2007 zainannualreport

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2007 zainannualreport

  1. 1. Annual report 2007Success in diversity
  2. 2. Annual report2007
  3. 3. H.H. Sheikh Sabah Al-Ahmed Al-Jaber Al SabahAmir of the State of KuwaitH.H. Sheikh Nawwaf Al-Ahmed Al SabahCrown PrinceH.H. Sheikh Nasser Al-Mohamed Al SabahPrime Minister
  4. 4. Contents08-09 Key objectives10-11 Growth of Zain12-13 Share price evolution14-15 Key performance indicators16-17 Key milestones18-19 Key highlights20-21 Zain presence22-23 Board of directors24-27 Chairman’s message28-31 Executive management team32-35 Management discussion and analysis36-37 Zain brand38-43 Group overview 200744-87 Operations snapshot90-91 One Network92-97 Corporate social responsibility
  5. 5. Consolidated financial statementsand independent auditors’ report 98-99 Independent Auditors’ Report100-101 Consolidated Balance Sheet102-103 Consolidated Statement of Income104-105 Consolidated Statement of Changes in Shareholders’ Equity106-107 Consolidated Statement of Cash Flows110-145 Notes to the Consolidated Financial Statements146-147 Glossary 152 Contacts
  6. 6. Key objectives * * * * By the year 2011 Zain Annual Report 2007 0
  7. 7. Growth of Zain Zain Annual Report 2007 11
  8. 8. Share price evolutionQuarterly Zain YTD 31/03/2003 - 31/03/2008 (Reuters) Zain Annual Report 2007 13
  9. 9. Key performance indicatorsCustomers (000) EBITDA (in million dollars) CAGR CAGR 2007 42,501 128% 2007 $2,557 53% 2006 27,037 2006 $2,044 2005 13,650 2005 $1,142 2004 3,192 2004 $594 2003 1,920 2003 $518 2002 691 2002 $305Revenues (in million dollars) Net Income (in million dollars) CAGR CAGR 2007 $5,912 60% 2007 $1,130 35% 2006 $4,466 2006 $1,015 2005 $2,254 2005 $622 2004 $1,344 2004 $407 2003 $1,094 2003 $346 2002 $571 2002 $250 CAGR: compound annual growth rate EBITDA: Earning before Interest, Tax, Depreciation and Amortization Zain Annual Report 2007 15
  10. 10. Key milestones From a national player to an emerging markets leader Acquired Fastlink, the leading Jordanian mobile operator Acquired Celtel in 13 African nations Leading mobile operator in Kuwait 1983-2002 Zain Annual Report 2007 17
  11. 11. Key highlightsOperational events for the fullyear of 2007 December Combined operations of Iraqna and MTC Atheer will serve 7 million customers in Iraq under the Zain brand Zain acquires mobile operator Iraqna, a subsidiary of Orascom Telecom June Africa Calling: IFC mobilizes US$ 320 million to improve and expand MTC- Celtel services IFC, the private sector arm of the World Bank, announced its largest 31, 2007 Holding, for US$ 1.2 billion. This acquisition consolidates Zain’s already 13, 2007 financing to date in Sub-Saharan Africa, a US$ 320 million package, to five existing market position in Iraq under the MTC-Atheer brand. The two operations of Celtel International (an MTC subsidiary) to help expand and companies join forces and jointly operate under the Zain brand in Iraq. upgrade its fast growing mobile networks in DRC, Madagascar, Malawi, Sierra Leone and Uganda. December Zain set to increase company’s capital by 75% Zain’s Board of Directors recommends an increase of the company’s capital by 75% drawing from its existing shareholder base. 2, 2007 June World’s first borderless mobile network, One Network, expands to 6 countries linking East and Central Africa Celtel International, the leading pan-African mobile telecommunications 6, 2007 company announces the expansion of the ‘One Network’ service, the world’s Africa abolishes roaming as Celtel’s ‘One Network’ expands first borderless mobile network, to include Congo B, Gabon and DRC. This Zain’s African operations under the Celtel and Zain brands announce the comes nine months after the successful launch of the One Network service extension of the ‘One Network’ service, the world’s first borderless mobile in Kenya, Tanzania and Uganda. network in Africa to an additional six countries to include Burkina Faso, Chad, Malawi, Niger, Nigeria and Sudan. The ‘One Network’ service, now available in 12 countries, plays a crucial role in boosting cross-border trade by eliminating roaming charges and driving economic growth in Africa. May MTC acquires remaining 15% of Celtel International MTC acquires the remaining 15% of the outstanding shares in Celtel. This finalizes a binding agreement entered into with the shareholders 7, 2007 of Celtel in April 2005 to acquire the outstanding shares within two years for a consideration of US$ 467 million. October Zain’s worldwide footprint now stands at 22 countries Celtel International, Zain’s African subsidiary, agrees to acquire 75% of Western Telesystems Ltd (Westel) from the government of Ghana for 22, 2007 US$ 120 million. The Group intends to launch services in 2008. Zain launches world’s first nationwide WIMAX network in Bahrain March MTC makes the highest bid for third mobile license in KSA The MTC-led consortium makes the highest bid for the third mobile telecommunications license in the Kingdom of Saudi Arabia for The Kingdom of Bahrain has set another telecommunication’s first with the 24, 2007 SAR 22.9 billion (US$ 6.1 billion). MTC holds a 50% interest in the launch of Zain@home, the world’s first nationwide WIMAX network. consortium, which will be reduced to 25% following a mandatory initial public offering of the new mobile operator in KSA in 2008. September MTC Group rebrands under the single Zain brand The leading mobile telecommunications operator in 21 countries across the Middle East and Africa re-brands the Group’s corporate master brand January MTC launches ACE MTC launches ACE an implementation strategy to realize the target of the 8, 2007 to