KUWAIT: Zain Group Annual General Meeting (AGM) was held today at Zain Group's headquarters in Kuwait, with a livestreaming available for shareholders and qualified parties, attended with a quorum of 72.49 percent that approved the recommended cash dividend of 33 percent (33 fils per share) to the shareholders already registered in the company's record as of 1 April 2020. Cash dividends will be paid to shareholders commencing April 7, 2021.
Excerpts from Zain Group Chairman Ahmed Al-Tahous' statement at the AGM:
On behalf of the Board of Directors I would like to welcome you to the AGM. The COVID-19 pandemic broadly affected economies across the globe, which were plunged into a state of uncertainty. Society, governments and all economic activity relied more than ever on telecommunication networks and digital platforms, as the exceptional circumstances increased the demand for data use, especially to remain in contact with loved ones and access other vital day-to-day services and important information, given the limitations on mobility, locally and travel abroad.
On its part, Zain Group mobilized all its resources to provide vital and meaningful connectivity during the lockdowns, implementing more digitalization initiatives to better serve businesses, governments, and societies, aiming to lessen the impact of the pandemic on society. During these challenging times, Zain Group undertook proactive measures to drive efficiencies and improve costs, such as renegotiating contracts and managing cash flows. The company used its infrastructure and digital solutions for quick access to clients and followed through on key operational activities across all operations to mitigate the impacts of the economic slowdown.
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, supporting us in overcoming challenges faced by the telecom sector during these unique times.
Excerpts from Zain Group Vice-Chairman and Group CEO Bader Al-Kharafi's AGM statement:
It is an honor to address shareholders in these exceptional times, which have been impacted so profoundly by the global pandemic. 2020 has been a turbulent year in ways that governments, businesses, and individuals could not have imagined or predicted at the start of the year. Zain Group stands in solidarity with the multitudes around the world who have been affected by the scourge of the COVID-19 pandemic and expresses its heartfelt sorrow for those who have and continue to succumb to the virus.
Like many businesses, we were faced with the twin responsibilities of protecting our own staff from the ravages of the virus, while also ensuring we continued to provide meaningful connectivity with minimal disruption given the central importance the telecom sector has continued to play in keeping people socially distanced while remaining connected and productive.
I am pleased to report that Zain Group's response to the modified operating circumstances has been nothing but exemplary. We refocused on digital transformation to better serve businesses, governments, and societies, granting increased digital access to essential medical, commercial and financial services.
We took numerous proactive measures across our footprint to ensure we take into consideration the needs and challenges that our communities face during this global pandemic. Early on, we equipped and empowered staff across our operations to be able to work from home, while also improving our digital sales channels to enable customers to stay connected and continue dealing with us from the safety of their homes.
Our fixed and mobile broadband networks responded well to the increased data traffic being exchanged as remote learning and working became the norm. Since March 2020, we experienced over a 50 percent increase in high-speed broadband data traffic across various markets across our footprint. To guarantee network resilience and continued connectivity at high service quality levels, Zain continued to actively engage with national regulatory authorities. Zain collaborated closely with government entities across various sectors to ensure that additional internet capacities and ICT solutions are provided to support educational and health services online.
Internally, we took a decision not to reduce salaries of Zain staff during the pandemic in a move aimed at expressing our appreciation for their ongoing efforts despite difficult circumstances, as well to incentivize them to keep giving their best. It is this type of regard for the well-being of staff that saw Zain as the only company from Kuwait to be included in Forbes magazine's The World's Best Employers list for 2020. The list saw Zain ranked fourth across all employers in the Middle East, and as the region's highest ranked telecom group.
Delivering on our dividend commitment of 33 fils
Last year, in a first by any corporate entity in Kuwait, the Board of Directors recommended a new cash dividend policy committing the company to a minimum 33 fils for three years commencing 2019. Despite the USD 417 million loss of revenues due to the impact of COVID-19 on the business and a foreign currency translation impact of USD 110 on revenue, I am pleased to reaffirm the Board's commitment for 2020 will be fulfilled. This 33 fils represents a 77 percent payout ratio of earnings, which is one of the highest in the region.
This confirmation is a result of the impressive operational performance attained by the Group, that saw the company achieve a relatively stable consolidated revenues of USD 5.3 billion, an EBITDA of USD 2.2 billion (41 percent margin) and a net income of USD 605 million.
This achievement was supported by our decisive efficiency drive that succeeded in reducing operational expenses by USD 168 million since the beginning of the pandemic. It is also a result of several beneficial regulatory initiatives that we achieved and the healthy revenues we attained from our strategic and forward-looking investments in 5G, fiber and network upgrades across key markets, which supported the ever-increasing demand for mobile and fixed broadband services by individuals, businesses and governments during the pandemic.
