Balloon has gone up for Vodafone Qatar

Markets Update: Vodafone Qatar gained almost eight times more subscribers last quarter than incumber Qtel, leading analysts to signal their interest in the stock.

Goodbye Qtel, hello Vodafone? A marketing slogan that once adorned Vodafone Qatar's promotional balloons probably won the telecommunications entrant no points with the rival Qtel. But what was once hot air is starting to become reality.

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Vodafone Qatar's subscription base grew by 53,000 during the second quarter, far ahead of analysts' estimates and almost eight times more than established rival Qtel.

Vodafone Qatar's stock rose 0.1 per cent yesterday, and is up 3.5 per cent since October. The stock is down 8.6 per cent since the start of the year, but analysts are starting to change their tune on the company.

The company has made steady progress since its launch in 2008 broke the monopoly of incumbent Qtel, said Chandresh Bhatt, a telecoms analyst at Global Investment House.

"The competition is getting good in Qatar now, with the advent of Vodafone Qatar," he said. "Since the venture started, they've been competing hard with Qtel, and quarter-on-quarter we're seeing growth in customers and in revenues."

Vodafone Qatar has enjoyed four consecutive quarters of improvement in earnings before interest, taxes, depreciation and amortisation - a measure analysts use to determine a company's performance during its early period when profit is suppressed by start-up costs.

The improvement puts Vodafone "on track to break even this year, on a cumulative basis", analysts from Naeem Holding wrote in a research report.

Vodafone Qatar has focused on international calls, which has helped it to grow in Qatar's market as the number of expatriate arrivals rises in the lead-up to the 2022 Fifa World Cup.

But aggressive promotional rates by Vodafone Qatar and Qtel during Ramadan curtailed average revenue per user, Naeem's analysts said.

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"Management said it was in discussions with regulator ictQatar in a bid to ensure that such below-cost pricing is not permitted again," the report said. "Vodafone Qatar is presumably arguing that Qtel's pricing was predatory and an abuse of its market position. The impact of the promotion on results, however, serves to show how reliant Vodafone Qatar is on international revenues at this stage of its development."

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