Zain Group records revenues of $4.4bn, net income of $764m for the full-year 2013
Zain Group, the pioneer of mobile telecommunications across the Middle East and Africa, announced its consolidated financial results for the full-year and fourth quarter ended 31 December, 2013.
Zain added 3.4 million new customers over the last twelve months to serve 46.1 million, reflecting an 8% growth rate. Zain is the market leader by customer base in six of its eight operations.
For the twelve months of 2013, Zain Group generated consolidated revenues of USD 4.4 billion. Consolidated EBITDA for the period reached USD 1.9 billion, reflecting a healthy EBITDA margin of 43.4%. Consolidated net income amounted to USD 764 million, reflecting Earnings Per Share of USD 0.20.
The Board of Directors of Zain Group recommended a cash dividend of USD 0.18 (KD 0.050) per share subject to the Annual General Assembly and regulatory approvals. Additionally, shareholders’ equity stood at USD 5.74 billion (KD 1.62 billion) as at 31 December, 2013.
For the fourth quarter of 2013, Zain Group recorded consolidated revenues of USD 1.12 billion up 2% when compared to the same period in 2012. EBITDA for the quarter reached USD 492 million, reflecting a healthy EBITDA margin of 44% and an increase of 3% to the same period in 2012. Net Income for the quarter reached USD 180 million, reflecting a stable result compared to the same period of 2012.
Commenting on the results, the Chairman of the Board of Directors of Zain Group, Mr. Asaad Al Banwan said: “The positive customer and data revenue growth across all our operations over the course of the year bodes well for the future. Our substantial investments in technology and network upgrades, especially in 4G LTE, are having positive results in attracting new customers and enhancing the mobile voice and broadband experience for our customers. Capital expenditure across the Group increased year-on-year by 15% and we will continue investing as we evolve and transform our mobile operations in order to maintain our market leadership and exceed our customers’ expectations.”
The Chairman continued, “2013 has been a challenging year and we continue to perform reasonably well if one considers our financial results in local currency terms. The company’s overall twelve-month financial results were substantially affected by currency translation impact, effectively slashing revenues by USD 419 million and EBITDA by USD 181 million. Without the effects of this currency translation impact, the company’s consolidated revenues would have grown 5% year-on-year with an EBITDA growth of 2%. With regard to net income, if not due to both a foreign currency translation impact of USD 92 million and an exceptional increase of USD 57 million loss from ‘foreign currency revaluation’ for the twelve-month period, net income would have grown by 1%.”
On a similar note in regard to the 2013 fourth-quarter, the Chairman also noted: “The company’s fourth quarter financial results were also affected by currency translation impact, reducing revenues by USD 31.5 million and EBITDA by USD 13.8 million. Without the effects of this currency translation impact, the company’s consolidated revenues would have grown 5% quarter over quarter with an EBITDA growth of 6%. With regard to net income, if not due to a foreign currency translation impact of USD 6.3 million for the fourth quarter period, net income would have grown by 4%.”
Zain Group CEO, Scott Gegenheimer noted, “We have undertaken many transformational initiatives to drive operational efficiency and innovation across our operations which continue to perform well in local currency terms. Although our quarter to quarter results are positive, it is disappointing to report declining financial results for the full year considering the sound operational progress achieved during 2013. Factors outside of Zain’s control such as an exceptional local currency devaluation in one key market, together with social instability in others continue to adversely affect our financial results. However, we are not discouraged by these set of circumstances and firmly believe that we are implementing the correct strategy for the company’s future growth.”
Gegenheimer reiterated the promising growth opportunities in the mobile broadband area for all of Zain’s operations, and that the company will continue to foster and develop this area of the business. “Our digital traffic and revenues continue to advance strongly, recording a healthy 25% growth rate, with data now reflecting 14% of all Zain Group’s service revenues.”
With regard to year-on-year key operational highlights across Zain’s operations, Gegenheimer noted the following:
Kuwait: The cornerstone of the company celebrated its 30th anniversary in 2013, continues to perform well with customer growth of 12% reaching 2.5 million, reflecting a leading market share of 39%. ARPU levels reach USD 39, with the attraction of its nationwide 4G LTE network resulting in data revenue growing 21%, forming 29% of total revenues. The introduction of Mobile Number Portability mid-way through the year had a neutral effect on the operation’s overall performance, quite uncommon for an incumbent operator, reflecting the appeal of the brand and the services provided.
Iraq: The operation continues to show its potential with its customer base growing 16% to reach 15.9 million, reflecting a 49% leading market position. ARPU levels reached USD 10 with data revenue increasing 65%. CAPEX for the year largely increased as Zain Iraq upgraded its network to Single-RAN allowing it to offer 3G services promptly and efficiently once spectrum is granted (expected in 2014) as well as expanding its network to the more affluent Northern Iraq region, where ARPU levels are higher.
Sudan: Leading the market with 11.7 million customers that reflect a 43% market share, the operator continues to excel in local SDG currency terms, as revenues and EBITDA grew by a healthy 18%. The steep 35% devaluation in the currency during 2013 compared to the USD, has an enormous effect on the Group’s overall results. Data revenues grew 49% as Zain Sudan continues to expand and upgrade its network. A favorable telecom tax law was introduced in mid-June 2013 that saw a 2.5% levy on operators’ revenues introduced for a period of three years replacing the 30% corporate income tax. This is set to enhance Zain Sudan’s financial position for the coming three years, partially compensating for the losses incurred due to currency issues.
Saudi Arabia: Attractiveness of 4G LTE network and aggressive marketing campaigns contribute to 13% customer growth to reach 8.5 million (applying 90-day policy of active customer rule), with an ARPU of USD 18 and impressive data revenue growth of 73%. The operator is currently undergoing a significant restructuring and transformation in many areas under the direction of the new CEO appointed in September 2013. Three positive financial events, namely a government sanctioned seven-year deferment of annual dues and other obligations as well as the renewal of two major loans, USD 600 million for three years and the extension of a USD 2.3 million Murabaha facility for five years, both at favourable terms, will all provide the necessary cash flow and stimulus for the company to expand its network and roll-out customer enhancing services.
Jordan: Customer base grew by 12% to reach 3.9 million, a leading 39% market share. Heavy investment in CAPEX and aggressive marketing fuels 34% data revenue growth whereby data now represents 20% of the operator’s revenues. A special tax was imposed on the telecom sector with mobile services tax rate increasing from 12% to 24% and mobile handsets tax rate increasing from 8% to 16%. These taxes have effectively acted as an impediment to the sustained growth of the telecom sector in the country in the short-term.
Bahrain: Customer base grew by 25% to reach 772,000 with revenues and EBITDA growing 5% and 7% respectively, reflecting a healthy ARPU of USD 23. Focused investment in CAPEX that increased 42% essentially for the launch of 4G LTE and other upgrades fuels data revenue growth of 20% whereby data revenues represents 27% of all revenues. In September 2013, acquired additional frequency spectrum in 1800 Mhz that will enhance its 4G LTE rollout.
South Sudan: Market leader sees its customer base grow by 22% to reach 812,000. Focus is on expanding the network, resulting in the building of 83 new network sites during 2013. All key financial indicators are witnessing healthy growth in the new nation.
Lebanon: Management contract extended for another three months to 31 March 2014, customer base grows 5% to reach 2 million.