Group records revenue of $2.6bn, net income of $273mn for H1 2020
KUWAIT CITY, July 15: Zain Group, a leading mobile innovator with operations in eight markets across the Middle East and Africa, has announced its consolidated financial results for the six months to June 30, 2020. Zain served 47.6 million customers at the end of the period, reflecting a 3% decrease year-on-year (Y-o-Y).
For the first six months of 2020 (H1), Zain Group generated consolidated revenue of KD 787 million (USD 2.6 billion), a decrease of 3% Y-o-Y. EBITDA for the period reached KD 336 million (USD 1.1 billion), down 5% Y-o-Y, reflecting an EBITDA margin of 43%. Net income amounted to KD 84 million (USD 273 million), down 14% Y-o-Y, reflecting earnings per share of 19 fils (USD 0.06).
Zain Group’s resilient results were achieved despite the widespread disruption in economic and social activity.
To counter the impact of the COVID-19 pandemic on Zain Group financials, management proactively took decisive cost optimization measures in areas such as contracts renegotiation, management of cashflows and loan repayments, that succeeded in reducing operational expenses by USD 68 million.
Group Key Performance Indicators (KD and USD) for the second quarter (Q2) of 2020 In the second quarter of 2020 (Q2), Zain Group generated consolidated revenue of KD 378 million (USD 1.22 billion), down 7% when compared to the same period in 2019.
EBITDA for the quarter reached KD 165 million (USD 533 million), down 7% Y-o-Y, reflecting an EBITDA margin of 44%. Net income for the quarter amounted to KD 36 million (USD 117 million), down 28% Y-o-Y, reflecting earnings per share of 8 fils (USD 0.03). Group Key Performance Indicators (KD and USD) for the first quarter (Q1) of 2020 In the first quarter of 2020 (Q1), Zain Group generated consolidated revenues of KD 409 million (USD 1.34 billion), up 1% Y-o-Y. EBITDA for the quarter amounted to KD 171 million (USD 559 million), down 4% Y-o-Y, reflecting an EBITDA margin of 42%.
Net income for the quarter reached KD 48 million (USD 155 million), up 1% Y-o-Y reflecting earnings per share of 11 fils (USD 0.04). Key Operational Notes for H1 2020
1. Zain Group consolidated data revenue grew 10% Yo- Y to reach USD 1.1 billion, representing 42% of the Group’s revenue.
2. Relevant elements that had financial impact on the company include lower air time revenues (as key markets provided free airtime); the closure of retail shops, thus less recharge and handsets sales; halt of international business, leisure and religious travel affecting roaming revenues; increase of home Wi-ficonnectivity and lifting of data-usage caps; waiving of late fees; provision of more flexible payment terms and offering free content, to name a few.
3. Throughout the first six-months, Zain Group invested over USD 494 million in CAPEX reflecting 19% of revenues, predominantly in expansion of Fiber-to-the- Home (FTTH) infrastructure; spectrum fees; 4G upgrades and new network sites across its markets, as well as 5G rollouts in Kuwait, Saudi Arabia and recently Bahrain.
4. On July 7, 2020 Zain Iraq’s mobile license was extended for an additional eight years to expire on 30 August, 2030, with the operator planning to launch 4G services in early 2021.
5. Zain Saudi Arabia expanded its 5G network to cover all regions in the Kingdom (30 cities).
6. On February 12, 2020, Zain Kuwait completed the sale and leaseback of the passive physical infrastructure of its 1,620 mobile tower portfolio for USD 130 million (KD 40 million) to IHS Holding Limited. The transaction is the first sale and leaseback of telecom towers in the Middle East by a licensed mobile operator.
7. On June 14, 2020, Zain joined the Hedera Governing Council to create a safer, fairer, more secure internet, providing Zain with first-hand exposure to cutting-edge and secure technologies in the blockchain and wider distributed ledger technology (DLT) space, driving innovation, e-commerce and B2B across the region.
8. The Zain Group Application Program Interface (API) platform enabling faster deployment of digital partnerships, continues to grow exponentially, resulting in an eight-fold Y-o-Y increase in revenues with approximately 5 million transactions per month.
Commenting on the H1 2020 results, Chairman of the Board of Directors of Zain Group, Mr. Ahmed Al Tahous said, “The Group’s performance in the first half of the year reflected Zain’s resilience to turbulence, given the numerous operational challenges in these unique times. The Board has been working closely with management in minimizing the impact of COVID-19 on the business as well as ensuring the mobile networks are at optimal performance. I would like to recognize all the government ministries and regulatory authorities across our markets for their proactivity and cooperation with the telecom sector at large, in supporting operators, mobile consumers and societies during these times.”
