Zain posts revenues of KD 1.14 bln for 2015 – Group records KD 154 mln net income; BoD recommends cash dividend of 30 fils per share

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KUWAIT CITY, Feb 10: Zain Group, a leading mobile telecom innovator in eight markets across the Middle East and Africa, announces its consolidated financial results for the year 2015 and fourth quarter ended Dec 31, 2015.

Zain served 45.6 million customers at the end of the period, reflecting a 3 percent increase year-on-year (Y-o-Y).

For the full-year 2015, Zain Group generated consolidated revenues of KD 1.14 billion ($3.78 billion), down 6 percent year-on-year (Y-o-Y), while consolidated EBITDA for the period reached KD 499 million ($1.66 billion), relatively stable Y-o-Y, reflecting a healthy EBITDA margin of 44 percent. Consolidated net income reached KD 154 million ($513 million), down 21 percent reflecting Earnings Per Share of 40 Fils ($0.13).

The Board of Directors of Zain Group recommended a cash dividend of 30 fils ($0.10) per share subject to the Annual General Assembly and regulatory approvals. Additionally, shareholders’ equity stood at KD 1.54 billion ($5.09 billion) as at Dec 31, 2015.

For the fourth quarter of 2015, Zain Group recorded consolidated revenues of KD 283 million ($933 million), a decline of 3 percent on the same period of the previous year (Q-o-Q). EBITDA for the quarter reached KD 127 million ($418 million), up 7 percent Q-o-Q, reflecting a healthy EBITDA margin of 45 percent. Net income for the quarter reached KD 36 million ($119 million), up 8 percent Q-o-Q, reflecting Earnings Per Share of 9 Fils ($0.03).

Key Operational Notes for 12 months ended Dec 31, 2015:

* Substantial investments in 3G and 4G LTE network expansion and upgrades continue to pay off as Group data revenues (excluding SMS and VAS) surged by an impressive 15 percent during 2015, representing 20 percent of the Group’s consolidated revenues.

* Foreign currency translation impact mainly due to the appreciation of the USD against the KD cost the company $218 million on revenue, $95 million on EBITDA and $30 million on net income for the year 2015.

* Specifically for the fourth quarter of 2015, currency translation impact cost the company $41 million on revenue, $18 million on EBITDA and $5 million in net income.

* The continued political instability in Iraq during 2015 has seen several million people displaced internally with Zain Iraq enduring frequent temporary network interruptions and associated higher network operational costs. These unavoidable occurrences coupled with heightened levels of price competition and implementation of a new 20 percent sales tax on mobile services as well as wide-ranging tax increases on other sectors in Iraq that hit spending on mobile services, all contributed to a negative impact on Zain Iraq’s and consequently Zain Group’s overall key financial metrics (24 percent decline in revenues recorded at Zain Iraq and a 52 percent decline in net income at the operation).

* Bahrain, Jordan, Saudi Arabia and Sudan operations all reflect robust growth for the year, with Zain Kuwait’s performance impacted by intense price competition despite customer growth.

* Heavy investment in 3G & 4G network expansion upgrades across operations saw CAPEX spend for the year amount to $797 million (excluding Saudi Arabia), reflecting 21 percent of Group revenues.

* Additional amortization on both Zain Iraq’s 3G licence fee and Zain Jordan’s additional 3G and newly acquired 4G spectrum licence fees impacted the bottom line by $52 million.

Commenting on the results, the Chairman of the Board of Directors of Zain Group, Asaad Al Banwan said, “The Board is working closely with the executive management to overcome the many challenging socio-economic factors in a number of our markets, particularly with regard to the social unrest in Iraq and the intense price competition in Kuwait. The positive performances in Bahrain, Jordan, Saudi Arabia and Sudan underline that the company’s strategy is fundamentally sound in driving the business forward and we shall continue managing the highly changeable environments we face in a pragmatic and effective manner.”

The Chairman continued, “We have invested significantly in 3G / 4G network expansion upgrades and spectrum licence fees across all our markets in order to improve the mobile experience for our customers. Our investments in capital expenditure reached $797 million (excluding Zain Saudi Arabia) which represents 21 percent 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 and attention to customer service”.

Zain Group CEO, Scott Gegenheimer said, “Zain Group remains resilient to the wider challenges facing a number of its markets, and the region in general. It is unfortunate that some factors outside of our control have impacted overall performance for the year considering the sound operational progress and transformation we have undertaken across all our markets. Nevertheless, we are pleased with the progress of our data monetization initiatives and draw much confidence from the growth in the uptake of data services, which now account for 20 percent of overall service revenues, and the Group will continue to foster and develop this key area of the business.”

