Zain generates $942 mln revenues in Q1

Commenting on the results, the Chairman of the Board of Directors of Zain Group, Asaad Al Banwan said, "We recognize the exceptional circumstances in one key market over the past nine months that has impacted us significantly. However we are seeing several positive signs of growth over the first three months of 2015 such as the addition of 1.8 million new customers and net income growth of 21% for the Group when compared to the final quarter of 2014. When coupled with data revenue growth of 8% year-on-year, these developments justify and reflect the appeal of our substantial investments in technology and network upgrades.

Furthermore the Chairman noted, "The Board is working closely with senior management in driving efficiency, maintaining our market leadership positions across our markets, and constantly evaluating business-enhancing and acquisition opportunities. The Board is confident that the company's innovation and digital strategy will generate long-term value for shareholders."

Zain Group CEO, Scott Gegenheimer noted, "The quarter reflected mixed results in what were quite challenging conditions in several of our key markets, especially Iraq where the security situation and intense competition is significantly impacting the performance there and subsequently the Group's overall financials. Nevertheless we witnessed many positive signs of net income and customer growth during the first quarter of 2015 when compared to the final quarter of 2014."

He added, "It is also encouraging to see Kuwait and Saudi Arabia grow their customer bases by 13% and 27% year-on-year respectively, with both Saudi Arabia and Sudan witnessing healthy growth in all of their key financial indicators over the past twelve months. We will continue to focus on and invest in our key markets to drive growth and efficiency even further."

Gegenheimer continued, "All operations witnessed robust growth in data related revenues, and we will continue to develop this area of the business to take advantage of the explosion of data usage by our customers. We are continually upgrading and rolling out 4G enabled networks in Kuwait, Saudi Arabia, Jordan and Bahrain, and we expect the roll-out of 3G services in Iraq to substantially improve performance there, anticipating that the security issues stabilize soon."

The Group CEO concluded, "The telecommunications landscape Zain operates in is evolving on multiple fronts, and we are facing competitive threats from both intense competition and OTT players on the one hand, in addition to security and forex issues on the other. Accordingly, Zain is transforming itself from being a mobile-centric company into an integrated services provider, in a bid to tap new opportunities for new, profitable revenue streams. In particular we are focusing on innovation, the digital space, and enterprise services such as M2M and smart cities. We are also seeking new deals and partnerships to drive the strategy that the company has designed to embrace the areas of future value realization within the telecoms sector."

Key markets operational review:

Kuwait

Zain's operation in Kuwait saw its customer base grow 14% Y-o-Y to now serve 2.9 million customers on its nationwide 4G network; impressive growth considering the highly penetrated market of over 200%. Revenues for the quarter reached $276 million, EBITDA reached $136 million and net income amounted to $89 million. The appeal of Zain Kuwait's nationwide 4G network continues to grow with data revenues now representing 35% of the operation's total revenues. The recent appreciation of the US Dollar against Kuwaiti Dinar cost the operation $14 million in revenues, 7 million in EBITDA and $4.4 million in net income for the quarter. Nevertheless, the operation remains the most efficient mobile operator within Zain Group and one of the most efficient in the region with an impressive 50% EBITDA margin.

Iraq

Zain Iraq launched 3G services at the beginning of the year and is very active in rolling out 3G services across the country. The performance of Zain Iraq over the quarter was severely hampered by the escalation of political and social instability that has seen several million people displaced internally, coupled with Zain Iraq enduring frequent temporary network shutdowns and associated higher network operational costs. These exceptional circumstances coupled with intense competition and currency fluctuations, adversely affected the operation's financial performance, as its revenues for the first three months reached $304 million, with EBITDA reaching $110 million, and net income amounting to $34 million.

Comparing the first quarter 2015 results to the fourth quarter of 2014, Zain Iraq's revenue decreased by 15%, EBITDA decreased 5%, and net income increased by 4%. Zain Iraq team is committed to maintaining a resilient and efficient network regardless of the situation in the country and the operator foresees significant growth for all key financial indicators due to mobile data revenue growth given the pent-up demand for broadband services. The operator now serves 13.5 million customers. On 30 April, 2015, the Iraq Securities Commission (ISC) formally approved Al Khatem JSC's (Zain's joint stock company in Iraq) application to list on the Iraq Stock Exchange and the company is in the process of completing all necessary and statutory procedures and steps to ensure that this process is completed in a timely fashion.

Saudi Arabia

Zain Saudi Arabia is continually improving in all key aspects of its business. For the first three months of 2015, revenues reached $459 million, reflecting a 7% increase, while net losses decreased 19% to $69 million, compared to same period in 2014. EBITDA increased significantly by 16%, reaching $93 million, while the EBITDA margin improved to 20% compared to 19% in Q1-2014. Encouragingly, data revenues grew significantly by 26%, representing 20% of total revenues at the end of the quarter. The customer base in the Kingdom grew a healthy 27% Y-o-Y during the quarter to reach 10.6 million, the highest customer growth rate in the Group.

Sudan

The operation performed well in both USD and local currency terms (SDG) with revenues increasing 10% Y-o-Y in USD terms to reach $176 million (up 17% Y-o-Y in SDG terms). EBITDA increased 9% Y-o-Y to reach $68 million (up 15% in SDG terms), with net income increasing 42% Y-o-Y to reach $43 million (up 51% in SDG terms). Data revenues have increased substantially Y-o-Y, up 72% in USD terms and 82% in SDG terms to reflect 8% of total revenues, boding well for the future given the scarcity of broadband services.

Jordan

Zain Jordan saw a slight decrease in revenues in Q1-2015 of 2% to reach $110 million with net income reaching $22 million for the period. The operation witnessed a 5% increase in data revenue where data represented 26% of Zain Jordan's total revenue at the end of the period, with this expected to grow substantially given the recent roll-out of 4G services in the Kingdom. The operation plans to expand and invest heavily in the expansion of 4G services throughout 2015. Zain Jordan's customer base reached 3.8 million.

Bahrain

Zain Bahrain's nationwide network has recently seen a $100 million investment over the past 12 months in a total network revamp and upgrade to 4G LTE, and the operation witnessed an 8% Y-o-Y increase in data revenues for the first three months of the year, representing 33% of the company's revenues. The appeal of the enhanced network and new marketing initiatives has driven customer growth to now serve 785,000 customers.