Rising OTT Migration And Fierce Price Wars Will Shrink Margins

Key Takeaways

• Intensifying competition and regulatory challenges are compressing margins, escalating costs, and limiting pricing power, putting pressure on profitability and financial flexibility.
  
• Market saturation, shifting consumer behavior toward OTT apps, and declining fixed broadband revenues are undermining efforts to diversify and sustain long-term revenue growth.
  
• Strategic investment in digital infrastructure, cloud services, and operational efficiencies positions the company for resilient growth, new revenue streams, and enhanced shareholder value.

Catalysts

Develops, operates, and maintains mobile and fixed telecommunications services in the Sultanate of Oman.

• The rapid growth in over-the-top applications such as WhatsApp, Telegram, and Zoom is accelerating the migration of users away from traditional SMS and voice services, putting sustained downward pressure on average revenue per user and overall top-line growth, which may result in further structural revenue declines for Omani Qatari Telecommunications Company SAOG.
  
• Aggressive competition from new and existing players, including inexpensive Mobile Virtual Network Operators, is forcing ongoing price wars in both mobile and fixed segments for a market with just over four million people, materially compressing net margins and eroding future profitability.
  
• Heightened regulatory pressures, including spectrum costs, government-imposed price controls, and compliance obligations on network shutdowns (such as 3G switch-off), are restricting pricing power and escalating ongoing capex requirements, reducing free cash flow and returns on invested capital.
  
• The company's ability to diversify revenue streams remains constrained by the limited scale and saturation of Oman's telecommunications market, exacerbated by Vodafone's exit onto its own network and migration of customers across technologies, which threatens long-term earnings trajectories despite recent B2B and wholesale gains.
  
• Rising consumer demands for higher data speeds and network quality are driving continual capital investments in 5G, fiber, and data centers, yet data shows that fixed broadband revenues are already declining despite tariff increases and customer stability, suggesting these capex initiatives may not translate into proportional revenue or net earnings growth.

Omani Qatari Telecommunications Company SAOG Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more pessimistic perspective on Omani Qatari Telecommunications Company SAOG compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts.
• The bearish analysts are assuming Omani Qatari Telecommunications Company SAOG's revenue will decrease by 0.3% annually over the next 3 years.
• The bearish analysts assume that profit margins will increase from 4.2% today to 5.5% in 3 years time.
• The bearish analysts expect earnings to reach OMR 13.7 million (and earnings per share of OMR 0.02) by about July 2028, up from OMR 10.3 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bearish analyst cohort, the company would need to trade at a PE ratio of 18.4x on those 2028 earnings, up from 15.1x today. This future PE is greater than the current PE for the OM Wireless Telecom industry at 15.4x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 20.96%, as per the Simply Wall St company report.

Omani Qatari Telecommunications Company SAOG Future Earnings Per Share Growth

Risks

• Omani Qatari Telecommunications Company SAOG is rapidly growing its B2B and international wholesale businesses, with B2B revenue up around 11 percent and its data2cloud cloud service subsidiary delivering 37 percent year-on-year growth, which could help offset mobile segment declines and support overall revenue stabilization or recovery.
  
• The company continues to invest heavily in digital transformation, 5G, and fiber optic infrastructure, improving customer experience and positioning itself to benefit from long-term secular trends like rising internet penetration and digitalization in Oman, which may bolster revenue and ARPU over time.
  
• High utilization rates (up to 90 percent) at its newly launched data centers and the company's ambition to further monetize these assets points to potential for high-margin new revenue streams in cloud and ICT services, which could strengthen both top-line growth and EBITDA margins.
  
• Management is actively driving operational cost efficiencies and margin enhancement programs, which have already led to a net profit margin improvement from 8.8 percent to 11.9 percent despite some revenue headwinds, suggesting that earnings resilience could support share price.
  
• Strong balance sheet management, effective working capital discipline, and a robust operating cash flow position (despite a reduction in EBITDA) provide the company with the financial flexibility to fund capex, pursue strategic growth opportunities, and potentially maintain attractive dividend payouts, which may underpin shareholder value and share price performance.

Valuation

• The assumed bearish price target for Omani Qatari Telecommunications Company SAOG is OMR0.22, which represents the lowest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Omani Qatari Telecommunications Company SAOG's future earnings growth, profit margins and other risk factors from analysts on the more bearish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of OMR0.38, and the most bearish reporting a price target of just OMR0.22.
  
• In order for you to agree with the bearish analysts, you'd need to believe that by 2028, revenues will be OMR251.2 million, earnings will come to OMR13.7 million, and it would be trading on a PE ratio of 18.4x, assuming you use a discount rate of 21.0%.
  
• Given the current share price of OMR0.24, the bearish analyst price target of OMR0.22 is 9.1% lower. Despite analysts expecting the underlying buisness to improve, they seem to believe the market's expectations are too high.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.