Transforming challenges

Zain Iraq's CFO and COO discusses trends, challenges and opportuities in Iraq
Wael Ghanayem, CFO and COO, Zain Iraq.
Wael Ghanayem, CFO and COO, Zain Iraq.


Wael Ghanayem, CFO and COO of Zain Iraq, tells CommsMEA about the company’s planned IPO and why he is optimistic about growth opportunities in Iraq.

CommsMEA: How is Zain Iraq performing at the moment?

This year has been particularly interesting and challenging for Zain Iraq and the sector due to the challenges posed in country. However, we have seen a significant turnaround in business and have witnessed steady and continuing growth. Today we mark the launch of our operations in Iraq 10 years ago and our success in the country makes us a significant player within Zain Group. We now contribute more than 40% of Zain Group’s total revenues and represent approximately 33% of the Group’s customer base. We have maintained strong market leadership over that time, and our brand enjoys a high level of recognition across Iraq’s diverse population. We proudly serve 14.5 million customers in Iraq, and continue to have dominant market share of the entire sector.

Zain Iraq is recognised as a leading brand with strong market share, enabling higher opportunities for cross selling as we continue to develop our offerings and services to the Iraqi market and people. Penetration rates for both voice and data, at around 86% and less than 10% respectively, are still considered to be at the low end, compared with neighbouring countries. However we see this is as an opportunity for further growth, especially as we look to launch our 3G service.

CommsMEA: What have been Zain Iraq’s main successes so far in 2013?

Over the course of 2013 we have implemented several initiatives to optimise our organisation’s capabilities and productivity, with the objective of further improving our operational excellence and efficiency and supporting our future growth.

These initiatives have helped us become the fastest growing company in Northern Iraq, having doubled our subscriber base in both Kurdistan and the Arab North. Additionally, we have invested heavily in our network infrastructure to make 3G ready, improve overall network performance and drive customer satisfaction and loyalty. We expect this to accelerate growth, strengthen our KPIs and positively impact our bottom line.

Despite intense competition and the challenging nature of this market, Zain Iraq has continued to progress positively in 2013 and has added more than 2 million subscribers since the beginning of the year, maintaining its leadership position and continuing to dominate the Southern and Western regions of Iraq.

Aside from winning the Middle East Operator of the Year Award at the CommsMEA Awards, and Telecom Operator of the Year at the Arabian Business Awards, 2013 was an outstanding community engagement year, with a series of CSR initiatives launched in several sectors including health, education, sports and environment. Operating from Baghdad also has its benefits, as it brings us closer to our customers and allows us to be an integral part of the Iraqi community. We see an important and critical role for Zain in supporting Iraqi communities and to this end we launched more than 15 major projects in 2013. This year, Zain Iraq worked with the Iraqi Red Crescent, and was able to support more than 3000 families living in poverty, with initiatives to provide assistance to more than 8000 widows in search of jobs. We also worked to create programs aimed at promoting green energy working with the Ministry of Environment.

CommsMEA: How is the IPO progressing?

We successfully resolved the main challenge associated with the IPO process: the transformation of a company registered outside Iraq to a joint stock company in line with regulations in Iraq. This is a significant achievement for Zain Iraq, as it is the first time a company of this size has implemented such a corporate restructuring in Iraq. The newly formed JSC, Al Khatem, is now ready to comply with the licence conditions and will list on the Iraq stock Exchange in due course. We expect the IPO to diversify our shareholder base and further enhance public awareness of the company, not only in the domestic market but at an international level as well. The Company will benefit from being a listed company as this will facilitate capital raising and improved corporate governance among many other benefits. We are delighted to contribute positively to the development and growth of the Iraqi Stock Exchange.

Recent financial and global research reports have all pointed to the significant advantages with the size and importance of this IPO for Iraq and the telecom sector. It is anticipated to provide traction to the Iraqi Stock Exchange, the Iraqi economy and expected FDI input.

CommsMEA: What are the main challenges facing the company at the moment in general?

Iraq continues to be a challenging and interesting market. We see a wealth of opportunity before us, but there remains much to be done to build a promising and favourable business environment. Our main challenge is maintaining top line growth in a challenging market environment, while at the same time continuing to improve operational efficiency and maintain robust EBITDA margins. We have a good track record in Iraq with strong revenue growth and high EBITDA margins despite intense competition and a challenging business environment. Our people are the key to our success, with more than 99% of our employees being Iraqi. We have focused our recruitment efforts on Iraqi experts with experience in the ICT industry both locally and internationally and have managed to retain and grow that talent over the years.

CommsMEA: Do you expect the regulator to move forward with 3G spectrums soon?

We do not have any official notification from the Communications and Media Commission (CMC) about the timing of 3G spectrum assignment. The CMC announced earlier this year that they have engaged PwC as advisors on 3G, and we are awaiting an official update on this matter. We did however invest heavily this year upgrading our network to make it 3G ready, and we are now in a strong position to capitalise on it when the spectrum is released.

CommsMEA: How is ARPU at the moment? What strategies do you have to raise it?

ARPU is still within the $10 - $11 range. The double digit forecasted growth in Iraq’s GDP is expected to enhance customers’ spending power, allowing them to allocate more budget towards telecom services. Once awarded, we expect 3G to boost data usage and positively impact overall ARPU. Following our network upgrades, we are prepared to offer a variety of services for voice and data, giving customers more choice and subsequently improving ARPU utilisation.

Additionally, as we continue to grow in the North and in Kurdistan, we expect to see further growth in ARPU. The Iraq corporate segment also holds untapped opportunities and represents significant growth potential for us.

The expansion into the Arabic North and Kurdistan regions will definitely provide us with access to higher ARPU users. Our plan is to offer customers increased services as and when we are able, which will ultimately improve overall ARPU levels. Our strategy is to capture higher ARPU levels by strategically targeting customers and catering products and services specific to their needs. We are also looking to launch new products in our core regions to ensure that our customers’ changing requirements are met.

We aim to take advantage of increased business growth in Iraq targeting higher ARPU business users. We see that the economic stability in the country to be a major booster to our growth over the next few years and we are certain that we will from this economic boom across Iraq.

CommsMEA: How is Zain growing in the North of the country?

We believe there is huge potential for growth in the North, and Zain Iraq has made exceptional progress there, doubling our subscriber base in both Kurdistan and the Arabic North, as well as doubling our market share in the latter. The key to our success has so far been our good value for money propositions, and utilising our brand new network to launch innovative data products for our customers. We are doubling our investments in the region to meet the growing demands of our expanding subscriber base there. Additionally, the stability in the Kurdistan region means that we can be more efficient, thereby becoming more profitable by serving the higher end ARPU customer segment.

CommsMEA: Where do the main opportunities lie for operators in Iraq now?

The demand for data services is growing everywhere. Our expectation is that soon after the allocation of the broadband spectrum by the CMC, local demand will rapidly increase, especially with the lack of real DSL or fibre optic access. Mobile broadband will therefore be the most convenient source for data.

The penetration rate for both data and voice is still at the low end, and this provides all mobile operators with the opportunity to acquire new customers and grow their subscriber base. Iraq has become more politically and economically stable across its various regions and is supportive of growing businesses. The services and infrastructure have come a long way in supporting companies like Zain Iraq in our operations. Today we have better grid availabilities, better support for new technology and fibre optic connectivity being introduced, making us more efficient in delivering our services and more capable of unlocking hidden shareholder value.

The future for Zain in Iraq is very promising, and we are looking forward to continuing to grow as the leading operator in Iraq and the region.

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