Zain. Four operations in Kuwait, Bahrain (both formerly MTC-Vodafone), 3x3x3 vision. ACE seeks to extract superior value from existing assets Jordan (formerly Fastlink) and Sudan (formerly Mobitel) re-brand to Zain. 30, 2007 through three main thrusts: Accelerating the growth in Africa and beyond; Consolidating the existing assets; and Expandind into adjacent markets. MTC Atheer acquires 15-year mobile license for Iraq MTC-Atheer, the leading mobile operator in Iraq with over 3.6 million active customers, makes a successful bid for one of the three licenses auctioned January MTC Kuwait deploys 3G/HSDPA Network with Motorola MTC Kuwait deploys a nationwide 3G mobile broadband network in Kuwait including HSDPA to further increase download speeds and improve the user by the Iraqi authorities. The successful bid for a consideration of US$ 1.25 9, 2007 billion secures a 15-year nationwide license, allowing MTC-Atheer to better experience of new services. serve its customer base and utilize Group synergies more effectively. Zain Annual Report 2007 19
  12. 12. Zain presence 22 countries LEBANON Over 42.5 million active customers (December 31, 2007) JORDAN CHAD Amsterdam IRAQ London NIGER KUWAIT NIGERIA LEBANON BAHRAIN IRAQ Amman JORDAN KUWAIT BAHRAINBURKINA FASO SAUDI SAUDI ARABIA ARABIA* NIGER CHAD SUDANSIERRA LEONE BURKINA FASO SUDAN GHANA * SIERRA LEONE NIGERIA GHANA DEMOCRATIC UGANDA KENYA UGANDA CONGO REPBUPLIC OF GABON THE CONGO TANZANIA GABON ZAMBIA KENYA MALAWI MADAGASCAR CONGO TANZANIAD. R. CONGO MADAGASCAR ZAMBIA MALAWI * Inclusive of 3 million customers acquired on December 31, 2007 through acquistion of Iraqna ** Saudi Arabia and Ghana: launch of commercial services in the second half of 2008 Zain Annual Report 2007 21
  13. 13. Board of directors Mr. Abdulmuhsen Ibrahim Al-Fares Board Member Mr. Asaad Ahmed Al-Banwan Chairman Mr. Abdulaziz Yaqoub Al-Nafisi Board Member Dr. Saad Hamad Al-Barrak Deputy Chairman - Chief Executive Officer Mr. Jamal Ahmed Al-Kandary Board Member Mr. Mishal Mohammed Al-Hammad Sheikh Khalifa Ali Khalifa Al Sabah Board Member Board Member Zain Annual Report 2007 23
  14. 14. Chairman’s messageDear Shareholders, During 2007, we consolidated our On September 8, 2007, the Group leadership position in the Middle East launched its new corporate andIt gives me great pleasure to present and Africa. Overall, the financial results customer facing brand, Zain, consistentthe consolidated annual financial show the executive management’s with its aim to become a global telecomstatements for 2007 of Mobile ability to cope effectively with industry operator. The Zain brand has beenTelecommunications Company developments and challenges. The introduced successfully in Kuwait,K.S.C. – Zain, as we look back on a company’s objectives are supported by Bahrain, Jordan, Sudan and Iraq andvery successful year, which constitutes its shareholders, customers, partners the Group will re-brand its Africanthe foundation for the company’s and employees alike. operations from Celtel to Zain in thefuture success. second half of 2008. Zain successfully expanded its presenceAs one of the leading mobile across the Middle East and Africa in 2007. The launch of the world’s first borderlesstelecommunications companies in the The Group won the third mobile license network across 12 operations inMiddle East and Africa, we will continue in Saudi Arabia for US$ 6.1 billion. Africa demonstrates the Group’sto seek growth aspiring to become This license will allow Zain to enter the ability to pioneer new and innovativeone of the leading global companies in biggest and wealthiest economy in the telecommunications services.this sector, by focusing on enhancing region. The Group will also provide The service, known as ‘One Network’,shareholder value, championing interconnection among its operations was originally launched in 2006,employees’ interests and being in the region, thus offering distinctive and expanded to 12 markets in 2007.a pioneer in corporate citizenship. advantages when we launch the mobile This technological break-through has network in Saudi Arabia. allowed 25 million mobile customersThis assembly of shareholders comes at to roam free-of-charge acrossa time when Zain has taken major steps In Q3-2007, Zain won a 15-year mobile geographical borders and withoutin implementing its ambitious expansion license for US$ 1.2 billion to operate in paying for incoming calls.strategy. The Group covers 22 countries Iraq through its MTC-Atheer subsidiaryin the Middle East and sub-Saharan where the Group had been operating The successful implementation ofAfrica with an active customer base already under a temporary license Zain’s objectives hinges on accurateof more than 42 million. since 2003. Less than three months feasibility studies and diligent later, Zain acquired Iraqna, the second execution. This allows the Group toOn behalf of my fellow shareholder largest mobile telecom operator in Iraq, benefit from profitable investmentrepresentatives on the Board of in a transaction worth US$ 1.2 billion. opportunities, boost the growth of theDirectors and all the employees of Subsequently, Iraqna and MTC-Atheer company and increase shareholders’the group, I am pleased to present merged to become a new entity jointly equity. The Group will continue toand review Zain’s annual financial operating under the Group’s new assess potential opportunities forreport for 2007. The report provides an brand Zain. In doing so, Zain in Iraq investment in the MENA region tooverview of the Group’s achievements has become the country’s largest further expand the business.along with the audited accounts and telecom company with a customerthe consolidated financial statements The Board of Directors and Executive base of over 7 million.for the fiscal year ended Management of Zain value the trustDecember 31, 2007. In addition to Zain’s expansions in placed in them by the company’s the Middle East, the Group was shareholders. This trust has allowed the also successful in Africa with a major management to propel the company to acquisition of 75% of Westel, Ghana’s its current position as the world’s fourth second national operator, in a largest telecom operator in terms of transaction valued at US$ 120 million. geographical footprint. With each successful acquisition, the Zain Group underscores its ambition to become one of the top ten telecom operators in the world. Zain Annual Report 2007 25
