Board of Directors recommends a cash dividend of 30 fils per share

KUWAIT: Zain Group, a leading mobile telecom innovator in eight markets across the Middle East and Africa, announces its consolidated financial results for the full-year 2018, and fourth-quarter ended 31 December, 2018. Zain serves 49 million customers, reflecting a 5 percent increase year-on-year (Y-o-Y).

For the full-year 2018, Zain Group generated consolidated revenues of KD 1.3 billion ($4.4 billion), an impressive 28 percent Y-o-Y growth, while consolidated EBITDA for the period increased by 25 percent Y-o-Y to reach KD 519 million ($1.7 billion), reflecting an EBITDA margin of 39 percent. Consolidated net income reached KD 197 million ($649 million), up 23 percent and reflecting Earnings Per Share of 45 Fils ($0.15).

For the full-year, foreign currency translation impact, predominantly due to the 47 percent currency devaluation in Sudan from an average of 16.9 to 31.9 (SDG / USD), deprived the company $216 million in revenue, $79 million in EBITDA and $27 million in net income.

The Board of Directors of Zain Group recommended a cash dividend of 30 fils per share, reflecting a total distribution of KD 130 million, subject to the Annual General Assembly and regulatory approvals.

For the fourth quarter (Q4) of 2018, Zain Group recorded consolidated revenues of KD 411 million ($1.4 billion), up 57 percent when compared to Q4, 2017. EBITDA for the quarter amounted to KD 195 million ($642 million), reflecting an EBITDA margin of 47 percent. Net income for the period amounted to KD 59 million ($196 million), up 59 percent Y-o-Y, and representing Earnings Per Share of 13 fils ($0.05).

Specifically, for Q4 2018, currency translation impact deprived the company $78 million in revenue, $25 million in EBITDA and $10 million in net income, again predominantly due to currency devaluation in Sudan from 18.3 to 46.2 (SDG /USD), a 60 percent decrease.

Key Operational Notes for 12 months ended 31 December, 2018:

1. Zain Saudi Arabia (KSA) became a subsidiary of Zain Group due to the step-up acquisition in Q3 2018. Consequently, Zain KSA's financial results are consolidated starting from 1st of July 2018, bolstering the Group's financial indicators on various levels and maximizing shareholder value. Zain KSA's share price has increased 71 percent and resulting market capitalization has increased $600 million over the last three months substantially on account of the recently implemented turnaround initiatives.
2. The impact of the Zain KSA step-up acquisition and resulting consolidation for a six-month period, combined with the operation's profitable growth ($89 million) for the year resulted in Zain Group recording an additional $1.1 billion in revenue, $487 million in EBITDA. For Q4 2018 specifically, this impact reflected in an additional $546 million in revenue and $292 million in EBITDA.
3. Group data revenues (excluding SMS and VAS) experienced a 71 percent growth for the full-year 2018, representing 33 percent of the Group's total revenues. Again, it should be noted that the substantial growth percentage is predominantly due to the consolidation of Zain KSA results, with substantial investments in network upgrades and expansion contributing to this growth.
4. The year was further highlighted by the notable 70 percent net profit increase in Zain Iraq; Zain Kuwait recording a healthy 21 percent increase in net income for Q4 2018; and Zain Sudan continuing to perform exceptionally well in all key financial indicators in local currency terms.
5. Throughout 2018, Zain Group invested $750 million in network expansion and 4G / 5G upgrades including fiber (FTTH) rollout and spectrum fees in several key markets.
6. The launch of the Zain Group Application Program Interface (API) platform in the first-half of 2018 saw Zain exposing its APIs, thus helping to remove a significant barrier to developing potential digital partnerships globally.

Commenting on the results, the Chairman of the Board of Directors of Zain Group, Ahmed Al-Tahous said, "The company's impressive performance for both the full-year and fourth quarter of 2018 is a result of the Board's and management's focus on the profitable turnaround of key operations and the constructive actions undertaken to consolidate Zain Saudi Arabia. We are grateful for our positive relationships with government ministries and regulatory authorities across all our markets. These bodies have been our partners and the wisdom they have shown in dealing with the new industry dynamics, has been instrumental in supporting us to overcome challenges faced by our operations and the telecom sector."