Huge investments to drive digital transformation and enhance mobile experience
Despite the unprecedented market conditions, Zain maintained robust commercial activity throughout 2020, investing USD 1.4 billion in its 5G and 4G networks as well as spectrum and license fees across its footprint, and producing strong financial results that reflected our continuing market leadership. Seeking to exploit the multiple and lucrative opportunities in the B2B space and provide customers an enhanced mobile experience, we launched 5G services in Kuwait and Saudi Arabia during 2019, followed by Bahrain in June 2020.
In addition, Zain continued to focus on 4G LTE technology in multiple operations. In Iraq and South Sudan, we paved the way for the introduction of LTE by modernizing the network, with Jordan and Sudan expanding their LTE and FTTH networks to meet the demand for broadband during the pandemic. We launched 4G LTE in Iraq in early 2021, which will contribute immensely to the socio-economic development of country and we forecast the Iraqi community to heavily subscribe to the technology.
Notable regulatory highlights
The COVID-19 pandemic brought to light the critical importance of fixed and mobile telecommunications infrastructure and the use of digital data and digital services as an essential economic and social enabler. Across the Zain footprint, in order to support the upsurge in demand, national regulatory authorities granted Zain temporary spectrum or rights to use existing frequencies on a technology-neutral basis. Moreover, Zain acquired additional spectrum in several of our countries.
The region also witnessed the enactment of various forms of legislation and regulations by the telecom and financial services sectors regulators to accelerate digital transformation including in the areas of cloud computing, electronic payments, enforcement of electronic contracts through the judicial system. These initiatives will serve to boost the take-up of digital services going forward, and Zain is primed to exploit the unlimited opportunities in this space.
4Sight strategy gaining momentum
Zain made significant progress on its '4Sight' strategy, centered on evolving the company's core telecom business to maximize value for shareholders and building on its many strengths to selectively invest in growth verticals beyond standard mobile services to support Zain's vision of becoming a leading ICT and digital lifestyle provider.
We aim to become one of the leading trendsetters in the digital revolution in the region and provide our customers an exceptional mobile experience. During the year we made several substantial investments and announced significant developments. We also identified new business areas, value-adding strategic partnerships, accretive acquisition opportunities and synergistic corporate venturing investments which, collectively, will create new revenue streams to fully maximize the Group's high-speed broadband networks, customer assets, network intelligence and payment and billing infrastructure.
The sale and leaseback of the passive physical infrastructure of Zain Kuwait's mobile tower portfolio for USD 130 million (KD 40 million) in February 2020 confirmed Zain's pioneering role in the region, as the transaction was the first sale and leaseback of telecom towers in the Middle East by a licensed mobile operator.
In order to take advantage of the full potential of our infrastructure investments across our footprint, we have entered into strategic partnerships with respect to digital infrastructure and rolled out Zain Data Park (ZDP) in Kuwait and Jordan, providing our government and enterprise customers with the very best IT support services focused on cloud hosting and managed services across the ICT stack, including applications, cybersecurity and networking.
New structures and entering into key partnerships
Zain is constantly setting up new structures and entering into key partnerships in the fintech, e-Health, esports, and insurance arenas, and opening our APIs across key markets to offer appealing entertainment and gaming services, so as to reap the lucrative opportunities in the digital space. Throughout 2020, Zain remained focused on our digital strategy of monetizing our broadband infrastructure and the Group API platform through compelling initiatives and packages for the B2B sector covering government, business, IoT, and smart city sectors, as well as focusing on gaming, entertainment, fintech and e-health services.
This focus proved instrumental in countering the negative impact of the global crisis prompted by COVID-19, with data revenues (excluding SMS and VAS) growing 9 percent year-on-year in 2020, representing 41 percent of the Group's consolidated revenue at the end of the year.
New growth areas
Continuing our efforts to reach out to the youth of the region and find better propositions for the broadband services being offered by Zain operations, Zain esports was launched in December 2020. It has held several major tournaments to date, and plans to organize more throughout 2021 to bolster the gaming ecosystem and build an active community for gamers in the region. Zain is confident that Zain esports will develop into a regional and international gaming powerhouse.
The first week of January 2021 witnessed a milestone in our regional Fintech ambitions with the Saudi Central Bank (SAMA) granting Zain fintech subsidiary, 'Tamam', the first consumer micro-financing license in region. This Sharia compliant platform offers consumer micro-finance in less than 5 minutes via a seamless digital customer experience through a mobile app. Innovation is key and investing in viable digital services such as the fintech sector is critical to Zain's sustained evolution and success.
Sustainability, Gender Diversity and Inclusion are an intrinsic part of our DNA
Zain recognizes that contributing to the socio-economic development of our operating countries, providing meaningful connectivity, aligning to the climate change target and developing our employees, ultimately leads to a more successful and profitable organization. Through digitization, our wide range of services, and reach, we aim to unlock the many opportunities that the UN's Sustainable Development Goals (SDGs) offer, as both Sustainability and Diversity & Inclusion are an intrinsic part of our DNA.