  15. 15. Zain’s strong financial performance in In parallel with the Group’s ambition to Finally, the Zain Group is indebted to2007 was driven by excellent financial expand geographically and offer the the dedicated efforts of its employeesresults of all key performance indicators. best services, Zain has always been and executive management. Also, theFor 2007, Zain’s Consolidated Net guided by high standards of corporate Board of Directors would like to expressIncome was US$ 1.13 billion social responsibility. its gratitude towards the government(KD 320.45 million) compared to and authorities of Kuwait as well to Over the years, Zain has madeUS$ 1.01 billion (KD 294.98 million) in the other countries in which Zain significant donations towards programs2006, an increase of 9%. Zain recorded operates. Their continuous support is directed at education, health,Consolidated Revenues of indispensable in providing a legal and environmental awareness, culturalUS$ 5.91 billion (KD 1.677 billion), regulatory framework that is conducive events and activities in the communities.an increase of 32% compared to the to the efficient and profitable operation In line with the Group’s vision, weprevious year. Group EBITDA increased of the Zain companies, which benefits believe we can continue to offerby 25% compared to 2006 to reach our customers and society as a whole. superior returns to our shareholdersUS$ 2.56 billion (KD 725.34 million). while maintaining high standards ofStockholders’ equity increased to Asaad Ahmed Al-Banwan corporate social responsibility.US$ 6.18 (KD 1.748) compared to Chairman of the BoardUS$ 5.18 (KD 1.5) in 2006. Despite the challenges Zain might face, we are determined to continueZain’s performance track record has our steady growth in the belief that ourallowed the company to establish markets offer significant potential.strong relationships with local, regionaland international financial institutions. As we look at 2008 with confidence,In 2007, a syndicated US$ 1.2 billion customer focus will continue to beMurabaha financing facility was renewed our priority to meet our customers’by a consortium of international banks, expectations. We also believe that thea step that deepened the confidence continued support of our shareholdersin our company and reflected its strong will allow us to move forward to achievefinancial position. the company’s strategic goals.In 2007, the company continued tooffer job development programs for itsexisting employees. These programsaim to attract and retain talentedpeople to support the headquartersin Kuwait and other markets. In doingso, Zain was rated as one of the bestprivate sector companies in Kuwait interms of employee development. Webelieve that our talented employeesare the cornerstone of the executionof Zain’s strategy.The Group was fortunate to berecognized for its achievements in 2007with various and prestigious awards.These include Best Telecom OperatorAwards in distinct markets in which theGroup operates and is testimony toour employees’ accomplishments inthese markets.
  16. 16. Executive management team Dr. Saad H. Al Barrak Chief Executive Officer Mr. Sam Deeb Mr. Ibrahim Adel Chief Financial Officer Chief Communications Officer Mr. Khaled Al Hajeri Mr. Tito Alai Chief Technical Officer Chief Commercial Officer Mr. Haitham Al Khaled Mr. Mohammed Rafi Chief Strategy Officer Chief Information Officer Mr. Tony Tasca Mr. Mohammad Shabib Chief Human Resources Officer Chief Regulatory Officer Zain Annual Report 2007 29
  17. 17. Executive management board Mr. Mahmoud Hashish Chief Executive Officer Middle East Mr. Chris Gabriel Chief Executive Officer Africa (Celtel) Mr. Barrak Al Sabeeh Chief Executive Officer - Zain Kuwait Dr. Marwan AlAhmadi Chief Executive Officer - Zain Saudi Arabia
  18. 18. Management discussionand analysisOne company united under one brand hiring and retaining world-class staff Zain operates in markets, many of2007 was a definitive year for the and, last but not least, maintaining a which are typically characterized byMTC Group in a multitude of ways. high standard of corporate governance, low mobile penetration, inadequateWe exceeded all performance targets while always being cognizant of the fixed-line networks, young and growingestablished for the year, added two importance of upholding mutually populations and above-averageimportant markets to our existing beneficial relationships with the economic growth. By offering ourportfolio of 20 countries in the Middle communities in which we operate. customers the mobile services theyEast and Africa and resumed the want and need, Zain has been a catalyst For the Zain Group, 2007 was alsore-branding of MTC into Zain. These in enabling them to become part of the the year of integration of its groupextraordinary achievements could connected world where they can start management team. The Zainonly be realized through the loyalty sharing in ‘A