Zain announces record financial results for 2008
· Customer base increases 50% to 63.5 million
· Company revenues jump 26% to US $7.44 billion despite currency fluctuations
· Net profit up 6% to US$ 1.2 billion translating to US$ 0.33 per share
· Strong performance allows company to pay off $1.8 billion in financial obligations and due to challenging market conditions Zain will adapt its strategy to take up prime opportunities
· Huge investment in network expansion expected to reap rewards in 2009 and beyond
Kuwait, March 1, 2009
Zain, the leading mobile telecommunication operator in the Middle East and Africa present in 22 countries, announces today its consolidated financial results for the year ended 31 December 2008. The results showed significant growth in many key indicators.
2008 Key Performance Indicators
Total Managed Active Customers
63.54 million up 50%
Consolidated Revenues
US$ 7.44 billion up 26%
EBITDA
US$ 2.78 billion up 15%
Net Income
US$ 1.2 billion up 6%
EPS
US$ 0.33
Shareholders Equity
US$ 8.69 billion up 36%
For the 2008 year, Zain Group recorded all time high consolidated revenues of US$ 7.44 billion, an increase of 26% compared to 2007. The company’s consolidated EBITDA increased by 15% for the same period to reach US$ 2.78 billion. Consolidated net profits reached US$ 1.2 billion, an increase of 6% on 2007. The earnings per share was US$0.33 and the shareholders equity was up 36% to US $8.69 billion.
Year on year customer growth across the two continents in which Zain operates was 50% with the Zain Group serving 63.54 million managed active customers at 31 December, 2008.
Operational Highlights throughout the year
· January 5: Iraqi operators MTC-Atheer and Iraqna unite as Zain soon after attaining a 15 year licence
· April 14: ‘One Network’ launched in four Middle East countries Bahrain, Iraq, Sudan and Jordan providing 14 million Zain customers preferential cross-border rates when travelling
· June 27: Zain brand introduced to over 1 billion global viewers through the broadcast of Zain sponsored concert celebrating Nelson Mandela’s 90th birthday..
· August 1: All 14 operations in Africa rebranded from Celtel to Zain in the biggest brand launch ever in Africa. This move coincided with the linking of two continents to ‘One Network’ to then include 15 countries, 50 million customers and potentially 500 million people who can benefit from the service
· August 26: Commercial services are launched in the Kingdom of Saudi Arabia. The operation joins ‘One Network’ and ends the year with 2 million customers after only four months of operations.
· September 20: Zain successfully completes a US$ 4.49 billion capital increase, carried out primarily to meet commitments and finance expansion plans
· December 15: Zain launches commercial services in Ghana, taking to 17, the number of countries in ‘One Network’. Ends year with more than 270,000 customers.
Chief Executive Officer of Zain, Dr Saad Al Barrak commented: “I am delighted that these 2008 financial results release, for the first time are announced under the umbrella of one brand, following the successful rebranding of all our Africa operations to Zain and the successful launch of commercial operations in the Kingdom of Saudi Arabia and Ghana. We firmly believe that the Zain brand will act as a catalyst and propel the company to our 2011 target of being a top-ten global operator.”
Ancillary to this Dr Al Barrak said, “Despite a very challenging environment on many fronts and huge investments in network expansion, the Group was able to achieve appealing and realistic levels of profitability during 2008, a testament to the sound management practices and excellent operational performance of all 22 operations in the Middle East and Africa.”
He added, “During the year Zain committed over US$ 3 billion in network upgrades and expansion primarily in vast and viable markets such as Ghana, Iraq, Nigeria, Saudi Arabia and Sudan all resulting in robust customer acquisition and revenues. These markets will continue to grow and we expect to further reap further rewards in the years ahead especially since they are all part of our ground-breaking and customer alluring ‘One Network’.”
On this point, Dr Al Barrak noted, “Overall, due to our massive network investment across all operations, we expect and are targeting a 30% increase on many of our financial indicators in 2009.”
Capital Increase pays off commitments and funds new acquisitions
On the successful capital increase that raised US$ 4.49 billion in September 2008 whereby 99% of all shareholders subscribed, Dr Al Barrak noted, “this unanimous vote of confidence by our shareholders in Zain's management and strategy will assist the company in meeting financial commitments and support our expansion plans of being a top-ten global mobile operator by 2011.” Further to this he added, “I am pleased to announce that Zain has recently paid back a Murahaba facility of US$ 1.2 billion as well as the first instalment of US$ 525 million for the purchase of Iraqna and several other financial obligations. Also we confidently expect to announce our entry into the Palestinian, and at least one other market, in the very near future.”
Overcoming the Global Economic Crisis
Referring to the global financial crisis and volatility that has affected many equity markets, commodities and currencies, Dr Al Barrak said, “Despite the fact that company had to endure higher borrowing rates in the second half of the year and an adverse US$ 138 million in currency exchange cost predominantly in Africa, it still performed admirably. This amount would have added another 12% to the net profit figure should currencies have stayed relatively stable.”
Defending the Zain share price that sees it trading at historical low Price Earnings multiples, amid the negative sentiment that is gripping world stock markets and seeing billions wiped off valuations, including telecom groups to the range of 30 to 70%, Dr Al Barrak said, “We believe this in unjustifiable in Zain’s case as the debt levels of the Group fall within a reasonable range when compared to many other international mobile groups. The Group has sound reserves, an excellent track record of wise borrowing and repayment, as well as diverse funding sources to support its strategic expansionary plans. Today’s stock price represents excellent value for investors.”
Dr Al Barrak added that, "Zain views this crisis as an opportunity to make further acquisitions given valuations of many prime telecom assets are considerably lower than they were just six months ago and we are actively pursuing such prospects. Going forward in the current economic climate, Zain will adapt its strategy where it makes commercial sense and where it is economically viable to take up an attractive opportunity. This includes share swapping with and acquiring minority stake deals in other telecom operations.”
Attractive dividend for shareholders
On a final note, Dr Al Barrak noted that the Board of Directors had recommended a cash dividend of 50 fils per share – subject to the approval of the general assembly to be held at the end of March 2009 – explaining that the dividend value compared to last year’s distribution is in fact equal to 110 fils, if one take into account the 75% capital increase by the group in the third quarter of 2008.