Thank you
On a final note, on behalf of the Executive Management team, I would like to express my deep, personal gratitude to Zain workforce, our individual and business customers, the Board of Directors, and government agencies and bodies we cooperate with across our footprint.
How Zain fulfilled its commitment to distribute 33 fils
Bader Al-Kharafi elaborates why the Board of Directors recommend the distribution of cash dividends of 33 fils, representing the second year of the new dividend policy that was approved by the General Assembly, that also represents a 77 percent payout ratio of earnings, which is one of the highest in the region.
* During 2020, cash flow is estimated at USD 350 million and debt reduction by about USD 625 million. Accordingly, the total net debt was reduced by nearly USD 1 billion.
* The Group reduced the net debt / EBITDA (including Guarantees) which currently stands at 2.0x, compared to 2.2x in 2019.
* An increase in initiatives with all operations resulted in the upstream of approximately USD 900 million.
More than USD 900 million investment in networks and technology
Bader Al-Kharafi said Zain Group expanded its strategy and strengthened its digital capabilities, investing more than USD 900 million in 5G and 4G networks. This has created the lucrative environment to focus on digital transformation monetization initiatives such as Fiber to the Home (FTTH), e-stores platforms, and opening our APIs across key markets to offer appealing entertainment and gaming services, so as to reap the lucrative opportunities in the digital space as well as fintech services. As an example, Zain Cash in Iraq saw the platform transferring Iraqi government employees' salaries of USD 500 million in 2020, and similarly with Jordan's Zain Cash platform transferring USD 600 million.
Key achievements futureproof Zain Saudi Arabia
Bader Al-Kharafi noted the successful completion of Zain KSA's capital restructuring during Q4 2020 and the massive demand in the remaining priority rights subscription that was oversubscribed by an unprecedented 469 percent, reflected the confidence of shareholders and investors in the operator's operational strategy and future growth plans, reinforced by the company's profitability over the last four years. The transaction enhances Zain KSA's ability to expand its strategic investments in the Kingdom's telecommunications sector, growing its profitability and paving the way for dividends.
This followed the successful signing of an agreement to reschedule the Zain KSA's SAR 3.85 billion syndicated Murabaha financing facility with a consortium of eight banks on preferential terms that also extended the term for a period of five years to 2025, with facilities of up to SAR 7 billion, which will provide additional liquidity to finance the company's business growth plans. Regarding the selling and leaseback of Zain KSAs mobile towers, this is still ongoing, as the operator is seeking the necessary approvals to complete this transaction in a way that best serves shareholders and the operator's targets.
Optimism in the Sudanese market
Al-Kharafi noted the Sudanese market is one of the most promising markets in the region, as the operation there saw impressive growth on all financial indicators during 2020 in both USD and local SDG terms. Moreover, Zain Sudan is preparing to invest in home fiber optics (FTTH) and expand digital services.
Despite the impact of the recent float of the local currency has increased the pressure on our operations, we have great optimism about the future of our operations in Sudan, where the market enjoys a wide segment of the youth category, and there are positive economic indicators that seem to be on the horizon that will positively reflect on the economic and social conditions there.
Tier III data center in Kuwait
Al Kharafi noted that the rollout of Zain Data Park (ZDP) in Kuwait and Jordan will provide government and enterprise customers with the very best IT support services focused on cloud hosting and managed services across the ICT stack, including applications, cybersecurity and networking.
In Kuwait, in the South Sabahiya area, situated a safe 30km outside of the city in case of emergency, Zain has built the country's first uptime-certified Tier III co-location data center that will change the digital landscape in the country. ZDP is to contribute to Zain's offer of world-class telecom and IT infrastructure to Kuwait's business and SME community. Zain is currently planning to expand ZDP to another location in Kuwait and we are working closely with the visionary team at CITRA to achieve this.
In Jordan, ZDP's platforms are hosted in The Bunker, a nuclear-grade regional data and disaster recovery center in Amman, which is the first-of-its-kind in the region. As a certified Tier III Data Center, The Bunker gives comfort to ZDP's clients that their data will be preserved under all circumstances.
Acknowledging the Kuwait Clearing Company
Zain Group would like to express its sincere gratitude and appreciation to Kuwait Clearing Company (KCC) for the support and cooperation that led to the success of the ordinary general assembly. Zain's general assembly was held virtually via the electronic system provided by Kuwait Clearing Company. The Group recognizes the continuous efforts of KCC to develop the mechanisms for holding general assemblies in light of the current world pandemic, and in accordance with the safety measures that the state and the regulatory authorities have imposed.
Remembering the six colleagues we lost during the pandemic
Bader Al-Kharafi began his speech at the General Assembly with a tribute to the six Zain employees who have passed away during the pandemic. Al-Kharafi said, "We are all deeply saddened by the loss of our colleagues, we share the grief of their families and relatives, and we pray to God to have mercy on their souls". To honor their memory, Al-Kharafi mentioned the name of each employee in recognition of their efforts and achievements during the course of their employment at the company.