Wonderful World’, the tag Group employees located in Kuwaitof our customers, support from our line of the Group’s new brand. as well as in other Middle Easternshareholders and –last but not least operating companies, and the Celtel– through the dedication and hard work Key events in 2007 management team in the Netherlandsof our 15,000 plus employees across We witnessed particularly strong growth will occupy new premises ensuringAfrica and the Middle East from 99 in our African operations and selective closer collaboration and proximitydifferent nationalities. On behalf countries in the Middle East especially to customers. Following theof the Executive Management Board, in Iraq in 2007. In terms of acquisitions, recommendation of a detailed studyI would like to thank all Zain employees we are very proud to have added commissioned by the company, a newfor their remarkable professionalism and the Kingdom of Saudi Arabia to our Group Head Office will be located inongoing commitment to the company. footprint in the Middle East in 2007 with Bahrain with a regional office in Nairobi.I am convinced that with such a winning commencement of operations planned Management appointments at Groupteam we can reach even higher in in 2008. As the economic powerhouse level are based on the principle of meritthe years ahead. in the region, the Kingdom of Saudi and all employees are encouraged Arabia offers ample opportunity forOur vision is to become one of the to actively contribute in the evolution growth in the mobile sector and weworld’s leading mobile operators with and growth of Zain. believe that Zain’s compelling mobilea ranking among the 10 largest global offer will be attractive to the rapidlymobile companies by 2011. By then, we Zain is born growing population in the Kingdomaim to serve 110 million customers and In support of its strategy and ambitions, and beyond. In Africa, we are delightedgenerate an EBITDA of US$ 6 billion. the company adopted a new corporate to add Ghana to our existing 14 marketsThis ambitious growth strategy, adopted master brand name unifying our on the continent. Ghana, the continent’sin 2003, so far has allowed us to evolve different operational brands under the fourth-largest economy, will strengthenfrom being a single mobile provider in single Zain brand. On September 8, Zain’s position in West Africa whenKuwait to a truly international company 2007, the operations in Kuwait, Jordan, we start operations in the secondcurrently operating in 20 countries in Bahrain and Sudan were re-branded to half of 2008.the Middle East and Africa with Zain. Iraq followed on January 5,520 million customers under licence. 2008 and all the African operations It is also worth mentioning that ZainWe anticipate the commercial launch of now known as Celtel will rebrand to significantly strengthened its positionour newest operations; in Kingdom of Zain in the 2nd half of 2008. On launch in Iraq. First, in August, 2007, weSaudi Arabia and Ghana during 2008. of commercial services, operations secured a 15-year nationwide licenseThe evolution of Zain achieved since both in Saudi Arabia and Ghana, for our existing operation MTC-Atheer.2003 was driven by organic growth of will be branded Zain. Subsequently, on December 31, 2007,our existing operations and by entering MTC-Atheer acquired the Iraqi mobile The name Zain was selected by ournew markets through new licenses and operator Iraqna with more than 3 million employees in coordination withacquisitions. Zain now enjoys growth active customers. Jointly, they now international advertising agencies whofrom a position of market operate under the Zain brand serving created the brand look and feel.share strength. more than 7 million Iraqi customers. The new logo and its colourfulBecoming a truly global company identity reflect the Group’s freshness,depends on more than just size and boldness and vitality.geographical presence. It entails havinga world-class, innovative and compellingservice offering for our customers, whichtranslates to superior returns to thecompany’s shareholders. It also requires Zain Annual Report 2007 33
  19. 19. In addition to these landmark contributed with US$ 592 million, operation but in Zain as a Group.acquisitions, we are also excited about US$ 263 million and US$ 119 million The Zain led consortium is thethe extension of Zain’s One Network respectively to the Group’s record Net Kingdom’s third mobile operator.in Africa, the world’s first borderless Income of US$ 1.1 billion. As a result of the IPO, Zain’s ownershipnetwork, from 3 to 6 to 12 nations stake has reduced to 25% while As of December 31, 2007, Zain’sallowing our customers to make calls at maintaining full management control African operations represented 63% oflocal rates across countries throughout of the company. the Group’s customer base while theAfrica. One Network now covers an Middle Eastern operation consisting ofarea twice the size of the European Opportunities ahead Bahrain, Iraq, Jordan, Kuwait, LebanonUnion with more than 400 million We look back on a challenging but and Sudan represented the remainingpeople under coverage. In early 2008, rewarding year in which the Group customers. The regional revenuewe introduced One Network services achieved some major strategic contribution of Middle Eastin Zain’s Middle East operations starting objectives in terms of performance and Africa are 46% and 56%with Bahrain, Iraq, Jordan and Sudan. targets, in addition to the successful respectively. The regional split inSaudi Arabia will join the network integration of employee teams working EBITDA for the two regions wason launch date, while other regional in the Middle East and Africa. A new