EBITDA grows 111% in Q1 • 50 million customers served

KUWAIT: Zain Group, a leading mobile telecom innovator in eight markets across the Middle East and Africa, announces its consolidated financial results for the first quarter (Q1) ended 31 March, 2019. Zain served 50 million customers at the end of the period, reflecting a 6 percent increase year-on-year (Y-o-Y).

Zain Vice Chairman and Group CEO Bader Al-Kharafi

Zain Group generated consolidated revenues of KD 404 million ($1.33 billion) for the first quarter of 2019, up 56 percent compared to the same period in 2018. EBITDA for the quarter reached KD 178 million ($586 million), up 111 percent Y-o-Y, reflecting an EBITDA margin of 44 percent. Net income for the quarter reached KD 47 million ($155 million), up 15 percent Y-o-Y reflecting Earnings Per Share of 11 fils ($0.04).

For Q1 2019, foreign currency translation impact, predominantly due to the 48 percent currency devaluation in Sudan from an average of 24.9 in Q1 2018 to 47.5 in Q1 2019 (SDG / USD), cost the Group $59 million in revenue, $27 million in EBITDA and $10 million in net income.

Zain Group Chairman Ahmed Al-Tahous

Key operational notes for three months ended 31 March, 2019:

  1. The company held its Annual General Meeting (AGM) on 20 March 2019 and approved the distribution of a cash dividend of 30 fils ($0.10) per share for the 2018 financial year.
  2. The consolidation of Zain Saudi Arabia (KSA) into Zain Group started in Q3 '18 resulted in an additional $559 million in revenue and $255 million in EBITDA during Q1' 19.
  3. The adoption of new accounting standard IFRS 16 - 'Lease' from the beginning of 2019 resulted in a benefit to EBITDA by KD 19 million ($61 million), and a minimal increase in net income of KD 1.75 million ($5.8 million)
  4. Group data revenue experienced a 118 percent growth in Q1 2019, representing 37 percent of the Group's total revenue. It should be noted that the data growth is predominantly due to the consolidation of Zain KSA results.
  5. The three-month period was further highlighted by the notable 77 percent increase in net income in Zain Iraq; healthy net profit growth of 11 percent by Zain Kuwait and 55 percent by Zain Bahrain; with Zain Sudan continuing to perform exceptionally well in all key financial indicators in local SDG currency terms.

Commenting on the results, Chairman of the Board of Directors of Zain Group, Ahmed Al-Tahous said, "The impressive first quarter 2019 results were achieved through the Board's and Executive Management's focus on implementation of the digital transformation strategy that has seen substantial investments in network upgrades, fiber optics and 5G readiness. These initiatives have been aimed at diversifying income sources primarily from digital-related areas and at the same time improve customer experience. We will continue driving cost optimization initiatives to improve the efficiency of the operations and seek new lucrative opportunities in driving the business forward and increasing shareholder value."

Vice-Chairman and Group CEO, Bader Al-Kharafi said, "Given the sweeping technological developments in the ICT sector and challenging regulatory environment, the management teams across all operations are being dynamic in their transformational and digitization efforts, supported by the Group. This has resulted in sound operational progress and the reporting of robust results in key markets, highlighted by the vastly improving profitability in our home market of Kuwait and even more impressively in our Bahrain, Iraq and Saudi Arabia operations."

Al-Kharafi added, "Zain Group's overall growth in many key indicators was underpinned primarily by the strategic consolidation of Zain KSA, combined with its strong performance and the beneficial regulatory changes in Saudi Arabia, which has driven the operation to profitability for three consecutive quarters. It is unfortunate that the unavoidable currency devaluation in Sudan continues to impact our results, however we draw confidence on this particular issue as we have recently seen the currency appreciate."

The Vice-Chairman and Group CEO concluded, "One of the key pillars of Zain's innovative digital strategy '4Sight' is built on future-proofing our telecom operations. We are continuing the digital transformation journey we started several years ago to maximize value for all stakeholders and offer our customers an improving customer experience. The data monetization, Enterprise (B2B) and smart city initiatives implemented across all operations continue to grow and we will continue to develop the required infrastructure and invest resources to further benefit from these lucrative and strategic business areas."

Operational review of key markets for the three months ended 31 March, 2019

Kuwait: Maintaining its market leadership, the flagship operation of Zain Group saw its customer base serve 2.6 million in a very challenging period that witnessed improving net profit for the quarter. Revenue generated for the quarter reached KD 82 million ($271 million), and net income increased 11 percent to reach KD 21 million ($70 million). Zain Kuwait's EBITDA amounted to KD 32 million ($105 million), a 21 percent increase Y-o-Y, with EBITDA margin standing at 39 percent for the quarter. Data revenue grew by 9 percent Y-o-Y, representing 38 percent of total revenue.

Saudi Arabia: Despite the fierce competition present in the Saudi telecom market, the operation's ongoing transformation has resulted in Zain KSA having recorded net profit for the last three consecutive quarters with revenue growing quarter-on-quarter. For Q1 2019, Zain KSA recorded revenue of SAR 2.1 billion ($559 million), a 24 percent increase to the same period in 2018. EBITDA for the quarter amounted to SAR 955 million ($255 million), up 67 percent from SAR 571 million ($152 million) in Q1 18. The operator's EBITDA margin for Q1 2019 stood at 46 percent. Net income for Q1 2019 reached a healthy SAR 129 million ($34 million); a marked improvement on the loss of SAR 77 million ($21 million) recorded for Q1 2018. Impressively, data revenue represents 44 percent of total revenue.

Iraq: Zain Iraq performed exceptionally well in Q1 2019 when compared to the corresponding three-month period in 2018, with revenue reaching $262 million, and EBITDA having reached $109 million, up 13 percent Y-o-Y and reflecting an EBITDA margin of 42 percent. The operation reported a net profit of $14.2 million, up 77 percent on the $8 million profit recorded in Q1 2018. The operator added 1.5 million customers (up 10 percent Y-o-Y) to reach 16 million and witnessed significant growth in data revenue, as well as profitable progress in the enterprise (B2B) segment.

Sudan: In local currency (SDG) terms, the operator continues to perform well, as revenue grew by 50 percent Y-o-Y to reach SDG 3.1 billion ($66 million, down 23 percent in USD terms) for Q1 2019. EBITDA increased by 54 percent to reach SDG 1.2 billion ($26 million, down 21 percent in USD terms), reflecting an EBITDA margin of 39 percent, while net income increased by 67 percent to reach SDG 509 million ($11 million, down 22 percent in USD terms). Data revenue formed 18 percent of total revenue, with an impressive growth of 63 percent (Y-o-Y) in SDG terms. Zain Sudan now serves 15.1 million customers, reflecting a 9 percent growth compared to Q1 '18.

Jordan: Zain Jordan serves a customer base of 3.7 million customers as at the end of Q1 2019, maintaining its market leadership. Revenue reached $117 million, with EBITDA increasing 18 percent to $56 million, reflecting an EBITDA margin of 48 percent. Net income was relatively stable increasing 1 percent to $18 million. With the continual expansion of 4G services across the country, data revenue grew by 2 percent Y-o-Y, and now represents 40 percent of total revenue.

Bahrain: During Q1 2019, Zain Bahrain generated revenue of $41 million. EBITDA for the period increased 48 percent to $15 million, reflecting an EBITDA margin of 35 percent, while net income increased 55 percent to $5 million. The operation's focus on new, attractive packages coupled with a totally revamped 4G network resulted in data revenue representing 47 percent of overall revenue.