Zain Vice Chairman and Group CEO Bader Al-Kharafi

KUWAIT: Zain Group, a leading telecommunications innovator operating in seven markets across the Middle East and Africa, announces its consolidated financial results for the six months to June 30, 2021. Zain served 48.3 million customers at the end of the period, a 1 percent increase year-on-year (Y-o-Y).

For the first six months of 2021 (H1) Zain Group generated consolidated revenue of KD 750 million ($2.5 billion), a decrease of 3 percent Y-o-Y. EBITDA for the period reached KD 310 million ($1.03 billion), down 6 percent Y-o-Y, reflecting an EBITDA margin of 41 percent. Net income amounted to KD 86 million ($285 million), up 5 percent Y-o-Y, reflecting earnings per share of 20 fils ($0.07).

For H1 2021, foreign currency translation was impacted mainly due to the currency devaluation in Sudan from 55 in January 2021 to 444 (SDG / USD) end of June 2021, and a 19 percent currency devaluation in Iraq from an 1,190 to 1,470 (IQD / USD), cost the Group $378 million in Revenue and $233 million in EBITDA.

Group Key Performance Indicators (KD and USD) for Q2 of 2021

In the second quarter of 2021 (Q2), Zain Group generated consolidated revenue of KD 369 million ($1.2 billion), remaining relatively stable compared to the prior period. EBITDA for the quarter reached KD 152 million ($506 million), down 5 percent Y-o-Y, reflecting an EBITDA margin of 41 percent. Net income for the quarter amounted to KD 41 million ($138 million), up 17 percent Y-o-Y, reflecting earnings per share of 10 fils ($0.03).

For Q2 2021, foreign currency translation was impacted mainly due to the currency devaluation in Sudan from 55 in January 2021 to 444 (SDG / USD) end of June 2021, and a 19 percent currency devaluation in Iraq from 1,190 to 1,470 (IQD / USD), cost the Group $215 million in Revenue and $175 million in EBITDA.

Key operational notes for H1 2021

1. Extraordinary General Assembly held in June 2021 saw the approval of the Board of Directors' recommendation to distribute interim dividends, quarterly or semi-annually.

2. Board meeting held on July 14 recommends an interim dividend of 10 fils per share for first six months of 2021 as part of the minimum 33 fils annual dividend policy, subject to Regulatory approvals.

3. Zain Group achieved consolidated data revenue of $1.05 billion, representing 42 percent of the Group's revenue.

4. Throughout the first six-months, Zain Group invested over $491 million in CAPEX reflecting 20 percent of 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 5G rollouts in Kuwait, Saudi Arabia, and Bahrain.

5. Zain KSA reports profitability for the 12th consecutive quarter and achieving Retained Earnings after extinguishing all accumulated losses

6. Enterprise (B2B) business arm continues to witness strong growth across several key markets landing key regional clients.

7. Zain eSports growth continues, holding 11 tournaments during Q2 2021 with over 5,000 participants and attracting 6 million social media impressions.

8. Zain partners UNICEF to launch Child Online Safety Booklet promoting safe esports and gaming to schools & universities.

9. The Zain Group Application Program Interface (API) platform enabling faster deployment of digital partnerships, continues to grow exponentially, offering 26 live services resulting in a healthy Y-o-Y increase in revenue with approximately 5 million transactions per month.

10. Zain named winner in three categories at the annual Global Good Governance Awards 2021: Best of the Best in Diversity Award 2021; Leadership in Sustainability Award 2021; and Championship Award in Women Empowerment 2021.

11. Zain recognized with prestigious World Finance Best Corporate Governance Award 2021 for Kuwait.

Zain Group Chairman Ahmed Al-Tahous

Commenting on H1 2021 results, Chairman of the Board of Directors of Zain Group, Ahmed Al-Tahous said, "The Board's key focus during these challenging times has been to support management in its endeavors to be future-ready to fully exploit the next phase of growth in driving shareholder value. We remain focused on providing meaningful connectivity and minimizing the impact of the pandemic on society by implementing digitalization initiatives to better serve communities, businesses, and governments. I would like to thank all the government ministries and regulatory authorities across our markets for their wisdom and understanding of the emerging industry dynamics and support of the telecom sector at large."

Bader Nasser Al-Kharafi, Zain Vice-Chairman and Group CEO commented, "The Board's recommendation to pay a half-year dividend of 10 fils per share (as part of the 33 fils) is a result of our strong balance sheet and the solid operational performance attained by the Group in the year to date. This interim dividend recommendation is a first in Zain's history and follows the approvals received during the recent Extraordinary General Assembly, and reaffirms the three-year minimum 33 fils dividend policy commitments we made in 2019."

Al-Kharafi continued, "The robust growth witnessed during Q2 2021 reaffirms the success of the '4Sight' strategy and digital transformation set forth by the Board and executive management to invest heavily and focus on monetizing our 4G, FTTH and 5G networks, while seeking new business verticals and revenue streams. Our excellent performance is even more satisfying when one considers the unavoidable currency devaluations in Iraq and Sudan, which had considerable impact on the financials."

"To minimize the impact of the currency devaluations, management has proactively undertaken decisive cost optimization initiatives across all markets, and both Zain Iraq and Zain Sudan have revamped prices and are now offering new attractive data monetization packages."

"Operationally, most of our markets recorded growth in Q2 as compared to the same period a year earlier. The healthy growth in Kuwait was powered by its incomparable 5G network that sees the operator capturing the largest market share in the country. Similarly, quality networks were instrumental in the robust profit growth in Iraq, Jordan, Sudan, and Bahrain, while in Saudi Arabia the operator continues to receive international accolades for the reach, speed and quality of its 5G network."

