Industry Updates

Kuwait – 28 October 2017: Zain Group, a leading mobile telecom innovator in eight markets across the Middle East and Africa, announces its consolidated financial results for the nine-month and third-quarter periods ended 30 September 2017. The company ended the period serving 45.3 million customers.

Group Key Performance Indicators (Kuwaiti Dinars (KD) and USD) for the first nine months 2017

For the first nine months of 2017, Zain Group generated consolidated revenues of KD 767 million (USD 2.5 billion), down 7% year-on-year (Y-o-Y) in KD terms, while consolidated EBITDA for the period reached KD 316 million (USD 1.04 billion), down 19% Y-o-Y, reflecting a healthy EBITDA margin of 41%. Consolidated net income reached KD 122 million (USD 404 million), reflecting a 2% Y-o-Y decrease. Earnings Per Share amounted to KD 0.031 (USD 0.10) for the nine-month period.

For the first nine months of 2017, foreign currency translation impact, predominantly due to the 61% currency devaluation in Sudan from average rate of 6.4 (SDG / USD) in the year to date to September 2016 to 16.5, cost the company USD 441 million in revenue and USD 76 million in net income.

Excluding this currency translation impact, Y-o-Y revenues and net income would have grown by 8% and 16% respectively for the first nine-months of 2017.

Group Key Performance Indicators (KD and USD) for the third quarter of 2017

For the third quarter of 2017, Zain Group generated consolidated revenues of KD 259 million (USD 860 million), down 6% Y-o-Y. EBITDA for the quarter reached KD 104 million (USD 346 million), a decrease of 23% Y-o-Y, reflecting a 40% EBITDA margin. Net income for the period amounted to KD 40 million (USD 133 million), reflecting 6% Y-o-Y decrease. Earnings Per Share for the quarter reached KD 0.010 (USD 0.03).

For the 3rd quarter of 2017, foreign currency translation impact, predominantly due to the 63% currency devaluation in Sudan cost the company USD 148 million in revenue and USD 20 million in net income.

Excluding the above-mentioned currency translation impact, Y-o-Y revenues and net income would have grown by 11% and 9% respectively for Q3, 2017.

Key Operational Notes for Q3, 2017

1. Group data revenues (excluding SMS and VAS) witnessed a 3% growth for the first nine months of 2017, representing 25% of the Group’s total revenues.
2. Zain sold 425.7 million treasury shares to Omantel for KWD 255.4 million (USD 846.1 million) representing 9.84% of Zain's fully paid up and issued share capital at KWD 0.600 per share
3. On October 10, 2017, Zain announced an agreement to sell and lease back its telecom towers in Kuwait for KWD 50 million (USD165 million) to IHS Holding Limited, in partnership with Towershare Management Limited in a regional first
4. Quarter highlighted by notable 10% net income growth in Kuwait, robust customer growth of 16% in Iraq, healthy revenue and data growth in Saudi Arabia and Jordan, plus Sudan continuing to perform exceptionally well in local currency terms
5. Zain Group’s smart city arm NXN (formerly neXgen) signed a Memorandum of Understanding with the National Digitization Unit (NDU) of the Kingdom of Saudi Arabia marking NDUs first step towards harnessing open data to help accelerate the digital transformation of the Kingdom. The MOU underpins an existing partnership between the two entities to support and develop NDU’s digital transformation agenda in the domains of digital services development and activation, platform innovation and most importantly data governance.

Commenting on the results, the Chairman of the Board of Directors of Zain Group, Mr. Mohannad Al-Kharafi said, "The concerted focus on expanding and exploiting our high-quality networks is proving instrumental as we recorded growth in several key financial metrics across many of our markets for the third-quarter and nine-month periods of 2017. Especially pleasing was the healthy revenue and net income growth in our home market of Kuwait and in Saudi Arabia where the turnaround continues to progress. The Board is working closely with management to maintain our market leadership and overcome the many socio-economic challenges across our footprint.”

Mr. Bader Nasser Al-Kharafi, Zain Vice-Chairman and Group CEO commented, “The third quarter and the immediate period beyond witnessed two major transactions that are value enhancing to our stakeholders and will have a profound positive effect on the future of our digital lifestyle strategy. The acquisition of treasury shares by Omantel brought immediate tangible benefit and so will the imminent sale of our telecom towers in Kuwait."

Al-Kharafi continued, "Both transactions will enhance our financial flexibility as we continue to seek opportunities in the digital space and invest in upgrading our modern networks to enhance our customers' mobile experience. One transaction set the course for future co-operation with Omantel, in which the two companies will explore mutually beneficial synergies and business enhancing opportunities across the region. The other marked the beginning of a strategy to unlock value from our fixed infrastructure, which can be more efficiently deployed in new technologies and higher yielding investments. The selling of our telecom towers will be replicated in other markets further enabling us to focus on our core business and driving customer satisfaction.”