US$ 1.4 billion for the Middle East andoperations will join subject to Head Office in Bahrain will allow US$ 1.2 billion for Africa, representingregulatory approvals. the multi-cultural team to excel in 53% and 47% respectively. The regional 2008 under the new Zain brand. WeOn the technology front, Zain had contribution of the Net Income was are confident that we can continueanother world’s first with the launch of 77% for the Middle East and 23% to serve the markets in which wea nationwide WIMAX network in Bahrain for the African operations. operate with state-of-the art wirelessfor home users, which later extended Although a sizeable share of the telecommunications services to helpfor businesses’ use. It offers customers Group’s net profit comes from Kuwait, our customers realize their ambitionsa fixed line voice service in addition to the contribution of other operations and dreams. Once again, I would likehigh-speed Internet access. will increase to constitute a larger to thank our stakeholders for the trust part of Zain’s future results, such as they placed in us in 2007 and we look2007 Financial and Operational Results the customer base in Africa, which forward to serving you in the yearsZain’s key performance indicators continues to grow significantly. ahead of us because we believe theshowed a healthy growth in 2007, best is yet to come.in line with the Group’s ambition to We have been very fortunate with thebecome one of the world’s premier loyal support of our shareholders in the Dr. Saad Hamad al Barrakoperators. For the year ending execution of our growth strategy over Chief Executive OfficerDecember 31, 2007, Zain served more the recent years. In December 2007, Zain Groupthan 42 million customers, an increase the Board of Directors recommendedof 57% compared to the previous year. a capital increase of 75% to bolster theThe Group recorded consolidated Group’s further growth ambitions. I amrevenues exceeding US$ 5.9 billion, delighted that the shareholders gavean increase of 32% compared to the the company their full support for thisprevious year. Over the same period, recommendation and we anticipate ourEBITDA increased 25% to reach more ability to finalize this capital increase inthan US$ 2.5 billion, resulting in an the second quarter of 2008, addingEBITDA margin of 43% compared US$ 4.4 billion to the company’s capital.to 46% in 2006. The company’s net We were also delighted that Zain’sincome in 2007 reached US$ 1.1 billion, initial public offering (IPO) of ouran 11% increase compared to 2006, Saudi Arabian operation in Februaryrepresenting earnings per share of 2008 succeeded with a 283%61 cents, an 11% increase compared oversubscription, raising US$ 1.87to the previous year. billion in capital. A record of 8.5 millionZain’s strong financial performance in Saudi nationals subscribed for Zain2007 was underpinned by the stable shares, which constitutes a sign ofcash-generative markets in the Middle market confidence not only in the SaudiEast. Kuwait, Sudan and Jordan
  20. 20. Zain brandZain (formally known as MTC) Even though these brands have become local icons in their own right, MTC had a bigger dream: to become The Zain logo represents the aura that radiates from every one of us as a result of our interaction with the world. Thehas built and maintained a true global player. With a global marketplace in mind, Zain was born, Zain values are defined as follows: Radianceseveral brands over the years with a new brand name and a new Leading the way with imagination and philosophy. Zain believes in uniting all vision, bringing joy, color, and richness the MTC brands in order to have thestarting with MTC-Vodafone in to your life. globe as its playground and the diverse nationalities as its family, offering its HeartKuwait and Bahrain to Fastlink forty-two plus million customers one Live your life with courage and interface no matter what country resolve, engage your spirit, touch your they choose to visit. emotions, connect to your soul.in Jordan, Mobitel in Sudan, Zain aims to unite operations in 22 countries into one attitude and outlook Belonging Bringing fellowship and communityMTC Atheer and Iraqna in Iraq, that allows every individual to live his/her life with fewer constraints. to all, transcending cultural and geographical boundaries.and Celtel in Africa. Shaped by a unique set of values; Heart, Radiance, and Belonging, Zain To launch this new brand, Zain developed a campaign promoting a wonderful world in which people aims to help each and everyone fulfill his or her potential by making the most observe not what they see, but what out of their world. With the power of they look for. This was followed up today’s telecommunications, the world with another campaign celebrating Eid, has become a much smaller place, implying to customers that if they allowing us to feel at home in the jungle have a positive outlook, they can or at work in the desert. Zain promises perceive everyday as Eid, and to continue developing its products celebrate life accordingly. and services ahead of the global pace, turning every difficulty into an opportunity, and every opportunity into a reward. Zain Annual Report 2007 37
  21. 21. Group overview 2007Active customers2007 (000s) 42,501Active customers2006 (000s) 27,038YOY growth 57% Zain Annual Report 2007 39
  22. 22. Group overview 2007Customers (000) Revenues (in million dollars) Nigeria 11,098 Kuwait 1,266.8 Iraq 7,287 Nigeria 1,171.9 Sudan 3,883 Sudan 792.5 Tanzania 2,507 Iraq 561 DRC 2,273 Jordan 477 Kenya 2,104 DRC 296.7 Zambia 1,966 Tanzania 265 Jordan 1,858 Zambia 252.1 Kuwait 1,576 Gabon 233.1 Uganda 1,435 Congo Brazaville 211.3 Congo Brazaville 1,014 Kenya 194.3 Burkina Faso 918 Bahrain 151.1 Gabon 666 Burkina Faso 100.5 Niger 666 Niger 92.5 Malawi 654 Chad 91.5 Lebanon 630 Uganda 91.4 Chad 595 Malawi 71.1 Madagascar 574 Lebanon 60.9 Bahrain 448 Madagascar 49.3 Sierra Leone 349 Sierra Leone 43.3 Zain Annual Report 2007 41
