Zain Group generated revenues of USD 4.3 billion, and recorded net income of USD 685 million for full-year 2014

Board of Directors recommends cash dividend of USD 0.14 (40 fils) per share.

Substantial investments in 3G and 4G LTE upgrades paying off as data revenues rise by a healthy 13%, forming 16% of total Group revenues for the year.

Appreciation of US Dollar against Kuwaiti Dinar, along with foreign currency revaluation losses mainly in Sudan and Iraq impact full-year results.

Political unrest in several markets lower revenues and profits.

Kuwait - 1 February, 2015

Zain Group, the pioneer of mobile telecommunications across the Middle East and Africa, announces its consolidated financial results for the year 2014 and fourth quarter ended 31 December, 2014.

Zain served 44.3 million customers at the end of the period, reflecting a 4% decline year-on-year (Y-o-Y). Zain is the market leader by customer base in six of its eight operations.

 

For the year 2014, Zain Group generated consolidated revenues of USD 4.3 billion. Consolidated EBITDA for the period reached USD 1.8 billion, reflecting a healthy EBITDA margin of 41.8%. Consolidated net income amounted to USD 685 million, reflecting Earnings Per Share of USD 0.18.

The Board of Directors of Zain Group recommended a cash dividend of USD 0.14 (KD 0.040) per share subject to the Annual General Assembly and regulatory approvals. Additionally, shareholders' equity stood at USD 5.6 billion (KD 1.6 billion) as at 31 December, 2014.

 

For the fourth quarter of 2014, Zain Group recorded consolidated revenues of USD 1.0 billion. EBITDA for the quarter reached USD 406 million, reflecting a healthy EBITDA margin of 40.4%. Net income for the quarter reached USD 115 million.

Key Operational Notes:

1.    Group data revenues (excluding SMS and VAS) witnessed a healthy 13% growth during 2014, accounting for 16% of the Group's consolidated revenues. 

2.    The recent appreciation of the US Dollar against the Kuwaiti Dinar, along with foreign currency revaluation losses predominantly in the Republic of Sudan and Iraq, cost the Group USD 152 million (KD 43 million) in net income for the full year 2014, substantially higher than USD 88 million (KD 25 million) for the full year 2013. Excluding the currency variance and FX translation impact, net income would have been relatively stable for the full-year 2014.

3.    Specifically for the fourth quarter of 2014, currency variance losses cost the company USD 41 million (KD 12 million) in net income, higher than USD 34 million (KD 10 million) in the fourth quarter of 2013.  

4.    Customer base decline is a result of two major circumstances; one, a new definition of an "active customer" implemented by the regulator in Iraq and second, due to the new registration policy implemented by Sudan's regulator.

5.    The escalation of political instability in Iraq during the second half of 2014 has seen several million people displaced internally. Additionally Zain Iraq endured frequent temporary network interruptions and associated higher network operational costs. These unavoidable occurrences had a drastic effect on Zain Iraq's and consequently Zain Group's overall key financial metrics.

6.    Zain Iraq entered into an agreement with Iraq's Communication and Media Commission (CMC) on November 10, 2014, earning the right to utilize 3G spectrum following an installment payment of USD 76.8 million representing 25% of the total USD 307 million spectrum fee. Zain Iraq made its first 3G call on New Year's Eve, 2014.

7.    Political unrest in South Sudan also affected Zain Group's results as the country also witnessed significant displacement of its people, with access to and repair of many network sites in parts of the country proved to be difficult, causing frequent interruptions and higher maintenance costs.

8.    As mandated by its mobile operating license, Zain Bahrain completed an Initial Public Offering of 15% of its share capital and listed on the Bahrain bourse on 4 December, 2014. This milestone was the first IPO in Bahrain since 2010. Additionally Zain Bahrain completed its USD 100 million revamp of the network and now offers nationwide 4G services across the Kingdom.

9.    Heavy investment in 3G and 4G network upgrades and expansion across operations sees CAPEX spend for the year amount to USD 730 million (excluding Saudi Arabia), reflecting 17% of Group revenues.

10.  In November 2014, the Board of Zain Saudi Arabia recommended a reduction of the company's share capital and awaits final approval by the general assembly and respective authorities. This proposed capital reduction is one of several positive steps being taken by the company to improve its financial position as part of a comprehensive transformation plan, which has been ongoing since the beginning of 2014.

Commenting on the results, the Chairman of the Board of Directors of Zain Group, Mr. Asaad Al Banwan said "Despite geo-political challenges and unavoidable currency issues in several markets that have had a dramatic effect on our 2014 financial results, the Board remains confident that management is implementing the right strategy in driving the business forward in this ever-evolving telecommunications industry. We are closely aligned with management in transforming the operating model of all Zain operations in order to cope with and overcome increased levels of competition from rival operators and OTT players combined, implementing numerous initiatives aimed at extracting more synergies between our operations and optimizing efficiency".

The Chairman continued, "We have invested significantly in our infrastructure, launching state-of-the-art networks across all our markets in order to improve the mobile experience for our customers. Our investment in capital expenditure reached USD 730 million which represents 17% of our revenues, reflecting Zain's commitment to innovation and quality of service. I remain proud that we have been able to maintain our leadership position in the majority of the markets we operate in, testament to our valued brand reputation".

