 40.9% 67.0% 11.7% 19.6% Capex Additions (RO million) QoQ (%) 71.7% 174.7% 36.2% 61.1% 90.1% 156.9% 55.4% Opex to Sales (%) 60.8% 59.9% 66.8% 71.9% 67.9% 69.5% 76.1% EBITDA Margin (%) 54.6% 55.3% 50.1% 46.8% 48.6% 48.1% 43.4% Net Profit Margin (%) 38.4% 35.2% 31.1% 17.9% 29.3% 26.6% 23.6% Source: Company Reports,

5 Institutional Sales Hunaina Banatwala, (+968) Institutional Brokerage Talal Al Balushi, (+968) Equity Research Kanaga Sundar, (+968) Vijay Sridharan, (+968) Disclaimer: This document has been prepared and issued by Gulf Baader Capital Markets SAOC ("the Company") on the basis of publicly available information, internally developed data and other sources believed to be reliable. While all care has been taken to ensure that the facts stated are accurate and the opinions given are reasonable, neither Gulf Baader Capital Markets SAOC nor any employee shall be in anyway responsible for the contents of this report. The Company may have a position and may perform buying/selling for itself or its clients in any security mentioned in this report. This is not an offer to buy or sell the investments referred therein.