  23. 23. Group overview 2007EBITDA (in million dollars) Net Income (in million dollars) Kuwait 684.5 Kuwait 592.3 Nigeria 393.5 Sudan 263.2 Sudan 325.2 Jordan 119.2 Jordan 220.6 Nigeria 83.2 Iraq 177.6 Congo Brazaville 66.1 Zambia 123.4 Zambia 58 Gabon 111.8 Gabon 52.8 Tanzania 97.3 Tanzania 52.1 Congo Brazaville 91.2 Iraq 46.6 DRC 89.4 Niger 31.4 Bahrain 47.7 Bahrain 29.3 Burkina Faso 46.2 DRC 25.9 Niger 45.6 Burkina Faso 21.1 Chad 34.1 Malawi 11.4 Kenya 31.9 Lebanon 9.5 Malawi 31.7 Chad 6.2 Uganda 14.6 Madagascar 3.7 Madagascar 11.5 Sierra Leone -4.1 Lebanon 10.7 Uganda -12.5 Sierra Leone 7.1 Kenya -21.7 Zain Annual Report 2007 43
  24. 24. Operations snapshot Key statisticsKuwait Population (000s) 3,400The operation had a total Zain in Kuwait, the Group’s flagship operation, was established in 1983 Customers (000s)of 1.576 million active as the region’s first mobile operator. Currently, there is one competitor in 1,576 Kuwait – Wataniya. However, at thecustomers by year end of 2007, end of 2007, a third license was issued to the Saudi Telecom Company. It is expected that STC will launch servicesrepresenting an 8% customer by Q4 2008. Despite sustained high oil prices inincrease compared to 2006. 2007, the Kuwaiti economy grew strongly fuelled by investments fromCustomers in Kuwait accounted both the private and public sector. This growth underpinned the operation’s 2007 revenues, which reached a record Kuwaitfor 4% of Zain’s total customer of USD 1,266.8 million, an increase of 16% compared to 2006. Revenues accounted for 21% of Zain’s total – thebase. At the end of 2007, Zain largest single contributor to the Group’s revenues. EBITDA increased by 27% towas the no.1 operator in Kuwait reach USD 684.5 million. The Group’s ARPU in Kuwait is the highest at USD 70.with a 57% market share. In 2007, several new services were introduced in Kuwait including E-Go, Year of launch BlackBerry and 7.2 mb Mobile Internet. The most important event for 2007 was 1983 the re-branding to Zain. Following the launch in September, customers quickly embraced the fresh and dynamic appeal of the new Zain brand. The smooth brand Ownership transition was reflected in an excellent performance with a record Net Income 100% of USD 592.3 million for the full year. Market positioning 1 Financial Growth 2007 2006 YOY Growth Market share Customers (000s) 1,576 1,461 8% 57% Revenues (USD m) 1,266.8 1,093.7 16% EBITDA (USD m) 684.5 539.9 27% ARPU ($) EBITDA margin 54% - - 70 Net Income (USD m) 592.3 447.5 32% Zain Annual Report 2007 45
  25. 25. Operations snapshot Key statisticsSudan Population (000s) 38,500In February 2006, the Zain Mobitel was successfully re-branded to Zain in September 2007. The response to Customers (000s)Group acquired the remaining the new brand by the public and media authorities exceeded all expectations. 3,883 In a predominantly Arabic speaking61% of Mobitel, Sudan’s first country, Zain is a recurring word in the Sudanese language, culture and Year of fullmobile operator, taking traditions. Zain has captured people’s imagination resulting in increased acquisition brand loyalty.ownership to 100%. 2006 Currently, there are three dominant mobile operators and a newly established 4th operator in Sudan Khartoum of which Zain is the largest with a commanding 49% market share. OwnershipThe operation’s 2007 revenues MTN and Sudani have a 25% and 24% market share respectively. 100%reached USD 792.5 million, Zain in Sudan had over 3.8 million active customers by year end 2007,an increase of 10% compared representing a 41% increase compared to the previous year. The operation’s Market positioningto 2006. Sudan’s revenues customers accounted for 9% of Zain’s total customer base in the Middle East 1 and Africa.accounted for 13% of the Despite an overheated market in Khartoum caused by continuousGroup’s total consolidated competitive promotions and discounte pricing, Zain focused its efforts on customer loyalty, retention programs Market sharerevenues. EBITDA decreased and rural coverage. Due to substantial investments into expanding the 49%by 22% compared to 2006. network, Zain now covers around 300 cities and towns, well ahead of competition. Population coverage ARPU ($)Net Income in 2007 decreased increased from 35% in early 2006 to 20 over 65% at the end of 2007, with aby 27% compared to 2006. target to reach 80% by Q2-2008. The operation is currently expanding its network to the South and to the DarfurZain in Sudan has an ARPU area where penetrations rates are very low or mobile telephony non-existent, Financial Growth 2007 2006 YOY Growth thus constituting a growth opportunity. Customers (000s) 3,883 2,754 41%of USD 20. Important new services were introduced in 2007 including GPRS roaming, Voice Revenues (USD m) 792.5 717.8 10% SMS and Missed Call Alerts as well as VPN corporate solutions. One of the EBITDA (USD m) 325.2 415.2 -22% most significant services launched in EBITDA margin 41% - - 2007 was One Network, linking Sudan to 11 other African countries in one Net Income (USD m) 263.2 362.5 -27% seamless network of the Zain Group. Zain Annual Report 2007 47