The Group CEO continued, “Furthermore, our efficiency and optimization initiatives are producing tangible positive results reflected in our improving EBITDA margin of 44 percent and 45 percent for the full-year and fourth quarter respectively. However, we have incurred an additional amortization cost of $52 million on 3G and 4G spectrum licence fees in two key markets which impacted our bottom line for the year. We do still draw encouragement from our overall performance in the fourth quarter of 2015, which saw EBITDA and net income increasing 7 percent and 8 percent Q-o-Q respectively.”

Strategy

Additionally Gegenheimer noted, “We are committed to our strategy that will leverage on our strengths, including our people, brand, customer experience, cutting edge technology innovations, and geographic coverage. We shall also continue on the path towards implementing operational efficiency initiatives, looking to develop new business areas and becoming a diversified and innovative digital lifestyle operator.”

Operational review of key markets for the 12 months ended Dec 31, 2015:

Kuwait: Maintaining its market leadership, the flagship operation of Zain Group saw its customer base grow 9 percent to serve 2.9 million in a very challenging year that saw intense price competition impact its financial performance for the year. Revenues reached KD 323 million ($1.1 billion), EBITDA amounted to KD 158 million ($526 million) and net income came in at KD 94 million ($314 million). Zain Kuwait’s healthy EBITDA margin of 49 percent for the year reflects the efficiency drive implemented by the operation, with Zain Kuwait’s nationwide 4G LTE network saw data revenues (excluding SMS & VAS) form 36 percent of total revenues, reflecting an annual growth rate of 8 percent.

Iraq: The exceptional circumstances facing the operation as mentioned above saw Zain Iraq’s financial performance severely affected with revenues for the full-year reaching $1.22 billion, a decrease of 24 percent on 2014, with EBITDA reaching $480 million, down 17 percent, and net income amounting to $122 million, down 52 percent Y-o-Y. Notably the operation’s efficiency drive saw its EBITDA margin increase to 39 percent, and with the launch of 3.9G services at the beginning of the year, data related revenue formed 7 percent of the total revenues, reflecting an annual growth of 34 percent.

Sudan: In local currency (SDG) terms, the operator continues to perform well, as revenues grew by 13 percent Y-o-Y to reach SDG 4.56 billion ($717 million, up 7 percent in $terms) for the full-year 2015. EBITDA increased by 22 percent to reach SDG 1.98 billion ($311 million, up 15 percent in $terms) while net income increased 77 percent to reach SDG 1.04 billion ($163 million, up 67 percent in $terms). Data revenues (excluding SMS and VAS) formed 11 percent of total revenues, with an impressive annual growth of 102 percent (91 percent in $terms).

Saudi Arabia: The transformation efforts of the third operator in the Kingdom are taking effect, resulting in an annual 32 percent increase in customers to serve 11.9 million at the end of 2015. For the full-year 2015, the operator posted improved financial results, recording an 8 percent Y-o-Y increase in revenues to reach $1.86 billion, a drastic 48 percent increase in EBITDA to reach $434 million and net losses narrowing by 23 percent to reach $259 million. EBITDA margin rose to 23 percent in 2015, up from 17 percent in 2014. Impressively, the operator witnessed a 58 percent rise in data revenues (excluding SMS & VAS) Y-o-Y, which represents 25 percent of total revenues as the company invested heavily and expanded its modern 4G LTE network.

Jordan: Despite the intensification of price competition, Zain Jordan managed to increase its customer base by 6 percent Y-o-Y, serving 4.1 million customers, and maintaining its lead in the market. Y-o-Y revenues decreased 2 percent to reach $459 million, with EBITDA increasing 30 percent to reach $251 million, and net income increasing 7 percent to reach $122 million. With the launch of 4G services, data revenues (excluding SMS & VAS) represented 29 percent of total revenues, growing by 18 percent as compared to the same period in 2014.

Bahrain: During 2015, Zain Bahrain generated revenues of $191 million, down 2 percent Y-o-Y. EBITDA for the period reached $75 million, up 4 percent, reflecting a healthy EBITDA margin of 39 percent. Net income amounted to $14 million, reflecting a 24 percent increase. The totally revamped 4G network in which Zain Bahrain has invested in excess of $100 million recently saw data revenues (excluding SMS & VAS) increase 11 percent, representing 33 percent of overall revenues.

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