Zain Group CEO, Scott Gegenheimer said "Due to number factors beyond Zain's control, the year proved to be especially challenging and it is disappointing to report declining financial results for the full year considering the sound operational progress and transformation we have undertaken across all our markets. Nevertheless we remain focused on growing the business in all our markets and we are committed to our strategy that will take advantage of our competencies, which include our people, brand, quality networks and geographic coverage, while looking to develop new areas and becoming a diversified and innovative digital operator".

Gegenheimer reiterated the promising growth opportunities in the mobile broadband area for all of Zain's operations. "Our digital traffic and revenues continue to advance strongly, recording a healthy 13% annual rise, with data now reflecting 16% of all Zain Group's service revenues. With Zain Iraq rolling out 3G services in January 2015 and Zain Jordan rolling out 4G services during the first quarter of 2015, coupled with healthy growth expected in our other 4G operations in Bahrain, Kuwait and Saudi Arabia, the Group will continue to foster and develop this key area of the business and expects it to reflect positively in our future financial metrics".

With regard to year-on-year key operational highlights across Zain's footprint, Gegenheimer noted:

Kuwait: The cornerstone of Zain Group continues to perform exceptionally well with customer growth of 6% to reach 2.7 million at the end of 2014, maintaining its market leadership. For the year, Zain Kuwait revenues rose by 2% to USD 1.2 billion. EBITDA and net income increased by 1% and 3% respectively. The operator reported a healthy EBITDA margin of 48% for the year 2014. Notably, with the attraction of its nationwide 4G LTE network, data revenues (excluding SMS & VAS) formed 31% of total revenues, reflecting an annual growth rate of 11%.

Iraq: The escalation of political instability in Iraq in 2014 saw several million people displaced internally coupled with Zain Iraq enduring frequent temporary network interruptions and associated higher network operational costs. These exceptional circumstances adversely affected the operation's financial performance specifically for the 2^nd half of 2014. Revenues for the full-year reached USD 1.6 billion, a decrease of 8% on 2013, with EBITDA reaching USD 578 million, down 19%, and net income amounting to USD 256 million, down 29% Y-o-Y. This decline took its toll on Zain Group's overall financial performance.

Sudan: In local currency (SDG) terms, the operator continues to perform well, where revenues grew by 14% Y-o-Y to reach SDG 4.0 billion (USD 669 million) for the full-year 2014. EBITDA increased by 13% to reach SDG 1.6 billion (USD 269 million) while net income was stable at SDG 586 million (USD 98 million). Excluding the forex loss variance, net income would have been higher by 18%. Zain Sudan witnessed a 3% reduction in customers due to the new registration policy implemented by the country's regulator, and ended the year serving 11.4 million customers. Data revenues (excluding SMS and VAS) formed 6% of total revenues, with a remarkable annual growth of 62%.

Saudi Arabia: The operator witnessed an annual 7% increase in customers to now serve more than 9 million. For the full-year 2014, the operator posted improved financial results, recording a significant 24% increase in EBITDA to reach USD 293 million up from USD 237 million in 2013. EBITDA margin rose to 17% in 2014 up from 13% in 2013 while net losses narrowed by 23% Y-o-Y to USD 339 million, down from USD 440 million a year earlier. Impressively, the operator witnessed a 37% rise in data revenues (excluding SMS & VAS) Y-o-Y, which represents 17% of total revenues as the company invests heavily and expands its state-of-the-art 4G LTE network.

Jordan: Despite the heightening of price competition, Zain managed to maintain its lead in the market with 40% customer market share, counting 3.8 million customers at the end of 2014. Y-o-Y revenue, EBITDA, and net income decreased by 5%, 8% and 5% respectively to reach USD 469 million, USD 193 million and USD 114 million respectively. Data revenues (excluding SMS & VAS) represented 23% of total revenues, which grew by 11% as compared with the same period in 2013.

Bahrain: During 2014, Zain Bahrain generated revenues of USD 194 million, a decrease of 9%. EBITDA for the period reached USD 72 million, reflecting a healthy EBITDA margin of 37%. Net income amounted to USD 11 million. Data revenues (excluding SMS & VAS) represented 31% of overall revenues.

South Sudan: The operation is facing challenging times given the social unrest in the country. The local team's focus there is on maintaining and expanding the network. It is pleasing to see data revenues (excluding SMS & VAS) growing significantly by 150% annually, representing 10% of the operation's total revenues for the full year 2014.

Lebanon: The management contract has been regularly extended, awaiting governmental decisions for a longer definite-term agreement. The customer base reached 2.1 million.

-Ends-

About Zain Group
Zain is a leading telecommunications operator across the Middle East and Africa providing mobile voice and data services to over 44.3 million active customers as of 31 December, 2014. With a commercial presence in 8 countries, Zain operates in: Kuwait, Bahrain, Iraq, Jordan, Saudi Arabia, Sudan and South Sudan. In Lebanon, the Group manages 'touch' on behalf of the government. In Morocco, Zain has a 15.5% stake in 'INWI', through a joint venture. Zain is listed on the Kuwait Stock Exchange (stock ticker: ZAIN).For more, please email info@zain.com  or visit: www.zain.com; www.facebook.com/zain; www.twitter.com/zain; www.youtube.com/zain; www.instagram.com/zaingroup; www.linkedin.com/company/zain

© Press Release 2015