Emirates Telecommunications reports strong Q1 25 results

Emirates Telecommunications reported its Q1 25 results on April 29, 2025, posting 18.6% y/y revenue growth to AED16.9m in Q1 25, driven by strong performance of telecom and digital verticals. As a result, EBITDA rose by 15.4% to AED7.4m, with a margin of 43.6%. Net profit grew by 130% to AED5.4m, with margins rising from 16.4% to 31.7%, accounting for the impact of the Khazna transaction.

The company exceeded its Q1 25 guidance, with revenue growth of 22.2% y/y at constant currencies, surpassing the projected 17%-20%. These developments highlight Emirates Telecommunications's robust growth.

Emirates Telecommunications Group Co., established in 1976 and headquartered in Abu Dhabi, UAE, is a telecommunications service provider. The Company’s principal activities include provision of telecommunications services, media and related equipment, including the provision of related contracting and consultancy services to international telecommunications companies and consortia. Emirates Telecommunications is publicly traded on the Abu Dhabi Security Exchange.

Emirates Telecommunications' business operations are divided into four primary segments. The e& UAE operations segment, which represented 55% of the company's total FY 2024sales, offers integrated telecom services and digital solutions for consumers, businesses, and government entities in the UAE. The e& International segment, accounting for 37% of the sales mix, manages the group's international telecom and digital assets outside the UAE. The e& Life segment, representing 3% of total sales, drives tech innovation in consumer digital businesses, including fintech, entertainment, and app services and e& enterprise segment, representing 5% of sales, delivers advanced digital capabilities, AI, and digital transformation solutions to customers.

Subscriber growth driven by expansion

Emirates Telecommunications, in collaboration with the UAE government, has initiated trials for new spectrum bands to enhance the country's 5G network on April 17, 2025. The trials focus on the 6 gigahertz band, promising speeds up to 10 gigabits per second, and the 600-megahertz band, aimed at extending 5G coverage beyond six kilometers, to emphasize the nation's commitment to advancing mobile telecommunications.

In addition, Emirates Telecommunications reported a 12.9% increase in total aggregate subscribers in Q1 25, reaching 194.8m, with international subscribers growing by 13.6%. Capex jumped by 46.4% y/y to AED2.4bn, driven by the acquisition of a 5G license in Egypt and the consolidation impact of e& PPF Telecom.

Operational efficiencies boost margins

Emirates Telecommunications reported modest performance over FY 21-24, posting a revenue CAGR of 3.5% to reach AED59.2bn. EBITDA grew at a CAGR of 7.9% to AED25.7bn in FY 24, with margins expanding from 38.3% to 43.4%, driven by operational efficiencies. Net income rose at a CAGR of 4.9% to AED10.7bn in FY 24, with margins expanding from 17.5% to 18.2%.

Positive earnings trajectory led to positive free cash flows over the last three years, reaching AED10.7bn in FY 24 from AED6.3bn in FY 21. As a result, cash and short-term investments strengthened from AED29bn to AED36.1bn as of the end of FY 24. Moreover, total debt increased from AED28.4bn to AED73.6bn in FY 24, leading to an increase in capital gearing ratio, calculated as total debt-to-equity, from 49.3% in FY 21 to 136.6% in FY 24.

In comparison, Saudi Telecom Co., a regional peer, posted a higher revenue CAGR of 6.4% over FY 21-24, reaching AED74.2bn in FY 24. Net income surged at a CAGR of 29.7% to AED24.1bn in FY 24, with margins expanding from 17.8% to 32.5%.

Valuation attractive compared to peer

Over the past year, the company's stock has delivered returns of about 8.5%. In comparison, Saudi Telecom’s stock outperformed with returns of approximately 24% over the same period. The management declared dividends of AED0.83 per share in FY 24, reflecting a high yield of 5.1%. Moreover, analysts forecast an average yield of 5.1% over the next three years, signaling the company’s focus on rewarding its shareholders.

The company is trading below its historical average. Emirates Telecommunications is currently trading at a P/E of 12.1x, based on the FY 25 estimated EPS of AED1.4, which is lower than its 3-year historical average of 16.6x and Saudi Telecom’s 16.7x. Likewise, the stock is currently trading at an EV/EBITDA multiple of 6.1x, based on the FY 25 estimated EBITDA of AED30.2bn, which is lower than its 3-year historical average of 7.6x and Saudi Telecom’s valuation of 9.5x.

Emirates Telecommunications is generally liked by 14 analysts, with four having ‘Buy’ ratings, one having ‘Outperform’ rating, and nine having ‘Hold’ ratings for an average target price of AED19.1, implying 9.4% upside potential from the current price. Their views are further supported by an anticipated EBITDA CAGR of 10.5% over FY 24-27, reaching AED33.7bn, with margins of 42.8% in FY 27. In addition, analysts estimate net profit CAGR of 7.6%, reaching AED13.4bn with margins of 17% in FY 27, with EPS expected to increase to AED1.6 in FY 27 from AED1.2 in FY 24. However, analysts estimate an EBITDA CAGR of 5.7% and net profit to decline at a CAGR of 14.3% for Saudi Telecom.

Overall, the company reported strong Q1 2025 results, with significant revenue, EBITDA, and net profit growth driven by telecom and digital verticals. The company is expanding its 5G network through new spectrum trials and has seen substantial subscriber growth. Despite trading below historical averages, analysts are optimistic, projecting robust EBITDA and net profit growth. However, the group is prone to a few risks, including foreign exchange risks, interest rate risks and credit risks.