Zain Group net profit grows 5% to $450 mln for 9M 2021, EPS 31 fils

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DATA REVENUE ACCOUNTS FOR 42% OF CONSOLIDATED REVENUE

KUWAIT CITY, Nov 10: Zain Group, the leading telecom innovator in seven markets across the Middle East and Africa, announces its consolidated financial results for the third-quarter (Q3) and nine-month periods (9M) ended September 30, 2021. The company ended the period with a stable customer base of 48.4 million customers. For 9M 2021, Zain Group generated consolidated revenue of KD 1.1 billion (USD 3.8 billion), down 3% year-on-year (Y-o-Y), while consolidated EBITDA for the period reached KD 478 million (USD 1.6 billion), down 3% Y-o-Y, still reflecting a healthy EBITDA margin of 42%. Efficiency and optimization initiatives resulted in consolidated net income increasing 5% Yo- Y, amounting to KD 135 million (USD 450 million). Earnings per share amounted to 31 fils (USD 0.10) for the nine-month period.

The increase in 9M consolidated net income is attributable mainly to the impressive revenue performance of the majority of Group operations, except primarily for Zain Iraq, which had its profitability impacted by the currency devaluation in the country. Moreover, Group net income increased on account of successful cost optimization initiatives and loan restructuring across operations and the Group, which resulted in significant savings in financing costs. For 9M 2021, foreign currency translation was impacted mainly due to the currency devaluation in Sudan from 55 in January 2021 to 439 (SDG / USD) end of September 2021, and a 19% currency devaluation in Iraq from 1,190 to 1,470 (IQD / USD). These movements cost the Group USD 609 million in revenue and USD 316 million in EBITDA.

Notably, if the USD 609 million currency translation impact on revenue was excluded, Y-o-Y revenue would have grown by 12% for 9M 2021. In Q3 21, Zain Group generated consolidated revenue of KD 385 million (USD 1.3 billion), down 4% Y-o-Y. EBITDA for the quarter reached KD 168 million (USD 557 million), an increase of 3% Y-o-Y, reflecting a 43% EBITDA margin. Net income for the three months amounted to KD 49 million (USD 165 million), a 5% increase Y-o-Y. Earnings per share for Q3’21 amounted to 11 fils (USD 0.04).

For Q3 2021, foreign currency translation was impacted mainly due to the currency devaluation in Sudan from 55 in January 2021 to 439 (SDG / USD) end of September 2021, and a 19% currency devaluation in Iraq from an 1,190 to 1,470 (IQD / USD), costing the Group USD 231 million in revenue and USD 132 million in EBITDA. Key Operational Notes for 9M 2021 1. The Ordinary General Assembly on October 12 approved distribution of an interim cash dividend of 10 fils, totaling US$ 143 million as part of 33 fils per share annual minimum dividend policy 2.

The 9M 2021 period was highlighted by the 104% Y-o-Y increase in net income at Zain Sudan, a 23% net income increase in Zain Jordan and a 18% net income rise in Zain Bahrain 3. Data revenue reached USD 1.58 billion representing 42% of the Group’s consolidated revenue 4. The first nine months saw Zain Group invest over USD 665 million in CAPEX reflecting 18% of revenue, mainly in Fiber-to-the-Home (FTTH); spectrum fees; 4G upgrades and 5G rollouts 5. Zain Kuwait witnessed impressive growth in 5G consumer and B2B customers, with Zain Saudi Arabia expanding its 5G network to over 51 cities covering all regions in the Kingdom 6. Zain joins forces with four regional operators to implement Open Radio Access Network (Open RAN) solutions to drive innovation, cost efficiencies, and customer mobile experience 7. The growth of Zain Esports continues, holding 16 tournaments since beginning of year with over 18,000 participants and attracting over 35 million social media impressions 8.

The Zain Group Application Program Interface (API) platform enabling faster deployment of digital partnerships, continues to grow exponentially, offering 32 live services resulting in a robust 43% Y-o-Y increase in revenue and a 70% Y-o-Y increase in API transactions per month 9. Zain receives three awards from SAMENA Council-MEA Business Technology Achievement Awards for: New Technology Leadership for 5G launches in Kuwait and KSA; Innovative Collaborations for Zain Esports; Groundbreaking services for fintech solution Tamam in KSA Commenting on the 9M performance, the Chairman of the Board of Directors of Zain Group, Ahmed Al Tahous said, “We continue to rollout high quality telecommunications services across our markets in an inclusive manner, empowering and improving the socio-economic well-being of the communities we serve. We are also focused on driving efficiencies and seeking new lucrative opportunities to create shareholder value. We thank government authorities across our markets for their vision and support in helping us overcome the many challenges faced by the telecom sector at large.”

Zain Vice-Chairman and Group CEO, Bader Al-Kharafi commented, “The operational performance that saw net profit growth over the 9M period, despite the huge impact of unavoidable currency devaluations, is testament to the successful implementation of the ‘4Sight’ strategy. I am extremely proud of the digital transformation achievements and network rollouts our teams have accomplished across our footprint, enabling us to continue in our mission to foster sustainable systemic change and provide meaningful connectivity in offering high-quality and appealing services to our customers.” Regarding the huge impact of unavoidable currency devaluations in Iraq and Sudan, Al-Kharafi noted, “It is unfortunate that factors beyond our control have impacted several key financial indicators.

