Zain reports profit increase in first half of 2018

Big growth in data revenues and rise in overall customers.
Zain, Business, Profits, Revenue, Income, Middle East, Africa, Kuwait, Money

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Kuwaiti telecom company Zain Group has reported a net profit increase of five percent for the first six months of 2018 compared to the same period last year.

The company reported that new profit growth had reached KD 86.4 million (US$287 million) for the first half of 2018. It also reported serving 47.4 million customers, also a five percent increase from the first six months of 2017.

For the first six months of 2018, Zain’s consolidated revenues remained stable at KD 503 million (US$1.67 billion). Of particular note was Zain’s growth in data revenue, which grew by 10 percent to represent 27 percent of total revenues.

Commenting on the results, Zain Board of Directors chair Ahmed Al Tahous said: “The company’s performance in the first half of the year has been pleasing given the numerous operational and forex challenges we face in several key markets. The Board is working closely with management in implementing wide-ranging programs to improve operational efficiency and cost optimisation, to consistently deliver strong operational results.”

He continued: “We are also focused on maintaining our leadership position in most of our markets and future-proofing the business by seeking new value-creating opportunities as well as maximising our state of the art networks by offering innovative digital services to meet the ever-growing demand for high-speed data connectivity.”

Bader Nasser Al-Kharafi, Zain vice-chair and Group CEO, said: “In addition to the consolidated five percent net income growth and five percent customer growth, the first six-months of 2018 produced numerous positive developments such as the operational progress being achieved in Kuwait, Iraq and Sudan as well as the robust growth in our data monetisation, Enterprise (B2B), and smart city initiatives especially in our key 4G markets of Kuwait, Saudi Arabia, Bahrain and Jordan.”

He added: “Despite the sound operational progress and transformation we have undertaken across all our markets, it is unfortunate that several factors outside our control, namely the deteriorating currency issue in Sudan and the application of the new IFRS accounting standards, have impacted several performance indicators.”

The devaluation of Sudan’s currency by 43 percent cost Zain US$52 million in revenue in the second quarter of 2018 alone.

Al-Kharafi said the outlook for the rest of the year appears rosier. “Our strategic transformation into a digital lifestyle operator continues to make headway and it is pleasing to report data revenue growth of 10 percent, which now represents 27 percent of our total revenues. We will continue fostering new value accretive areas to unlock the many lucrative opportunities that exist in the digital arena, in a bid to drive the business forward. We expect continued growth in all facets of our operations in the second half of the year.”

Al Kharafi concluded by commenting on Zain’s recent disclosure regarding Zain Saudi Arabia, whereby Zain KSA will be treated as a subsidiary of Zain and its financial results will be consolidated with the overall results of Zain starting from the third quarter of 2018. He said, “The impact of this consolidation will strengthen the Group’s financial indicators on various levels, except for the net income, since Zain Group’s ownership in Zain KSA will not change.”

Breakdown: Zain’s operational review of key markets for the six months ended June 30, 2018

Kuwait: Maintaining its market leadership, Zain Kuwait saw its customer base increase to serve 2.8 million customers, reflecting a seven percent annual growth. It remains the Group’s most profitable operation with revenues for the first six months of 2018 up five percent reaching KD 174 million (US$579 million), EBITDA amounting to KD 54 million (US$180 million) and net income increased two percent to reach KD 39 million (US$130 million). Zain Kuwait’s EBITDA margin stood at 31 percent at the end of the first half of 2018, (36 percent EBITDA margin for Q2 2018) with data revenues (excluding SMS & VAS) accounting for 32 percent of total revenues, growing six percent year-on-year.

Iraq: Zain Iraq performed exceptionally well in H1 2018 when compared to H1 2017 with revenues reaching US$558 million, a seven percent increase year-on-year and EBITDA reached US$194 million, up eight percent reflecting an EBITDA margin of 35 percent. The operation reported a net profit of US$18 million, up 66 percent on the USD 11 million profit recorded for H1 2017. The expansion of 3.9G services across the country and restoration of sites in the west and north of the country, combined with numerous customer acquisition initiatives, especially in core regions, resulted in an addition of 1.9 million customers (15 percent increase) to reach 14.7 million. Also contributing to the operation’s financial revival was the significant growth of data revenues, robust growth in the Enterprise (B2B) segment and the revamping of its call centers significantly improving customer service.

Sudan: A substantial 40 percent currency devaluation in Sudan from an average of 15.8 (SDG / USD) to 26.5 affected the operation’s financial results in US dollar terms for H1 2018. Nevertheless, in local currency (SDG) terms, the operator continues to perform well as revenues grew by 31 percent year-on-year to reach SDG 4.4 billion (US$168 million, down 21 percent in USD terms). EBITDA increased by 38 percent to reach SDG 1.8 billion (US$67 million, down 17 percent in USD terms) and net income increased by 26 percent to SDG 688 million (US$27 million, down 21 percent in USD terms). Data revenues (excluding SMS and VAS) accounted for 17 percent of total revenues and grew 52 percent in SDG terms. The operation saw its customer base expand eight percent to reach 13.9 million.

Saudi Arabia: The operator recorded a loss of US$31 million in H1 2018, compared to net profit of US$14 million in H1 2017. Revenues for the period were down by seven percent, reaching US$942 million. EBITDA reached US$316 million in H1 2018 with EBITDA margin stable at 34 percent. Compared with the first quarter of 2018, Zain Saudi Arabia reported a 10 percent increase in revenues, with EBITDA growth amounting to eight percent in Q2 2018. The company achieved a 25 percent increase in operating profit quarter-on-quarter in Q2 and a three percent growth in gross profit. Zain Saudi Arabia also managed to reduce its net losses by 51 percent in Q2 compared to the previous quarter. The operator’s total customer base stood at 8.4 million at the end of June 2018. Data revenues (excluding SMS and VAS) represent 53 percent of total revenues.  

Jordan: Zain Jordan saw its customer serve 3.7 million at the end of June 2018, maintaining its market leading position despite intense price competition. Year-on-year revenues were stable at US$241 million, with EBITDA down 17 percent to reach US$96 million, reflecting a 40 percent EBITDA margin. Net income decreased 25 percent to US$36 million in H1 2018. With the continual expansion of 4G services across the country, data revenues (excluding SMS & VAS) represented 38 percent of total revenues.

Bahrain: Zain Bahrain generated revenues of US$87 million for the first six months of 2018, generating an EBITDA of US$20 million, reflecting an EBITDA margin of 23 percent. Net income amounted to US$6 million, reflecting a 60 percent increase year-on-year. Data revenues (excluding SMS & VAS) represent 45 percent of overall revenues.

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