Zain Vice-Chairman and Group CEO, Bader Al-Kharafi commented, "Our remarkable Group financial performance gives us confidence going into 2019 and beyond. These exemplary results are extremely satisfying on multiple levels as they confirm that our digital transformation strategy is on track. They also reflect the dedicated efforts of Zain's 6,000-strong talented workforce, who work with passion every day, in all that they do."

Al-Kharafi added, "The results are even more impressive when the various operational, regulatory, social and forex challenges we face across our footprint are taken into account."

Al-Kharafi continued, "We are creating the right foundation at Zain and investing heavily to be able to benefit from developments such as the forthcoming commercialization of 5G, the growing needs of enterprise users, and the interconnectivity created by the advent of the Fourth Industrial Revolution.

Initiatives such as optimizing the synergies between the Group, Omantel and all operations, huge investments in fiber and network upgrades and opening up of our APIs across key markets are geared towards making us a more agile operator that can reap the lucrative opportunities in the digital space and move quickly in the face of the sweeping changes in the ICT sector."

Furthermore, Al-Kharafi recognized numerous milestones during the year that included, "The value accretive consolidation of Zain Saudi Arabia that has seen its market capitalization substantially increase over the last three months, the ongoing revival of Zain Iraq reporting a 70 percent increase in profit, and the robust revenue growth in data monetization programs that accounts for 33 percent of Zain's overall service revenues. Moreover, our focus and investment in exploiting Enterprise (B2B) opportunities, cloud services, as well as smart city initiatives in key markets, particularly Kuwait and Saudi Arabia, are growing efficiently. We will continue to foster these areas of the business."

Al-Kharafi concluded, "Zain is evolving into an organization for the 21st century from a number of different perspectives - operationally, financially, through our Gender Diversity initiative, and our corporate sustainability programs supporting the youth and digital innovation like the recent ZINC initiative in Kuwait and established ZINC facility in Jordan. We are establishing an ecosystem of services based on delivering the highest quality experiences to our customers, and we are firm believers that this outlook will keep us relevant and successful long into the future."

Operational review of key markets for the 12 months ended 31 December, 2018:

Kuwait: Maintaining its market leadership, the flagship and most profitable operation of Zain Group saw its customer base serve 2.6 million in a very challenging year that witnessed intense price competition in the market. Revenues remained stable at KD 331 million ($1.1 billion), EBITDA amounted to KD 115 million ($381 million) and net income came in at KD 82 million ($272 million). Zain Kuwait reported an EBITDA margin of 35 percent for the year, with data revenues (excluding SMS & VAS) forming 35 percent of total revenues. For Q4 2018, Zain Kuwait reported $72 million in net profit, an impressive 21 percent increase as a result of cost optimization and growth in B2B initiatives.

Transforming itself into a digital services provider, Zain Kuwait launched numerous digital innovative solutions in 2018. The Zain Life portfolio focused on the areas of Customer Experience, Smart Homes, and Digital Entertainment while zBot smart customer services utilized the latest artificial intelligence (AI) solutions to interact and respond to customer inquiries in a fully automated manner. Zain Kuwait also launched eSIM services, an electronic SIM that replaces the traditional physical SIM card that is embedded in the device, allowing customers to add up to 10 individual numbers on one device. The operator launched an exclusive offer with Amazon Prime Video, through which customers gain access to award-winning movies and TV content on an advanced network. Similarly, Zain Kuwait launched a gaming platform with DoCoMo Digital, allowing customers to enjoy more than 1,000 popular high-quality games on iOS, Android and Windows.

In its 5G roadmap, the operator launched BEAM, the advanced wireless broadband technology, offering speeds that match fiber optics at 40 Mbps; the first telco to offer this revolutionary technology in Kuwait.

At the end of 2018, Zain Kuwait entered into an agreement with Zain Drone to undertake inspections of its tower infrastructure. The agreement, the first commercial deal for Zain Drone, demonstrates Zain Kuwait's drive to become a more agile and cost-efficient operator by deploying drone technology to inspect and maintain its infrastructure through comprehensive tower inspection and maintenance.

