Vodafone Qatar stock worth a second listen

Operator rings up a 21% market share in just two years

Investors looking for a stable company poised to ring in profits should have a close look at Vodafone Qatar. The Kuwaiti brokerage NBK Capital initiated coverage of the telecommunications operator with a "buy" rating yesterday, based on strong growth in the Qatari mobile market. Vodafone Qatar ended the country's telecoms monopoly in 2008 after it was granted a mobile licence by the country's regulator.

In its short lifespan, the operator has aggressively competed against the incumbent Qatar Telecom and now has a 21 per cent share of the mobile market. Vodafone Qatar reported sales of 144.7 million rials in its most recent quarter, with an earnings before interest, tax, depreciation and amortisation (Ebitda) loss of 28.7m rials. Diala Hoteit, a telecoms analyst with NBK Capital, expects Vodafone Qatar to post positive earnings in the current quarter, based on the continued growth of the Qatari mobile market and reliance on the Vodafone worldwide brand to attract new subscribers.

"Backed by a global telecom operator, Vodafone Group, Vodafone Qatar stands to gain from the group's expertise and experience," said Ms Hoteit. "Vodafone Qatar will also benefit from the special prices provided by suppliers to Vodafone Group on network equipment, services and handsets." Vodafone, the world's largest telecoms operator by revenue, and the Qatar Foundation each own a 23 per cent stake in the company, while 40 per cent is publicly traded. The other shares are held by various Qatari government funds. Investors should keep an eye on Vodafone Qatar's investments in a nationwide broadband and TV network, as well as how it manages the 294m rials of debt it has accumulated due to the increased demands for its services.

Ms Hoteit forecasts Vodafone Qatar's revenue will grow at a compound annual rate of 39 per cent until 2015, while its Ebitda margins will increase from 11 per cent next year to 32 per cent in 2015. Vodafone Qatar closed trade on the Doha Financial Exchange yesterday at 7.90 rials. Ms Hoteit placed a 12-month "fair value" target price of 9.60 rials on the operator's shares. dgeorgecosh@thenational.ae