Bader Al-Kharafi

KUWAIT: Zain Group, a leading mobile innovator with operations in seven markets across the Middle East and Africa, announced its consolidated financial results for the first quarter (Q1) ended March 31, 2021. Zain served 48.5 million customers at the end of the period.

Zain Group generated consolidated revenue of KD 382 million ($1.3 billion) for the first quarter of 2021, down 6 percent year-on-year (Y-o-Y). EBITDA for the quarter reached KD 158 million ($523 million), down 7 percent Y-o-Y, reflecting an EBITDA margin of 41 percent. Net income for the quarter reached KD 45 million ($147 million), down 5 percent Y-o-Y reflecting an Earnings Per Share of 10 fils ($0.03). Significantly, Zain Group net income grew operationally by 4 percent Y-o-Y for Q1, 2021, when excluding the one-time gain from the sale and lease back of towers in Kuwait during Q1 2020.

For Q1 2021, foreign currency translation was impacted mainly due to the currency devaluation in Sudan from 55 to 375 (SDG/USD) during end of February, and a 19 percent currency devaluation in Iraq from 1,190 to 1,470 (IQD/USD), cost the Group $177 million in revenue and $66 million in EBITDA.

Zain Group's resilient results for Q1 2021 were achieved despite the widespread disruption in economic and social activity caused by COVID-19, further compounded by the recent and significant currency devaluations in Iraq and Sudan. It should be noted that the impact of the pandemic on the business was minimal during Q1 2020, given its early stage of spread at the time, however in Q1 2021 the impact was more profound.

Key operational notes for Q1 2021

1. Zain Group consolidated data revenue reached $530 million, representing 42 percent of the Group's overall revenue

2. Zain KSA completely settled the Group Shareholder Loan with an upstream of $553 million during Q1 2021

3. Throughout the quarter, Zain Group invested $415 million in CAPEX (tangible and intangible) reflecting 33 percent of total revenue, predominantly in expansion of Fiber-to-the-Home (FTTH) infrastructure; spectrum fees; 4G upgrades and new network sites across its markets, as well as ongoing 5G rollouts in Kuwait, Saudi Arabia and Bahrain

4. Kuwait witnessed impressive growth in 5G consumer and B2B customers, with Zain Saudi Arabia expanding its 5G network to over 50 cities covering all regions in the Kingdom

5. Zain KSA enters MoU with Mobily to unify telecom towers aiming to maximize efficiency and improve coverage throughout the Kingdom

6. Saudi Central Bank (SAMA) grants Zain KSA fintech subsidiary, 'Tamam', first consumer micro-financing license in the region

7. Zain Iraq and Zain South Sudan launch high-speed 4G commercial services boosting connectivity and socio-economic activity

8. Zain eSports successful rollout as one of the fastest growing eSports brands across Middle East attracting over 15,000 registered players and 25 million views across various social media channels

9. The Zain Group Application Program Interface (API) platform continues to grow with 12 digital partnerships offering 21 attractive services, resulting in substantial revenue with 5 million monthly transactions and totaling over 80 million transactions since its launch

10. Zain was the highest ranked MEA operator in CDP global index with respect to its efforts to address climate change

11. Zain Group publishes 10th annual sustainability report, titled 'The Ten-Year Journey' as well as an insightful report on 'Women in Technology- Bridging the Gender Gap in STEM Fields' Commenting on the Q1 2021 results, Chairman of the Board of Directors of Zain Group, Ahmed Al-Tahous said: "The Board and Executive Management have been focused on minimizing the ongoing impact of COVID-19 and significant currency devaluations in Iraq and Sudan on the business.

Ahmed Al-Tahous

We are dedicated to ensuring our mobile networks are operating at optimal levels and providing meaningful connectivity to the communities we serve. I would like to thank all the government entities and regulatory authorities across our markets for their proactivity and cooperation with the telecom sector at large, in supporting operators, mobile consumers and societies during these times."