Mr. Bader Nasser Al-Kharafi, Zain Vice-Chairman and Group CEO commented, “The first six-months was a mission-critical period as all our operations were focused on providing connectivity during the lockdown to minimize the impact of the pandemic on socio-economic life. At the same time, we refocused on digital transformation to better serve businesses, governments, and societies, granting increased digital access to essential medical, commercial and financial services.”
Al-Kharafi continued, “I would like to recognize and thank all Zain personnel who have remained dedicated and motivated to their duties and provided exemplary services, helping deliver on the critical role we play in maintaining connectivity and supporting the communities we serve throughout these exceptional times.
Furthermore, Zain was committed to ensuring its employees’ wellbeing and safety and the company took decisive actions to support and provide them with the tools needed to adapt during this time of crisis.” The Group CEO added, “Our culture of innovation has been invaluable at this time of rapid change, and Zain has been pro-active in its use of technology to maintain its operations at a high-level of availability, and our business continuity strategy has been executed impressively in the fight against COVID-19. We are proud to not reduce the salaries of any employee, as the company is optimistic of the telecom sector’s resilience in such times.”
Commenting specifically on the operational performance, Al-Kharafinoted, “We are reassured that the business fundamentals of Zain remain strong, although like most businesses, our financial results have been affected by factors outside of our control. Nevertheless, our decisive efficiency drive succeeded in reducing operational expenses by USD 68 million.”
“We have also focused on our digital strategy of monetizing 4G and 5G networks, our FTTH services, and Group API platform through compelling initiatives and packages as well as focusing on gaming, entertainment, fintech and e-health services. This has proven instrumental in countering the negative impact of the crisis with data revenues growing 10% Y-o-Y and now representing 42% of total revenues.”
“We have invested USD 1.5 billion in CAPEX including spectrum fees over the last 18 months, launching 5G networks in Kuwait, Saudi Arabia and most recently Bahrain as well as upgrading and expanding our 4G networks and FTTH services across our footprint. Doing so allows us to offer more innovative services to our customers in government, business, IoT, and smart city sectors, bolstering the digital economy in these areas. 5G technology will create vast opportunities in the value chain proposition in numerous industries and will push the telecom sector to a new and exciting phase of growth.”
“Moreover, the recent granting of a 4G licence in Iraq coupled with our mobile license extension there to 2030, will be instrumental to Zain playing its key role in the country’s socio-economic prosperity.”
Al-Kharafi concluded, “The critical importance of high-quality connectivity has never been more evident in keeping businesses, governments, and societies connected and functioning. The wide-ranging effects of COVID- 19 will bring multiple opportunities and challenges, and Zain is mobilizing all its resources to ensure its networks are operating at optimal levels to provide a superb mobile experience to all while at the same time capitalizing on the many opportunities in the digital space to create shareholder value.”
Financial KPIs of key markets for six-month period (H1) ended June 30, 2020 Kuwait: Maintaining its market leadership, the flagship operation of Zain Group saw its customer base serve 2.6 million.
The Group’s most profitable operation saw its H1 2020 revenue reach KD 153 million (USD 497 million), with EBITDA amounting to KD 54 million (USD 175 million), reflecting an EBITDA margin of 35%. The operator recorded net income of KD 38 million (USD 122 million). Data revenue represented 40% of total revenue.
Saudi Arabia: Zain KSA served 7.1 million customers. For H1 2020, the operator generated Revenue of SAR 3.9 billion (USD 1.05 billion), with EBITDA amounting to SAR 1.8 billion (USD 490 million), reflecting an EBITDA margin of 47%. Net income for the period reached SAR 164 million (USD 44 million). Data revenue represented 51% of total revenue.
Iraq: Zain Iraq served 14.9 million customers, maintaining its market leadership. For H1 2020, the operator generated revenue of USD 464 million and EBITDA reached USD 185 million, reflecting an EBITDA margin of 40%. Net income for the period reached USD 28 million.
Sudan: Zain Sudan served 15.7 million customers, maintaining its market leadership. For H1 2020, the operator generated revenue of SDG 9.4 billion (USD 178 million), with EBITDA amounting to SDG 4.1 billion (USD 77 million), reflecting an EBITDA margin of 43%. Net income for the period reached SDG 803 million (USD 15 million). Data revenue represented 24% of total revenue.
Jordan: Zain Jordan served 3.4 million customers, maintaining its market leading position. For H1 2020, the operator generated revenue of USD 234 million with EBITDA amounting to USD 103 million, reflecting an EBITDA margin of 44%. Net income for the period reached USD 34 million. Data revenue represented 46% of total revenue.
Bahrain: For H1 2020, the operator generated revenue of USD 83 million with EBITDA amounting to USD 27 million, reflecting an EBITDA margin of 32%. Net income for the period reached USD 5.7 million. Data revenue represented 50% of total revenue.