Saudi Arabia: Celebrating a decade of commercial operations in the Kingdom, Zain KSA reported consecutive and record full-year 2018 net profit, which soared to SAR 332 million ($89 million), reflecting a 29-fold increase on the 2017 performance. For the full-year 2018, Zain KSA generated revenues of $2 billion, a 3 percent Y-o-Y increase, while EBITDA for the year increased by 20 percent Y-o-Y to $802 million, reflecting an EBITDA margin of 40 percent. The operator's total customer base stood at 8.1 million and data revenues (excluding SMS and VAS) represent 51 percent of total revenues. For the fourth quarter of 2018, Zain KSA recorded revenues of $546 million, a 19 percent increase to the same period in 2017. EBITDA for the quarter reached $292 million, reflecting a 54 percent EBITDA margin, up 86 percent from $157 million recorded in Q4 2017. Net income for the three months reached an unprecedented $106 million, reflecting a marked improvement on the loss of $12 million recorded for Q4 2017.

Key operational highlights at Zain KSA include an agreement with the Kingdom's regulatory authorities to consolidate and reduce the annual royalty fee for commercial service by 5 percent from 15 percent to 10 percent of net revenues retrospectively, backdated to 1 January, 2018, with this 5 percent reduction set to positively impact the company's financial results going forward. Furthermore, the agreement included the settlement of disputed amounts related to the payment of annual royalty fees by Zain KSA to the CITC for the nine-year period between 2009 and 2017, under certain conditions. The financial impact of this settlement is expected to reach SAR 1.7 billion ($453 million) over three years.

During the fourth quarter of 2018, the company made a second early voluntary payment towards its Murabaha financing agreement, following a voluntary payment in September 2018. These early payments reflect the company's solid cashflow generation ability and shrewd cash management. Following such repayments, the net debt to EBITDA ratio of Zain KSA has improved.

Iraq: The improving socio-economic situation sweeping the country is providing the much-needed stimulus to support Zain Iraq's turnaround efforts. The operation performed exceptionally well when compared to the previous year. Revenues and net profit are consistently growing on a quarter-on-quarter basis, with full-year revenues reaching $1.1 billion, a 3 percent increase Y-o-Y and EBITDA reached $423 million, up 11 percent. The operation reported a net profit of $49 million, up 70 percent Y-o-Y compared to a profit of $29 million in the previous year, with EBITDA margin standing at 37 percent. The expansion of 3.9G services across the country and restoration of sites in the West and North (97 percent of all sites restored to date), combined with numerous customer acquisition initiatives, especially in core regions, resulted in an impressive addition of 1.3 million customers (9 percent increase) to reach 16 million. Another contributing factor to the operation's financial revival included cost optimization initiatives in areas such as repair and maintenance, as well as the significant growth of data revenues, robust growth in the Enterprise (B2B) segment and the revamping of Zain Iraq's call centers, which significantly improved customer service.

Sudan: In local currency SDG terms, the operator continues to perform exceptionally well, as revenues grew by 37 percent Y-o-Y to reach SDG 9.7 billion ($316 million, down 24 percent in USD terms) for the full-year 2018. EBITDA increased by 29 percent to reach SDG 3.7 billion ($121 million, down 27 percent in USD terms), while net income increased 11 percent to reach SDG 1.2 billion ($45 million, down 31 percent in USD terms). Data revenues (excluding SMS and VAS) formed 18 percent of total revenues, with an impressive annual growth of 56 percent.

Jordan: Although it maintained its market leadership, the intensification of price competition and return of refugees to their homeland resulted in Zain Jordan's customer base shrinking by 6 percent Y-o-Y, to serve 3.7 million customers at the end of the year. Y-o-Y revenues were stable at $494 million, with EBITDA amounting to $194 million, reflecting a healthy EBITDA margin of 39 percent. Net income reached $73 million, down 19 percent. With the ongoing expansion of fiber and 4G networks and related digital offerings including B2B services, data revenues (excluding SMS & VAS) represented 38 percent of total revenues.

Bahrain: Celebrating its 15th year of operation in the Kingdom, Zain Bahrain team's focus on operational efficiency and the delivery of state-of-the-art technology was evident by the profit increase the operator recorded. The team also focused on the offer of appealing innovative digital services that provide greater value to enterprise (B2B) and individual customers. During 2018, Zain Bahrain reported a net profit of $14 million reflecting a 20 percent Y-o-Y increase. Revenues amounted to $176 million, down 10 percent Y-o-Y. EBITDA for the period reached $41 million, down 30 percent, reflecting an EBITDA margin of 23 percent. The operation's completely revamped 4G network served a customer base of 668,000 with data revenues (excluding SMS & VAS) representing 45 percent of overall revenues.