Orange Jordan plans wide-ranging initiatives to address constraints, improve performance

AMMAN — Jordan Telecom Group (JTG), operating under Orange Jordan brand name, intends to apply wide-ranging initiatives to address several constraints denting its performance.

JTG Chairman Shabib Ammari indicated in the company's annual report that the initiatives include a change in strategy and in the way of operations as well as an amendment to the organisational structure.

Ammari wrote in a foreword that competition, coupled with lower purchasing power of Jordanians and the need to dole out more investments on the networks, were the foremost challenges that dented Jordan Telecom's growth drive.

He also mentioned previous government decisions and others by the Telecommunications Regulatory Commission (TRC) as additional factors that resulted in higher operational costs and reduced earnings.

"The sudden doubling of the special tax on mobile calls [to 24 per cent from 12 per cent] and the sales tax on mobile handsets during the second half of 2013 contributed to lowering the 2014 income," Ammari said.

The annual report showed that JTG's base of subscribers diminished by 2.4 per cent from 4.09 million at the end of 2013 to 3.99 million at the end of 2014. 

The chairman criticised the TRC for not giving JTG's licence renewal an equal treatment similar to the that awarded to another operator in terms of value and period, describing the JD52.7 million paid for the 2G/900MHZ mobile telecom licence as inflated and unfair.

Reiterating that the board of directors and the executive management remain determined not to back down over the amount paid, the change in the type of licence at short notice, and the manner in which the matter was handled, Ammari said there was no option but to take the dispute with the TRC to Jordanian jury.

He added that the Arab Spring repercussions also disrupted JTG's strategy because the crisis in Syria slammed the brakes on the fiber-optic network project, known as JADI, which was "one of our most important plans”.

JADI was  originally set to pass through Jordan, Saudi Arabia, Syria and Turkey and to link the region's east and west through a fiber-optic cable network, the chairman told the shareholders.

"We aim to turn challenges into opportunities by through lowering operational costs to correspond to the new difficult conditions, and to look for new offers and services in order to boost our earnings," he said.

The annual report showed that JTG reduced its labour force by 6.9 per cent from 1939 employees at the end of 2013 to 1805 workers at the end of last year.

Ammari added that JTG's gross investments since the year 2000 have reached around JD1 billion and that the company has allocated the necessary funds in the 2015 budget to establish the G4 network whose services are almost ready to be launched. 

Chief Executive Officer Jean-Francois Thomas stressed innovation as the strength platform of Orange Jordan, listed the company's main achievements in terms of services and products and highlighted three major contracts that JTG signed with Abdali Boulevard, Saraya Aqaba and Royal Jordanian to provide them with an integrated telecom infrastructure within the company's keenness  to support and develop the Jordanian corporate sector.

According to Thomas, 2014 was a year marked by unfavourable market conditions for developing Jordan's telecommunications and information technology industry.

Within this context, he mentioned stiff and rising competition as a result of a market saturated with many services and products.

The annual report estimates the market share of Orange Fixed at 90 per cent, Orange Mobile at 30-35 per cent, and Orange Internet at more than 40 per cent. 

"The continued rise in electricity charges besides higher taxes and repeated regulatory obstacles had a negative impact that weighed on the sector and impeded its advancement and growth," he wrote in the annual report.  

The chief executive officer indicated that the group's earnings declined to JD345 million in 2014, 3.2 per cent lower than the JD356.4 million in the previous year when earnings were 11.7 per cent below the 2012 income.

Operational profit before interest, tax, depreciation and amortisation amounted to JD104.7 million, a 4.1 per cent drop from the JD109.1 million generated in 2013 when the figure was 29.5 per cent lower than the 2012 profit.

Analysing the performance by divisions, Orange Mobile topped the list with the only improvement as its operational earnings rose 2.9 per cent  to JD36 million (JD35 million), despite a decline in total earnings to JD156.4 million (JD160.5 million).

The operational earnings generated by Orange Fixed and Orange Internet dropped by 7.1 per cent to JD68.9 million (JD74.1 million) as total earnings fell 8.1 per cent to JD254.3 million (276.7 million).

Costs related to inter-connections came at JD65.7 million (JD80.9 million).

The annual report showed the cost of services, at JD161.4 million,  as the highest category of expenditures, although it was 5.3 per cent down from the amount in 2013.

An increase in commissions related to sales and distribution raised the spending by 6.6 per cent to JD43 million.

Also administrative expenditure increased by 1.8 per cent reaching JD22.1 million.

As per the agreement signed with the TRC stipulating a 10 per cent government share of the net earnings from the cellular service, JTG will pay the state treasury JD8.3 million in 2014, 7.4 per cent  higher than the previous year..

In lieu of using the Orange trademark in all subsidiaries, JTG will pay JD4.1 million, representing 1.6 per cent of operational earnings, compared to JD4.3 million in 2013.

As per the business support agreement, Orange will also be getting JD3.3 million in fees, unchanged from 2013.     

According to the profit and loss statement as of December 31,2014, JTG's net profit regressed by 18.5 per cent to JD42.1 million (51.7 million at the end of 2013.)

JTG's profitability has been on a downward trajectory since 2010 when net profit stood at JD95.1 million before slipping to JD89.8 million, JD83.1 million, JD51.5 million, and JD42 million in the following years.

Dividends to shareholders were also on the decline from JD97.5 million in 2010 down to JD90 million, JD83.5 million, JD52.5 million, and JD42 million.