Global Insight Perspective | |
Significance | The operator demonstrated its can consistently deliver good results. Although previous quarters have shown higher revenue growth, Zain is in an expansion phase which will reap greater benefits in the medium-to-long term. |
Implications | Although the company reported a good set of figures, net profits were lower than expected due to heavy international investment. |
Outlook | The operator is in a good position to reach its mobile expansion plans of 75 million customers by 2011; however, it still needs to be aggressive in the few available acquisitions. |
Zain reported its first-half results with revenues of US$3.49 billion, up 26% year-on-year (y/y); EBITDA was US$1.31 billion, up 20%, and net profits reached US$551.5 million, up 7% y/y. The operator also reported phenomenal customer growth, through its acquisitions of 58% with 50.74 million customers worldwide. Commenting on the results, CEO Saad Al-Barrak said: "…these impressive results reflect the exceptional operational efficiencies in a company which is investing heavily and rapidly expanding across two continents … We have started to reap the rewards of our recent large investments particularly in Iraq, Nigeria, and Sudan with these three countries now serving more than half of Zain's 50 million customers, and we expect similar rewards when our operations in Saudi Arabia and Ghana commence commercial operations".
Zain operates in 22 countries; within the Middle East/North Africa Zain operates in Bahrain, Iraq, Jordan, Kuwait, and Sudan. In Lebanon the company operates as MTC-Touch. Zain plans to commence operations in the Saudi Arabia in August 2008 where it will enter as the country's third mobile operator, which will compete with Etisalat's Mobily and STC. In Africa, Zain operates under the Celtel brand in 14 sub-Saharan African countries, Burkina Faso, Chad, Democratic Republic of the Congo, Republic of the Congo, Gabon, Kenya, Malawi, Madagascar, Niger, Nigeria, Sierra Leone, Tanzania, Uganda, and Zambia. The company's mobile telecommunications operations in Ghana will begin in the fourth quarter of 2008.
Outlook and Implications:
Zain's primary advantage is its diverse set of mobile assets which will serve it well in the long run, its operations in Kuwait, and Bahrain produce its highest ARPU figures, as will its operations in Saudi Arabia when it launches mobile services in August 2008. Its investment in emerging markets have been at a relatively low cost, though ARPU figures will be low, the operator will benefit from the sheer volume of customers. Within much of the emerging markets, the mobile phone is also seen as gateway to the internet.
- Expansion Outlook: Although the operator is working on current expansion projects within the MENA region, it has also expressed interest in the acquisition of Syrian mobile operator Syriatel (see Syria: 11 March 2008: Zain Expresses Interest in Syriatel Mobile Telecom) which owns 10% of Yemeni telecoms operator, Hits Unitel and has a 55% market share in the Syrian mobile market, equating to 19 million customers. It also intends to convert its cellular management contract in Lebanon where it operates under the brand MTC Touch into a full licence (see Lebanon: 10 March 2008: MTC Touch Expresses Interest in Lebanese Mobile Licence Auction).
- Customer Targets: Saad Al-Barrak has increased the firm’s customer figure target to 110 million by the end of 2011; this is more than double the current customer figure. Originally, the target was 75 million by the end of 2011 which is more achievable. In order for it to exceed 100 million customers in 2011, it needs to rapidly expand through acquisitions of existing operators in growth regions. Within 2006 many mobile licences were offered across the MENA region; however, most MENA countries now have some form of competition and very few are expected to be announced in 2008.