Management is taking concrete steps to mitigate the impact, including revamping of prices, and offering new lucrative digital services and packages to individual and enterprise customers to capitalize on the comprehensive 4G rollouts in these countries.” Al-Kharafi continued, “We are operating at optimal efficiency levels and are confident of the future prosperity of the company, evident by the minimum dividend policy we set in 2019 and the recent decision to distribute interim dividends in Q4 ‘21, a step that provides a clear indication of the strength of our financial solvency, and the company’s ability to execute on its strategic growth and financial plans.” “We remain focused on several new lucrative and strategic business opportunities with a priority today on obtaining a digital banking license and becoming the first telco-led challenger bank across the Middle East. We are keen on fostering innovations in the fintech space, given the success and exponential growth we have achieved to date with Tamam in Saudi Arabia and Zain Cash in Iraq and Jordan.” “Similarly, a priority that will create enormous value, is the recent establishment of ZainTech, a vital development in Zain’s determination to transform into a multi-core digital business. A first among telecom operators in the Middle East, ZainTech unifies the Group’s ICT assets under one roof to provide comprehensive digital solutions and transformation services to enterprises and governments across the region. The new entity also incorporates NXN and Zain Data Park, both specialized ICT establishments in their respective fields. ZainTech offerings will range from solutions for cloud, cybersecurity, and associated managed and professional services. The company will also provide standard and customized digital solutions addressing the unique needs of different verticals leveraging the latest innovations in IoT, big data, artificial intelligence, and emerging technologies.”

“To support the ever-growing demand for high-quality data and benefit from the many lucrative opportunities especially in the enterprise space, sound international connectivity and capacity is critical in offering customers quality services across all our markets. Accordingly, the company has revamped the Group’s Wholesale business, aiming to become the carrier-of-choice in the region for telcos, other carriers and OTTs. The entity will act as the single interface between Zain opcos and other international carriers, thereby operating at scale and achieving efficiencies. It will also invest in its own infrastructure, including platforms, international cables and data centers.” “I’m extremely excited by the recent creation of Zain Ventures, formalizing Zain’s entrepreneurial startup-related investments under a single entity and opening the door to future investment opportunities in the venture capital, fintech and tech world. We will support and create enormous value from recent investments we’ve made in fast-growing innovative startups such as PIPE and SWVL.”

Al-Kharafi concluded, “As the world continues to deal and co-exist with the pandemic, Zain’s resilience and agility to adapt to a vastly changing environment primes us well to tap into the many lucrative opportunities that are brought forth by the Fourth Industrial Revolution. New business verticals and opportune investments we proactively made in the digital arena in recent times will ensure Zain achieves healthy cashflows and sustainable returns for shareholders. We will continue fostering new value-accretive areas as we drive the business forward.” Operational review of key markets for the nine months ended 30 September, 2021 Kuwait: Maintaining its market leadership, Zain Group’s flagship operation saw its customer base serve 2.3 million. It remains the Group’s most profitable operation with revenue for 9M 2021 growing 1% and reaching KD 235 million (USD 779 million), EBITDA grew 9% to reach KD 91 million (USD 303 million), representing an EBITDA margin of 39%. Net income grew by 2% to reach KD 58 million (USD 193 million) for 9M 2021, with data revenue accounting for 41% of total revenue, representing 6% growth. Saudi Arabia: For the 9M 2021, Zain KSA generated revenue of SAR 5.8 billion (USD 1.6 billion), EBITDA for the period reached SAR 2.3 billion (USD 616 million), reflecting an EBITDA margin of 40%.

Net income for the nine months reached SAR 143 million (USD 38 million). Data revenue represents 49% of total revenue and customers served stood at 7.5 million. For the 3rd quarter of 2021, Zain KSA revenues increased by 3% to reach USD 530 million, EBITDA increased by 5% to reach USD 215 million, with an impressive EBITDA margin of 41%, and net profit stable at USD 16 million. Iraq: Zain Iraq’s 9M 2021 revenue reached USD 574 million and EBITDA amounted to USD 226 million, reflecting EBITDA margin of 39%. Net income reached USD 31 million for 9M 2021. The operator served 16.5 million customers maintaining its market leading position. Sudan: For 9M 2021, Zain Sudan generated revenue of USD 241 million, with EBITDA amounting to USD 118 million, reflecting an EBITDA margin of 49%. The operation reported an impressive net profit of USD 72 million, reflecting a 104% increase in USD terms. Data revenue represented 28% of total revenue, while the operator’s customer base reached 16.4 million, maintaining its market leadership. Jordan: For 9M 2021, Zain Jordan revenue increased by 4% to USD 373 million, EBITDA grew by 16% and reached USD 186 million, reflecting a healthy EBITDA margin of 50%, with net income increasing an impressive 23% reaching USD 69 million. With the ongoing expansion of 4G services across the country, data revenue represented 50% of total revenue. Zain Jordan served 3.7 million customers maintaining its market leading position. Bahrain: Zain Bahrain generated revenue of USD 127 million for 9M 2021 (4% growth). EBITDA grew by 4% to reach USD 44 million, reflecting an EBITDA margin of 34%, while Net income grew by an impressive 18% to reach USD 12 million, for 9M 2021.

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