  26. 26. Operations snapshot Key statisticsJordan Population (000s) 5,900 Customers (000s) 1,858Zain in Jordan was among the Jordan is considered to be one of the most liberalized telecom markets in the Middle Eastern region. Currentlyfirst operations acquired by there are four main mobile operators in Jordan, of which Zain has 43% market Year of acquisitionthe Group in the Middle East share. Umniah and Orange have 20% and 33% market share respectively; with 2003 IDEN provider express holding the rest.in 2003. The operation has Zain in Jordan operation had over 1.8 million active customers by year Ownershipattained impressive reputation end 2007, representing a 5% decrease compared to 2006. The operation’s 96.52%as a market leader in innovation customers accounted for 4% of Zain total customer base. The operation’s 2007 revenues reached Ammanhaving first introduced many USD 477 million, a decrease of 2% compared to 2006. Market positioningmobile services and receiving Jordan’s revenues accounted for 8% of Zain’s total consolidated revenues. 1many awards over the years. EBITDA decreased by 13% compared to 2006. Net Income in 2007 reached Market share USD 119.2 million, a decrease of 12% 43% compared to the previous year. Zain in Jordan has an ARPU of USD 19. Despite competitive pressure from other operators, Zain in Jordan has maintained its No.1 market position even with a loss in market share of 10%. ARPU ($) As the Jordanian market for mobile telecommunication becomes mature and more competitive, Zain has shifted 19 its focus from customer acquisition to customer retention. The new Zain brand was well received and got significant attention from customers and the media, despite the simultaneous re-branding of another Jordanian mobile operator from Jordan Telecom (Mobilecom) to Orange. In 2007, Zain introduced several new Financial Growth 2007 2006 YOY Growth services including BlackBerry, Ring Back Customers (000s) 1,858 1,961 -5% Tone (RBT) and user generated content. Revenues (USD m) 477 485.4 -2% EBITDA (USD m) 220.6 253.7 -13% EBITDA margin 46% - - Net Income (USD m) 119.2 135.1 -12% Zain Annual Report 2007 49
  27. 27. Operations snapshot Key statisticsNigeria Population (000s) 146,200 Customers (000s) 11,098The operation’s 2007 revenues In May 2006, Zain acquired a 65% majority stake in the Nigerian mobile operator V-mobile. With a populationreached USD 1,171.9 million, of over 146 million, Nigeria is Africa’s most populous nation and has become Year of acquisitionan increase of 20% compared one of Zain’s main drivers for customer growth throughout its 22 operations. Competition remains intense with the 2006to the previous year. The telecom industry going through its fair share of consolidation. Celtel Nigeriaoperation’s revenues accounted ended the year as the No.2 operator with a 29% market share, followed by Globacom at 25% while MTN remainedfor 20% of Zain’s total revenues. the dominant operator with a 42% of the market. As mobile penetration increases, Nigeria will soon overtakeEBITDA reached USD 393.5 South Africa as the continent’s largest telecoms market.million in 2007. Net Income in At year end, Celtel Nigeria had over 11 million active customers accounting Abuja2007 reached USD 83.2 million, for 26% of Zain’s total customer base. Despite increased competition in thea decrease of 37% compared mobile market in Nigeria, the increase in customer numbers reflects the impact of introducing new products,to 2006. Celtel Nigeria’s the opening of regional offices, rural penetration and aggressive roll-outARPU stands at USD 12. initiatives. In addition, Celtel Nigeria increased its number of Points of Sales, managing churn and increasing Ownership coverage through a disciplined CAPEX program. 65% Moreover, the introduction of services such as new Mobile Access Code (0708), prepaid roaming and One Network supported strong customer growth. Market positioning 2 Financial Growth 2007 2006 YOY Growth Market share Customers (000s) 11,098 6,396 74% 29% Revenues (USD m) 1،171.9 972.9 21% EBITDA (USD m) 393.5 221 78% ARPU ($) EBITDA margin 34% - - 12 Net Income (USD m) 83.2 131.5 -37% Zain Annual Report 2007 51
  28. 28. Operations snapshot Key statisticsCongo Brazzaville Population (000s) 3,800 Customers (000s)The operation had a total of Celtel Congo Brazzaville was launched in December 1999 and is the premier operator in the country with a 76% 1,0141.014 million active customers market share. There is one competitor Libertis operating in the country.by year end 2007, representing The operation’s 2007 revenues were USD 211.3 million, an increase of 47% Year of launcha 48% increase compared compared to 2006 accounting for 4% of Zain’s total revenues. EBITDA increased 1999 by 61% compared to 2006 and reachedto 2006. The operation’s USD 91.2 million. Net Income in 2007 reached USD 66.1 million, an increase Ownershipcustomers accounted for 2% of 58.5% compared to the previous year. Celtel Congo Brazzaville’s ARPU in 2007 was USD 21. 90%of Zain’s total customer base. Celtel Congo Brazzaville performed very strongly in 2007 underpinned by solid customer growth and an increased Brazzaville Market positioning market share due to successful promotions and loyalty programs. Throughout 2007, the operation 1 spearheaded several initiatives to increase usage in an attempt to offset ARPU decline. Increased network roll-out enabled the operation in Market share Congo Brazzaville to extend coverage to 83% of the population. 76% In 2007, Celtel Congo Brazzaville launched 3 new services including One Network, GPRS and Mobile Top Up. In order to retain customers and reduce ARPU ($) the churn rate, Celtel Congo Brazzaville launched a customer loyalty program. 20 Financial Growth 2007 2006 YOY Growth Customers (000s) 1,014 683 49% Revenues (USD m) 211.3 143.5 47% EBITDA (USD m) 91.2 56.6 61% EBITDA margin 43% - - Net Income (USD m) 66.1 41.7 58.5% Zain Annual Report 2007 53