"Moreover, it's rewarding that for the first time in its history, Zain KSA achieved Retained Earnings after reporting its profitability for the 12th consecutive quarter and extinguishing all accumulated losses in accordance with its capital restructuring strategy, and we look forward to the operator exploiting the enormous potential of the Saudi telecom market and entering a new era of growth. Congratulations to the Zain KSA board and management team for this decisive milestone."

Commenting on the success of Zain's focus on reaping the lucrative opportunities in the digital space, Al-Kharafi said, "Management is extremely optimistic of the potential of our fintech entities including Zain KSA's subsidiary, 'Tamam', Zain Jordan's and Zain Iraq's 'Zain Cash' platforms and 'M-Gurush' in South Sudan, that are all experiencing exponential growth."

"Zain KSA's digital operator 'Yaqoot' continues to deliver healthy growth in the Saudi digital telco space, and we recently launched another digital operator in Iraq, 'oodi', where we expect similar success. Both Yaqoot and oodi offer a simple, all-digital mobile experience that frees customers from the traditional retail buying experience. From the moment customers download the app, they have all the power they require to manage their mobile service."

With respect to the continuing growth of Zain esports, Al-Kharafi said, "This exciting and fast- growing initiative creates shareholder value on multiple fronts as it meets several different goals for Zain, including youth development, enriching the brand, fostering innovation, and creating vast digital opportunities across our 4G, 5G and fiber networks. Our confidence that Zain esports will develop into a regional gaming powerhouse is taking shape."

On Zain's Wholesale business, Al-Kharafi noted; "We have recently revamped our wholesale carrier company, 'Zain Global Services', consolidating and providing it the resources to open new revenue streams and manage the capacity, voice, messaging and roaming businesses across Zain's operating companies. Zain Global Services will ultimately evolve to become a truly regional carrier and the single interface for all of Zain's operating company requirements, as well as for other international carriers having requirements within the region."

"Over recent years, Zain has been evolving to become a fully integrated service provider and has been focusing on enterprise segments for additional synergies and growth. Given that the wholesale industry has at its core the transformation of the infrastructure enabling global connectivity, Zain considers the development of its wholesale business as a key area to the telco's overall transformation. It is worth noting that our B2B revenue has grown an impressive 16 percent over the year, and we are elated to land several lucrative corporate accounts in key markets."

Al-Kharafi concluded by commenting on the recently held EGM, "The amendments and new provisions to the company's articles approved by the Assembly will help the Group in its execution of our '4Sight' growth strategy, providing the Board of Directors and executive management greater flexibility, while we focus on digital innovation and seek new lucrative opportunities in the ICT arena across the region and beyond."

Financial KPIs of key markets

Kuwait

Maintaining its market leadership, the flagship operation of Zain Group saw its customer base serve 2.4 million. The Group's most profitable operation saw its H1 2021 revenue grow by 4 percent to reach $515 million (KD 155 million), with EBITDA increasing by 11 percent to $194 million (KD 59 million), reflecting an EBITDA margin of 38 percent. The operator recorded net income of $123 million (KD 37 million). Data revenue grew by 5 percent Y-o-Y and represented 40 percent of total revenue. The operator continues to grow its 5G mobile and broadband customers and resulting revenue, capturing the largest 5G customer and revenue market share in the country.

Saudi Arabia

For H1 2021, the operator generated Revenue of SAR 3.8 billion ($1 billion), with EBITDA amounting to SAR 1.5 billion ($401 million), reflecting an EBITDA margin of 39 percent. Net income for the period reached SAR 83 million ($22 million). Having the Kingdom's largest 5G network covering 50 cities, data revenue represented 50 percent of total revenue and customers served stood at 7.4 million, a 4 percent increase.

Iraq

Zain Iraq's H1 2021 revenue reached $376 million, and EBITDA amounted to $145 million, reflecting an EBITDA margin of 39 percent. Net profit reached $24 million for the period. The operator's customer base increased by 7 percent to reach 16.1 million customers maintaining its market leading position. It should be noted that the Iraqi dinar devaluation also impacted Zain Iraq's revenue by $88 million for the six-month period.

Sudan

For H1 2021, Zain Sudan generated revenue of $160 million, with EBITDA amounting to $77 million, reflecting an EBITDA margin of 48 percent. Net income for the period reached $41 million, compared to $15 million last year. Data revenue grew by 4 percent representing 28 percent of total revenue, while the operator's customer base grew 8 percent to reach 17 million, maintaining its market leadership. The significant currency devaluation impacted Zain Sudan's revenue by $340 million.

Jordan

For H1 2021, Zain Jordan revenue increased by 5 percent to $245 million, EBITDA grew by 15 percent to reach $118 million, reflecting an EBITDA margin of 48 percent, with net income growing 24 percent Y-o-Y and reaching $43 million. With the ongoing expansion of 4G services across the country, data revenue grew 13 percent representing 49 percent of total revenue. Zain Jordan served 3.5 million customers maintaining its market leading position.

Bahrain

For H1, 2021, Zain Bahrain generated revenue of $87 million for H1 2021, up by 4 percent Y-o-Y. EBITDA for the period increased by 6 percent to $29 million, reflecting an EBITDA margin of 33 percent. Net income increased 29 percent amounting to $7.4 million, with data revenue growing 5 percent to represent 45 percent of total revenue.