The Group CEO added, “We continue to undertake transformational programs across all markets and have seen operational progress on several fronts. These include multiple data monetization, smart city and Enterprise (B2B) initiatives across our operations, all which are fast-growing and profitable business areas. While these areas continue to grow, it is unfortunate that one main factor outside of our control, the Sudan currency devaluation issue, has impacted overall results for the quarter and year-to-date.

Nevertheless, we draw confidence from the future prosperity of Sudan given the recent lifting of the US sanctions and expected appreciation of the country’s currency.”

Mr Bader Al-Kharafi concluded, “The Board and executive management strongly believe in our strategic and transformational direction and look forward to the final quarter of the year with optimism as we explore more new business and value creating opportunities.”

Operational review of key markets for the nine months ended 30 September 2017

Kuwait: Maintaining its market leadership, Zain Group’s flagship operation saw its customer base serve 2.5 million in a very challenging nine-month period that witnessed intense price competition. Nevertheless, revenues reached KD 249 million (USD 820 million), EBITDA amounted to KD 100 million (USD 329 million) and net income came in at KD 62 million (USD 206 million). Specifically, for the 3rd quarter of 2017, Zain Kuwait’s revenues and net income grew 6% and 10% year-on-year respectively. Data revenues (excluding SMS & VAS) formed 32% of the operation’s total revenues. Zain Kuwait remains one of the most efficient operations within the Group with a 40% EBITDA margin.

Iraq: Despite the exceptional socio-economic circumstances coupled with the continuation of intense price competition, Zain Iraq achieved USD 811 million revenues due to the impressive growth in data usage and numerous customer acquisition initiatives in the northern regions of the country. The operation’s efficiency drive saw EBITDA reach USD 281 million, reflecting a 35% EBITDA margin. Net income amounted to USD 24 million for the period. Zain Iraq leads the market serving 13.7 million customers, which represented an impressive 16% Y-o-Y increase.

Sudan: A significant 61% currency devaluation in Sudan affected the operation’s financial results in USD terms for the first nine months of 2017. Nevertheless, in local currency (SDG) terms, the operator continues to perform remarkably well as revenues grew by 40% Y-o-Y to reach SDG 5.2 billion (USD 315 million, down 45% in USD terms) for the first nine months of 2017. EBITDA increased by 30% to reach SDG 2 billion (USD 124 million, down 49% in USD terms) and net income increased by 29% to SDG 836 million (USD 51 million, down 49% in USD terms). Data revenues (excluding SMS and VAS) accounted for 15% of total revenues, with an impressive annual growth rate of 63%. The operation saw its customer base expand by 4% to reach 12.9 million.

Saudi Arabia: The turnaround and cost optimization program in place at the operation, combined with investment in network upgrades and the introduction of appealing data monetization initiatives bolstered all key financial indicators for the first nine-months of 2017. The operator recorded its third consecutive quarterly net profit, which reflected in the operation reporting USD 15 million net profit for the first nine-month period, compared to net losses of USD 225 million for the same period in 2016. Revenues for the nine-month period were up by 9%, reaching USD 1.5 billion, with Zain KSA also recording a significant 48% increase in EBITDA to reach USD 514 million. The company’s EBITDA margin rose to 34%, up from 25% in 2016. The introduction of the biometric identification requirement over the past year, capping number of prepaid Sims to two for each unique identity and the impact of seasonality saw the operator’s total customer base shrink by 21%, to stand at 8.3 million customers at the end of September 2017. Impressively, the operator witnessed a 42% rise in data revenues (excluding SMS and VAS) Y-o-Y, representing 50% of total revenues.

Jordan: Zain Jordan grew its customer base by 1% Y-o-Y, serving 4.2 million customers at the end of September 2017 and maintaining its market leading position despite intense price competition. Y-o-Y revenues increased 2% to reach USD 371 million, with EBITDA down 2% to reach USD 174 million, reflecting an impressive 47% EBITDA margin. Net income decreased 9% to USD 72 million for the nine-month period. With the continual expansion of 4G services across the country, data revenues (excluding SMS & VAS) represented 37% of total revenues, up by 14% Y-o-Y.

Bahrain: Zain Bahrain generated revenues of USD 148 million for the nine-month period of 2017, up 12% Y-o-Y. EBITDA for the period amounted to USD 44 million, down 10%, reflecting an EBITDA margin of 30%. Net income amounted to USD 7 million, reflecting an 8% decrease. Data revenues (excluding SMS & VAS) increased 29% Y-o-Y, representing 44% of overall revenues.

Source: Zain Press Release