“Parturient montes, nascetur ridiculus mus”
Horace
Overview
Nominative determinism is when a person or company live up to their name: Usain Bolt for example became the fastest runner. In finance, we have Sam Bankman Fried who literally fried the whole crypto banking system and Madoff Bernie who made off with billions in a Ponzi scheme. (thankfully nominative determinism is only a lucky coincidence or else Arnold Schwarzenegger would be a ….)
In Jordan, this would like having a judge from the Qadi family. But that doesn’t work for companies here; gaming company Tamatem doesn’t sell tomatoes 🍅 and telecom giant Orange doesn’t sell Oranges 🍊.
Financial Profile
To keep things simple, I will keep referring to the whole group as Orange from now on. However, you need to know that what we call Orange Mobile is operated by a company called Petra Jordanian Mobile Telco which is 100% owned by the publicly listed company Jordan Telecom on the Amman Stock Exchange (ticker: JTEL). Every division is run and operated by a separate subsidiary fully owned by JTEL (Internet, Renewable etc.)
Orange is majority owned by the Jordanian Armed Forces (4.6%), Social Security (28.8%) and Orange Belgium (via Atlas Countries Support) (51%) with over 1600 employees across the Kingdom.
i- Revenue
Orange recently posted its preliminary results for 2022, 347 mil JODs, up 4.2% which can be considered good when taking into account the economic impact and repercussions from COVID and the Russian invasion of Ukraine.
Although Orange is known as a mobile operator, its fastest growing profit centre is becoming its internet service segment (ADSL + Fiber). Another fast growing (yet still very small segment) is Orange Money (payment services), doubling in revenue from 2020 to 2021.
It is important to note that in 2002, 20 years ago, Orange’s revenue was 303 mil JODs. That means 2022 revenue is up 14% compared to then. However if we adjust to inflation, revenue is actually down 38% in the last two decades !!!
Rating: 👎 They have a lot of catching up to do against its two largest competitors, Zain and Umniah.
ii- Balance Sheet
Orange has one of the healthiest balance sheets in the market with and equity ratio of 40%
Another thing to note that hidden away in the balance sheet is the “property and equipment”. It net book value stands at 261 mil JODs. But the actual cost is 1.24 billion JODs (depreciating at ~50 mil JODs/year). This only takes into account the purchasing cost. The assets are not justly valued as lands appreciate in value over time. Some of these lands were actually acquired decades ago, and if marked to market, would be worth way more today than they are on paper.
Had this company been listed on the US stock exchange, it would have been a target of many hostile takeovers to sell off the highly valued lands and spinoff the broadcasting towers division into a separate one altogether.
Rating: 🤩 excellent financial ratios and hidden treasures in the balance sheet
If I were CEO
Just as I did with El-Zay1, these are my personal FREE suggestions. If you have any, please share in the comments
a- The Solar Farm: part of the Orange World Group’s strategy to reach net 0, Orange Jordan built a 36 MW Solar PV plant for 42 mil JODs. They managed to reduce cost of electricity by 65% and reduce carbon emissions by 100%. The Farm is generating revenue by selling back to the grid at preferential prices. What the farm isn’t doing is selling the Carbon Credits on the open markets. That’s 2.5 mil JODs in lost revenue (for 30 kt of CO2/year at current prices).
b- Rakuten: last year, a relatively unknown Jordanian was awarded a medal during the 76th Independence Day ceremony.
That person was Tareq Amin, CTO of Japanese Telco giant Rakuten. Rakuten started as a basic e-commerce website in 2000. Now it is one of the biggest players in Japan and innovating in the 5G space thanks to Tareq.
Maybe Orange should consider getting out of its comfort zone and expanding into new territory (travel & leisure, advertising & media, insurance & fintech, own and sponsor a women’s sports team etc.). All other examples below are inspired by Rakuten.
c- Cloud and Website: Orange is in the perfect position to offer all in one secure package for every customer a unique email address, a .jo website domain and cloud storage. This can be also integrated to small businesses to have their own websites and payment processing through Orange Money (+ accounting software, investment platform etc. etc.)
d- Media: its not secret that Jordanians have an identity crisis when it comes to cinema. Every show or movie that comes out, we decry and denounce it.
One suggestion would be to work with the Royal Film Commission and launch a streaming platform that broadcasts all Jordanian films/shows (free for Orange customers). Using the extra money from carbon credits, at 300,000 JODs/movie, they can produce up to 7 feature films a year, covering a huge range of subjects and themes.
Maybe take it even further and create an operating system that comes pre-installed in all Made in Jordan Television sets2, where you can get the above app with other Jordanian channels, with an accessible UI/UX, easy to use for young kids and senior citizens.
Maybe Orange can manage to offer a 1 subscription to all other streaming platforms (Netflix, Shahid, Starzplay, OSN, Disney etc.)
d- Media 2: if Rakuten owns Kobo and Overdrive, Orange can consider owning a local newspaper like Al-Rai (to create content) and Abjaad (to distribute content).
e- Debt forgiveness: a lot of delinquencies have shown up in the past decade. With any of the extra cash above, Orange can reconcile with customers and take a good haircut on their debts (especially when its credit loss is only around 1 mil JOD/year). It’s all part of CSR/ESG.
d- Shut down its Metaverse linked unit (similar to what Disney did)3
I could go on till z but Substack limits the size of the newsletters.