Arab Today, arab today zain reshapes strategy to stop decline in revenues
Last Updated : GMT 21:25:08
Arab Today, arab today
Arab Today, arab today

Zain reshapes strategy to stop decline in revenues

Arab Today, arab today

Arab Today, arab today Zain reshapes strategy to stop decline in revenues

Kuwait - KUNA

Kuwait Zain has reshaped its strategy to stem the company\'s decline in revenue and profitability and deliver new services and systems to drive incremental income in the coming years, the telecom giant CEO Scott Gegenheimer has unveiled. \"Having had an opportunity to assess the businesses, I have reshaped the strategy of the group to focus on several key areas, including customer experience, operational excellence and synergies, human resources, and new business areas,\" Gegenheimer has revealed during conference call with 30 global banking and telecom analyst to discuss Zain\'s strategy and operation. Gegenheimer says Zain is now executing strategies that will address the challenges that it faces. The main aim of Gegenheimer\'s strategy is to stem the company\'s decline in revenue and profitability, and like operators the world over, look to new services and delivery systems to drive incremental income. Interestingly for a business in which size and scale is an important success factor, Gegenheimer has chosen not to focus on subscriber acquisition and subscriber growth as one of the company\'s driving priorities. \"From a group perspective, we have not really focused specifically on the growth of the customer base as we want to be careful about flooding the market with SIM cards and multiple SIM cards,\" Gegenheimer said. \"We don\'t particularly want to give a forecast for that customer growth because it is not one of the KPIs that we want to drive the market with, as we are more focused on value,\" he added. Mobile broadband is a definite area of interest to Gegenheimer and Zain, and with commercial LTE deployments in Saudi Arabia, Kuwait, and Bahrain, the company is staking its claim to being one of the leading regional innovators. Zain Group\'s data revenues increased 14 percent year-on-year during the first quarter with data now accounting for 12 percent of overall service revenue, without the inclusion of value added services and SMS revenues included. With these other non-voice services included, data would account for 21 percent of Zain\'s overall service revenue as at the end of March. \"We expect data revenue growth to continue, in line with industry trends worldwide\" said Gegenheimer also noting, \"that the percentage growth in data revenues is all the more significant and promising for Zain when one considers that a large number of the Group\'s customers do not yet have smartphones and are located in rural areas across several countries that are vast in their geographies.\" \"We will make strategic acquisitions and partnerships in computer-based industries this year to exploit rising demand for data and help offset falling conventional call and sms income, this will bolster our value and customer experience proposition,\" added Gegenheimer. On a country-level, there is work to be done across much of Zain Group\'s footprint. In its home market of Kuwait where the company is celebrating 30th anniversary, competition is squeezing the operator\'s margins, and generating incremental revenues from the subscriber base is proving challenging, yet Gegenheimer is optimistic. Revenues in Zain\'s Kuwait operation were slightly down in Q1 13, Gegenheimer attributed this decline mainly to the cannibalisation of voice revenues due to the increased use of VoIP and over-the-top solutions, as well as the heightened level of competition in the market. Nevertheless, with a USD39 ARPU, Kuwait remains Zain\'s and one of the region\'s most lucrative markets. \"Clearly Kuwait is a very competitive and challenging market for us. We have been undertaking a number of measures to improve results here,\" Gegenheimer said. With number portability just being introduced, the state of the art nationwide LTE network and many other marketing activities being rolled out, Gegenheimer believes Zain Kuwait will show growth in the years ahead. Saudi Arabia continues to be a loss making entity, though losses are narrowing year-on-year. What investors will be most pleased to learn about with respect to Zain Group\'s exposure to Zain Saudi Arabia, is that the group does not expect to inject any more cash into the operator beyond what it had already committed to in last year\'s capital restructuring arrangement. Zain Group management is also confident a settlement is imminent between Zain Saudi Arabia and creditor banks over a Murabaha loan which is set to be restructured. Recently Zain Saudi Arabia signed an agreement with Saudi Arabia\'s Ministry of Finance agreeing to postpone payments of the government\'s entitlements due from the Company for the next seven years. These payments are estimated to add up to SR 800 million per year, representing a total amount of SR 5.6 billion for the entire period. Since the announcement of this deal, the Zain Saudi Arabia share price has risen over 15 percent. As for Zain\'s operations in Sudan, there is limited proactive action that Zain can take with respect to the macro-economic and political issues adversely affecting its operations in Sudan. The significant depreciation of the Sudanese pound against the dollar has adversely affected the country operations as well as denting the group\'s metrics, and Gegenheimer is hopeful that a measure of stability will return to the region soon, allowing for more predictable performances from both Sudan and South Sudan. The shortage of foreign currency in Sudan has resulted in unpredictable remittances of cash from the local operations, another area of concern that is beyond the group\'s immediate influence. In local SDG currency terms, Sudan performed surprisingly well with revenues growing by 25 percent year-on-year and net income by 57 percent. Initial public offerings are also on the horizon for Zain\'s operating companies in Iraq and Bahrain. The requirement to list in Iraq, and in the process comply with its licence conditions, has loomed since the latter part of 2011, and finally seems to have kicked into high gear. The goal is to float 25 per cent of Zain Iraq before year-end or by the first quarter of 2014 at the latest, which in turn is expected to generate in excess of US 1 billion which proceeds Gegenheimer said will be used for capital expenditure, acquisitions /partnerships and general corporate purposes. Zain also waits the licensing of 3G spectrum in Iraq, and given the emphasis the company places on driving new revenue streams through mobile data applications, is keen to have 3G networks operational as soon as possible. The company has recently spent heavily in expanding its network in the northern regions of Iraq and expects healthy customer and revenue growth from this investment. In preparation for its own listing, Zain Iraq is undergoing the final stages of forming the requisite joint stock company, with the company initially in possession of the operating licence having been an offshore entity, which has now been brought onshore. With respect to Bahrain, the regulatory requirement is for Zain to float 15 percent of the issued share capital of the business prior to listing prior to listing or 13.04 percent post offering, and the operator expects to accomplish this before the end of the year. Notably, global operator Vodafone has a small equity stake in Bahrain and the offer structure of the IPO has not yet been finalised according to Gegenheimer. In late 2012, Zain entered into a non-equity partnership agreement with Vodafone for its operations Bahrain, Iraq, Jordan, Kuwait and Saudi Arabia whereby Zain will have access to Vodafone\'s devices and services in its home markets and become the preferred partner of Vodafone in respect of the agreed  

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