Bader Nasser Al-Kharafi, Zain Vice-Chairman and Group CEO commented: "The Group's resilient performance for the quarter reflects the reality of the unavoidable combination of both COVID-19's ongoing disruption on socio-economic activity and the impact of currency devaluations on the business. Nevertheless, our culture of innovation has been invaluable at this time of rapid change, and our business continuity strategy has been executed impressively to counter these factors.

Management has proactively undertaken numerous decisive digital transformation and cost optimization initiatives while maintaining healthy cash flows, and both Zain Iraq and Zain Sudan have recently taken measures in dealing with currency devaluations by revamping prices and offering new attractive data monetization packages."

Al-Kharafi continued, "Given the limitations on mobility, locally and travel abroad, we have continued to play a key role in keeping people socially distanced while remaining connected and productive during the current learning and working from home environment. All Zain operations' response to these modified circumstances has been nothing but exemplary. We implemented additional digitalization initiatives to better serve businesses, governments, and communities, granting them increased digital access to everyday life and essential medical and commercial services, aiming to lessen the impact of the pandemic on the societies we serve."

"Our operational focus has been centered on expanding and monetizing our 4G, FTTH and 5G networks creating vast and lucrative opportunities particularly related to Enterprise (B2B) services to government and businesses of all sizes. At the same time, we continue to make significant progress in raising the company to new heights and maximizing value for shareholders through our '4Sight' strategy. We are evolving the company's core telecom business and building on its many strengths to selectively invest in growth verticals beyond standard mobile services."

Financial KPIs of key markets for Q1

Kuwait: Maintaining its market leadership, Zain Group's flagship operation saw its customer base serve 2.5 million. It remains the Group's most profitable operation with revenue for Q1 2021 reaching KD 79.4 million ($263 million), EBITDA reaching KD 28 million ($93 million), representing an EBITDA margin of 35 percent. Net income reached KD 17 million ($56 million) for Q1 2021, with data revenue growing by 2 percent and accounting for 39 percent of total revenue.

During the quarter, the operator witnessed impressive growth in both 5G mobile and broadband customers and resulting revenue capturing the largest 5G market share in the country. Continual innovation and digital transformation saw the launch of a new and dynamic customer app offering many new features, as well as enhancement of its web and zBot chat service. From a B2B perspective, Zain Kuwait partnered with the Ministry of Interior to revamp the Kuwait TV app to live stream 9 local video and 11 radio channels. Also, the operator entered deals with Kuwait International Bank and Boubyan Bank for data related services.

Saudi Arabia: For Q1 2021, Zain KSA generated revenue of SAR 1.9 billion ($517 million), EBITDA for the period reached SAR 735 million ($196 million), reflecting an EBITDA margin of 38 percent. Net income for the three months reached SAR 41 million ($11 million). Having the Kingdom's largest 5G network covering 50 cities, the operator's data revenue represents 51 percent of total revenue and customers served stood at 7.2 million.

Iraq: Zain Iraq's Q1 2021 revenue reached $184 million and EBITDA amounted to $75 million, reflecting an EBITDA margin of 41 percent. The operation reported a net profit of $12 million for Q1 2021. The operator served 16.2 million customers maintaining its market leading position.

Sudan: For Q1 2021, Zain Sudan generated revenue of $92 million, with EBITDA amounting to $42 million, reflecting an EBITDA margin of 46 percent. Net income for the period reached $18 million. Data revenue grew by 32 percent representing 29 percent of total revenue, while the operator's customer base reached a record 17.2 million, maintaining its market leadership.

Jordan: For Q1 2021, Zain Jordan revenue reached $124 million, EBITDA reached $56 million, reflecting an EBITDA margin of 45 percent, with net income reaching $20 million. Zain Jordan served 3.6 million customers maintaining its market leading position.

Bahrain: Zain Bahrain generated revenue of $44 million for Q1 2021. EBITDA for the period amounted to $14 million, reflecting an EBITDA margin of 33 percent. Net income amounted to $4 million, with Data revenue growing 4 percent to represent 45 percent of total revenue.