Vodafone Qatar

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Global Research - QatarVodafone QatarWith prudent government policies, Qatar has weathered the credit crisis well enough. As per IMF estimates, Qatar real GDP isexpected to increase 16.0% in 2010 and 20.0% in 2011, which is among the highest in the world, backed by higher hydrocarbonprices, huge expansion in natural gas production and public investment expenditure.The telecom sector in any country always have strong correlation with the economic environment under which it operates. Qataroffers strong economic fundamentals, proactive government, growing population base, strong GDP per capita, booming businessenvironment, etc. Therefore, we are of the opinion that all these economic factors are highly supportive for further growth of thiscore sector in Qatar.GSM Subscribers and Penetration Forecasts4.504.003.503.002.502.001.501.000.500.002010-11e 2011-12e 2012-13e 2013-14e195.0%190.0%185.0%180.0%175.0%170.0%165.0%160.0%Subscribers (mn)Penetration Rate*Year end in the chart is corresponding to Vodafone Qatar’s financial year end (April-March)Source: Global ResearchLast in GCC to open its doorsMobile subscribers in Qatar have grown at a 2006-10 CAGR of 25% to 2.81mn. However, Qtel was the only player in the marketto take advantage of the rapid growth in cellular subscribers till Vodafone entered the market in 2H09. We believe Qatar iscurrently at a stage where the incumbent operator is likely to lose its mobile market share to the new operator. The trend hasalready set in with Vodafone captured 25.3% of the market subscribers at of the end of 4Q10.Vodafone to extend its reach in the fixed line segmentThe incumbent is also likely to face competition in the fixed line sector as Vodafone has already rolled out its fixed line operationsin 2H10. The launch will give the incumbent the first taste of competition in this segment which is likely to boost the fixed linepenetration rate. Fixed line subscribers have grown at a 2006-10 CAGR of 5.1%.Internet usage yet to take offInternet users have grown at a 2006-10 CAGR of 20.1%. In Qatar, the internet user penetration rate reached around 43% at theend of 2010 which leaves room for significant growth ahead. The growth has lagged its peers in GCC as Qtel was the onlyprovider. However, the entry of Vodafone is likely to accelerate the growth in this segment. We expect around 38% YoY growth ininternet user base for the year 2011.Revenue market shareVodafone Qatar launched its mobile services in June 2009 and in a short span of around 18-months it achieved significantmileage in revenue market share which was at 15.9% at the end of June 2010 and increased to 23.7% at the end of Dec. 2010. Itachieved this by posing stiff competition to the incumbent operator, Qtel, as during these six quarters Qtel’s mobile revenuedeclined from QAR1,015.2mn in Q2 ended June 2009 to QAR857.7mn at the end of Q4 ended Dec. 2010. Sector’s mobilerevenue grew from QAR1,018.2mn in June 2009 to QAR1,124.2mn in Dec. 2010, witnessing a marginal CAGR of 1.7%.March - 2011 6
Dec-08Mar-09Jun-09Sep-09Dec-09Mar-10Jun-10Sep-10Dec-10Dec-08Mar-09Jun-09Sep-09Dec-09Mar-10Jun-10Sep-10Dec-10(in '000)Global Research - QatarVodafone QatarRevenue Market Share120.0%100.0%80.0%99.7%96.4%83.9% 86.2% 84.1%80.5%76.3%60.0%40.0%20.0%0.0%16.1%23.7%19.5%13.8% 15.9%0.3%3.6%Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 Sep-10 Dec-10VodafoneQtelSource: Company reports & Global ResearchCustomer market shareVodafone Qatar’s current subscriber base of 711.2k gives it a 43% mobile population share and customer market share of 25.3%.At the end of FY2009-10, the subscriber base was at 464.9k, which was 121% ahead of the company’s own projections.Vodafone Qatar rapidly gaining the subscribers market share which increased from 0.8% at the end of June 2009 to 25.3% at theend of Dec. 2010. In the last six quarters (Sep.09 to Dec.10), Vodafone Qatar’s net adds were 135.8k, 202.8k, 111.4k, 69.5k,66.4k and 110.3k while Qtel’s customer net adds were 214.4k, -17.6k, 31.2k, 4.5k, -20.3k and -33.7k respectively.Customer Market ShareCustomer Additions (in '000)110.0%100.0% 99.9% 99.2%100.0%93.4%90.0%85.7% 82.2% 80.1% 78.0%80.0%74.7%70.0%60.0%50.0%40.0%30.0%25.3%17.8% 19.9% 22.0%20.0%14.3%6.6%10.0%0.1% 0.8%0.0%250.0202.7200.0150.0100.050.00.0146.51.092.214.0214.4135.8202.8111.431.269.5 66.44.5110.3-50.0(17.6)(20.3) (33.7)VodafoneQtelVodafoneQtelSource: Company reports & Global ResearchAt the quarter ended Dec. 2010, Vodafone Qatar’s customer market share grew by 332bps QoQ to 25.3% while revenue marketshare witnessed a QoQ growth of 420bps to 23.7%. The company’s customer base increased by 18.4% QoQ and 101.1% YoY.We expect Vodafone Qatar’s mobile subscribers to increase at a CAGR of 28.1% during FY2011 to FY2014. We forecastVodafone’s customer market share will increase to about 41% by FY2014 from the current 25.3%.March - 2011 7
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Vodafone Qatar

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