Zain Group revenues KD 277 million in Q1 2016 – Leading telecom innovator records net income of KD 37 million for Q1 of 2016

Zain Group Chairman Asaad Al Banwan.
Zain Group Chairman Asaad Al Banwan.

KUWAIT: Zain Group, a leading mobile telecom innovator in eight markets across the Middle East and Africa, announced its consolidated financial results for the first quarter ended 31 March, 2016. The company closed the period serving 45.5 million customers.

For the first quarter of 2016, Zain Group recorded consolidated revenues of KD 277 million ($919 million), a similar level to the same period in the previous year (Y-o-Y) in KD terms. EBITDA for the quarter reached KD 123 million ( $ 407 million), up 5 percent Y-o-Y in KD terms, reflecting an EBITDA margin of 44 percent. Net income for the quarter reached KD 37 million ( $ 124 million), down 9 percent Y-o-Y in KD terms reflecting Earnings Per Share of 10 fils ( $ 0.03).

The Group incurred foreign currency losses amounting to $ 35 million for the three-month period, a substantial $28 million increase from a $7 million impact for the same period in 2015, predominantly in Sudan and Iraq.

Key Operational Notes for the three months ended 31 March 2016:
1. Substantial investments in 3G and 4G LTE network expansion and upgrades continue to pay off as Group data revenues (excluding SMS and VAS) grow 8 percent Y-o-Y, representing 21 percent of the Group’s consolidated revenues.

2. The continued social unrest in Iraq coupled with heightened levels of price competition and implementation of a new 20 percent sales tax on mobile services, as well as wide-ranging tax increases on other sectors in Iraq that hit spending on mobile services, all contributed to a negative effect on Zain Iraq’s and consequently Zain Group’s overall key financial metrics.

3. Zain’s operations in Jordan and Saudi Arabia witness growth for the quarter across metrics, with Zain Kuwait’s performance impacted by intense price competition.

Commenting on the results, the Chairman of the Board of Directors of Zain Group, Asaad Al-Banwan said, “The Board and executive management are content with our stable consolidated revenues and higher EBITDA results given the many challenging socio-economic circumstances we are dealing with in a number of our key markets of operation. We are managing the highly changeable environments we face particularly with regard to the social unrest and hefty tax increases in Iraq that has impacted mobile consumption, as well as the intense price competition in our home market of Kuwait in a pragmatic manner, and we remain hopeful of the improving conditions across all our markets.”

The Chairman continued, “We are pleased by the performance of our Jordan and Saudi Arabia operations having invested significantly in 3G / 4G network expansion upgrades and spectrum licenses there and in other markets to improve our customers’ mobile experience. Zain is committed to innovation, quality of service and maintaining our leadership position in the majority of the markets we operate in.”

Zain Group CEO, Scott Gegenheimer said, “It is unfortunate that unavoidable currency fluctuations and unique market conditions have impacted our net income for the quarter considering the positive effects of the transformation process we are undertaking across all our markets. Our data monetization initiatives on multiple fronts are bearing fruit across all key markets and we draw confidence from the 8 percent growth in the uptake of data services, which now account for 21 percent of overall service revenues. The Group will continue to foster and develop this key area of the business.”

Gegenheimer also noted, “Several strategic partnerships we have entered into recently are set to fast-track and enhance Zain’s delivery of innovative digital services to customers and enterprises, as well as unlock many lucrative opportunities in the connected society revolution by delivering smart city services and solutions to governments and mega real estate projects across the region. We are committed to our strategy of implementing operational efficiency and data monetization initiatives, as we look to develop new business areas and become a diversified and innovative digital lifestyle provider.”

Operational review of key markets for the three months ended 31 March, 2016:
Kuwait: Maintaining its market leadership, the flagship operation of Zain Group saw its customer base serve 2.9 million in a very challenging quarter that saw intense price competition impact its financial performance for the period. Revenues reached KD 84 million ( $ 278 million), EBITDA amounted to KD 40 million ( $ 132 million) and net income came in at KD 22 million ( $ 73 million). Zain Kuwait’s EBITDA margin stood at 47 percent at the end of the quarter with data revenues (excluding SMS & VAS) forming 35 percent of total revenues.

Iraq: The exceptional socio-economic circumstances facing the operation saw Zain Iraq’s financial performance severely affected, with revenues for the quarter reaching $ 270 million, a decrease of 11 percent Y-o-Y, and EBITDA reaching $ 96 million, down 13 percent. Currency variance loss severely impacted net income which amounted to $ 3 million. The operation’s EBITDA margin stood at 35 percent, with data related revenues forming 8 percent of total revenues for the first quarter of 2016.

Sudan: In local currency (SDG) terms, the operator’s revenues grew by 9 percent Y-o-Y to reach SDG 1.2 billion ( $ 187 million, up 6 percent in $ terms) for the first quarter of 2016. EBITDA increased by 13 percent to reach SDG 486 million ( $ 76 million, up 11 percent in $ terms) while net income decreased 28 percent to reach SDG 195 million ( $ 30 million, down 30 percent in $ terms). Data revenues (excluding SMS and VAS) formed 12 percent of total revenues, with an impressive annual growth of 49 percent (52 percent in dollar terms).

Saudi Arabia: The operation served 11.5 million customers at the end of the first quarter of 2016, posting improved financial results in all key financial indicators. Revenues grew 5 percent Y-o-Y to reach $ 482 million while EBITDA grew 28 percent to reach $ 119 million and net losses narrowed by 3 percent to reach $ 67 million for the quarter. Zain Saudi Arabia’s EBITDA margin rose to 25 percent, up from 20 percent. Impressively, the operator witnessed a 69 percent rise Y-o-Y in data revenues (excluding SMS & VAS), representing 31 percent of total revenues as the company invested heavily and expanded its modern 4G LTE network.

Jordan: Zain Jordan grew its customer base by 5 percent Y-o-Y, serving 4 million customers, maintaining its market leading position. Y-o-Y, revenues increased 6 percent to reach $ 117 million, with EBITDA up 20 percent to reach $ 56 million, and net income increasing 12 percent to reach $ 24 million. With the launch of 4G, data revenues (excluding SMS & VAS) represented 32 percent of total revenues, growing by 26 percent Y-o-Y.

Bahrain: Zain Bahrain generated revenues of $ 43 million for the quarter, down 9 percent Y-o-Y. EBITDA for the period reached $ 16 million, down 11 percent, and reflecting an EBITDA margin of 38 percent. Net income amounted to $ 2.4 million, reflecting a 10 percent decrease. Data revenues (excluding SMS & VAS) increased 6 percent Y-o-Y, representing 37 percent of overall revenues.

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