08 Chart 4: Qtel Liquidity – Quick Ratio (x) & Total Liabilities / Total Assets (%) Trends


Middle Eastern telecom companies have been fairly resilient during the tumultuous political period in the region


Qtel – How Has The Credit Health Changed? Qtel has improved its credit health in the past four years. One important indicator is Qtel’s liquidity ratio in Chart 1 – that is, its ability to immediately extinguish its current liabilities. Plotted against the company’s standard peer group of 40 firms, it is clear that since March 31, 2007, Qtel has been increasing its short- term assets to cover its immediate liabilities. And after March 31, 2011, this ratio peeked above the group average. In addition, Chart 2 shows that the


company’s leverage (total liabilities-to- total-assets) dropped significantly from nearly 80 per cent on March 21, 2007, to around 65 per cent on March 31, 2011. However, Qtel’s long-term debt (chart 3) grew significantly from $5,411m in 2009 to $12,013m in 2010. A conflicting perfor- mance is appearing as the total liabilities- to-total-assets are falling but the long-term debt is rising (comparing charts 2 and 3). One likely explanation is that Qtel has increased its assets at a faster rate than its debt.


Chart 3: Qtel Operational – Long-Term Debt and Total Asset Trends


Entity


20,000 40,000 60,000


0


Last 12 Months 31-Mar-2011


Last 12 Months 31-Mar-2009


Last 12 Months 31-Mar-2010


Last 12 Months 31-Mar-2007


Last 12 Months 31-Mar-2008


Peers


(Ratio) 2


1.5


0.5 1


0


Last 12 Months 31-Mar-2011


Last 12 Months 31-Mar-2009


Last 12 Months 31-Mar-2010


Last 12 Months 31-Mar-2007


Last 12 Months 31-Mar-2008


© 2011 Standard & Poor’s © 2011 Standard & Poor’s Entity Peers


80 (%)


60 65 70 75


Last 12 Months 31-Mar-2011


Last 12 Months 31-Mar-2010


Last 12 Months 31-Mar-2009


Last 12 Months 31-Mar-2008


Last 12 Months 31-Mar-2007


Entity Peers


Indeed, Qtel’s total assets have been


increasing rapidly since 2006; Chart 4 shows a 1,252 per cent increase since December 31, 2006. This was mainly driven by Qtel’s acquisition of a 38.2 per cent stake of NavLink for $28 million on November 20, 2006. Despite these very positive flashes, a growing debt burden could change Qtel’s perception in the market and thus its equity value. Consequently, as an entity’s credit profile


is often linked to share price in this manner, it is helpful to take a closer look at Qtel’s equity profile to examine it for any adverse behavior during the Arab Spring.


Qtel – How Has The Market View Changed? Qtel’s share price dropped immediately after the beginning of the Arab Spring, with a signifi- cant fall (around 20 per cent) in the beginning of March 2011. Since that date, the price has slowly been increasing, mainly outperforming the S&P GCC Composite Index since April 2011. Interestingly, the S&P GCC Composite Index has rebounded since the drop in March


Chart 5 (Mil QAR) 120,000 -25.00% 80,000 40,000 0


Mar-31 2011


Dec-31 2010


Dec-31 2009


Dec-31 2008


Dec-31 2007


Dec-31 2006


© 2011 Standard & Poor’s


Qatar Telecom (Q-TEL) Q.S.C (DSM:QTEL) - Share Pricing S&P GCC Composite - Index Value S&P GCC Composite Telecommunication Services (Sector) - Index Value


Total Assets in Million QA


-20.00% -15.00% -10.00% -5.00% 0.00% 5.00% 10.00% 15.00%


2011. However, the S&P GCC Composite Telecommunication Services Index only rebounded for a transient period. From April 11, 2011, it has been dropping, posing ques- tions about the sector’s overall performance. However, Qtel is outperforming this index as well, showing signs of weathering the storm well. This could be a market response to Qtel’s initiatives to improve its leverage ratios.


Concluding Thoughts In light of this fundamental credit health analysis, it seems that the key Middle East- ern telecom companies have been fairly re- silient during the tumultuous political period in the region. Saudi Telecom, Du, and Qtel have actually improved their CHP scores despite strains from the Arab Spring. From an equity perspective, the GCC


Telecoms Index is showing decreasing per- formance, but Qtel so far appears to be rela- tively unaffected as it has continued to see increases in its share price. Qtel is clearly taking actions to improve the company’s credit health, and the market is rewarding this initiative. ■


Middle East Market Review | November 2011


Oct-01-2010 Oct-13-2010 Oct-25-2010 Nov-06-2010 Nov-18-2010 Nov-30-2010 Dec-12-2010 Dec-24-2010 Jan-05-2011 Jan-17-2011 Jan-29-2011 Feb-10-2011 Feb-22-2011 Mar-06-2011 Mar-18-2011 Mar-30-2011 Apr-11-2011 Apr-23-2011 May-05-2011 May-17-2011 May-29-2011 Jun-10-2011


Jun-22-2011 Jul-04-2011


Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10  |  Page 11  |  Page 12  |  Page 13  |  Page 14  |  Page 15  |  Page 16  |  Page 17  |  Page 18  |  Page 19  |  Page 20  |  Page 21  |  Page 22  |  Page 23  |  Page 24