  29. 29. Operations snapshot Key statisticsZambia Population (000s) 11,900The operation had over 1.9 Celtel Zambia launched service in 1998 and continues to be one of Customers (000s)million active customers by the strongest performers of the Zain Group with a commanding market 1,9667 share of 79%. The operation has twoyear end 2007, representing a competitors in Zambia: Zamtel and MTN with market shares of 11% and 10% respectively. Year of launch48% increase compared to the Celtel Zambia’s 2007 revenues were USD 252.1 million, an increase of 32.5% 1998previous year. The operation’s compared to the same period in 2006. The operation’s revenues accounted Ownershipcustomers accounted for 5% of for 4% of Zain’s total revenues. EBITDA increased by 46% compared to 2006 and reached USD 123.4 million. Net Lusaka 88.88%Zain’s total customer base. Income in 2007 was USD 58 million, an increase of 85% compared to the previous year. Celtel Zambia’s ARPU for 2007 was USD 12. Celtel Zambia’s excellent performance Market positioning was driven by strong customer growth and brand loyalty, resulting in a 1 significantly higher EBITDA and Net Income. In 2007, Celtel Zambia launched two Market share 79% new services with 24/7 access, an SMS top-up solution which enables Celtel prepaid customers to top-up their Celtel accounts directly from their bank accounts, and Web2sms service, allowing customers to send an SMS from a PC to multiple users. ARPU ($) 12 Financial Growth 2007 2006 YOY Growth Customers (000s) 1,966 1,325 48% Revenues (USD m) 252.1 190.2 32.5% EBITDA (USD m) 123.4 84.6 46% EBITDA margin 49% - - Net Income (USD m) 58 31.3 85% Zain Annual Report 2007 55
  30. 30. Operations snapshot Key statisticsGabon Population (000s) 1,300 Customers (000s) 666The operation had a total of Celtel Gabon was launched in June 2000 and is the undisputed telecom leader with a 63% market share. There666,000 active customers by are currently two competitors: Libertis and Telecel with a market share of 27% Year of launchyear end 2007, representing and 10% respectively. Celtel Gabon managed to finalize the negotiation on 2000 its license renewal, extending its currenta 30% increase compared license for an additional 10 years. Gabon stands out in Africa as a Librevilleto 2006. The operation’s prosperous nation with a high GDP. As a result, Celtel Gabon recorded the Group’s highest African ARPUcustomers accounted for 2% of USD 33 in 2007. Celtel Gabon’s 2007 revenues reachedof Zain’s total customer base. USD 233.1 million, an increase of 42% compared to 2006. The operation’s revenues accounted for 4% of Zain’s total revenues. EBITDA increased by 26% and reached USD 111.8 million. Net Income in 2007 reached USD 52.8 million, an increase of 11% compared to the previous year. Celtel Gabon continues to dominate the market in terms of its market share despite the increased competition following the privatization of Gabon Telecom. Population coverage reached 80% in 2007, an increase of 4% compared to the previous year. Ownership Additionally, new services were rolled out including One Network and GPRS. 90% Market positioning 1 Financial Growth 2007 2006 YOY Growth Market share Customers (000s) 666 514 30% 63% Revenues (USD m) 233.1 164.6 42% EBITDA (USD m) 111.8 88.7 26% ARPU ($) EBITDA margin 48% - - 33 Net Income (USD m) 52.8 47.6 11% Zain Annual Report 2007 57
  31. 31. Operations snapshot Key statisticsTanzania Population (000s) 39,700The operation’s 2007 revenues Celtel Tanzania was launched in 2001 as the fourth entrant. Zain currently Customers (000s)reached USD 265 million, an owns 60% of the company, while the remaining stake is held by the 2,507 government of Tanzania. With a marketincrease of 56% compared to share of 39%, Celtel Tanzania is the second largest operator in the country. As the result of a regulatory regime that Year of launch2006. This accounts for 5% of was further liberalized, the total number of mobile operators increased to seven 2001Zain’s total revenues. EBITDA with an eighth entrant expected in 2008. The three main competitors in Zambia are Vodacom, Mobitel andincreased by 55% compared Zantel with a market share of 41%, 15% and 5% respectively. Dar Es Salaamto 2006 and reached Celtel Tanzania ended 2007 with more than 2.5 million active customers, representing an impressive 65%USD 97.3 million. Net Income increase compared to the previous year. The operation’s customers accountedin 2007 was USD 52.1 million, for 6% of Zain’s total customer base. Celtel Tanzania’s strong performance isan increase of 96% compared underpinned by the overall improved economic situation of Tanzania. In addition, the operation continued itsto the previous year. Celtel efforts to increase population coverage to over 75% by year end.Tanzania had an ARPU In 2007, new services were introduced tailored to the lifestyle and preferences Ownershipof USD 11 in 2007. of Tanzanian customers. These include Mambo Prepaid Tariff for late night callers and the youth, the launch 60% of BlackBerry services, the Bonga Digressive Tariff and ultra low-cost handset initiatives opening up a new customer segment. Market positioning Tanzania was one of the three countries where the One Network 2 was first launched, such a service also contributory to its recent success. Financial Growth 2007 2006 YOY Growth Celtel Tanzania’s excellent performance Market share Customers (000s) 2,507 1,517 65% was recognized when it was granted the 2007 Award for most respected company in the ICT sector in East Africa. 39% Revenues (USD m) 265 169.6 56% EBITDA (USD m) 97.3 62.9 55% ARPU ($) EBITDA margin 37% - - 11 Net Income (USD m) 52.1 26.6 96% Zain Annual Report 2007 59

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