Kuwait’s Zain expects $8.2 billion revenue in 2009
Kuwait: Kuwait Mobile Telecommunications Company’’s (known as Zain) Chief Executive Officer (CEO), Saad AlـBarrak, announced on Wednesday that the company expects to generate revenue of about 8.2 billion US dollars in for the year of 2009. Al Watan newspaper reported that AlـBarrak also spoke about the speculated reasoning behind the drawbacks in the Zain’’s income.
He explained that it is mainly due to the rising costs of mobile operations and foreign exchange rates in Saudi Arabia and Ghana.
The CEO of the thirdـlargest telecom operator by market value in the Arab world also added that the effect of rising operations cost in Saudi and Ghana cost Zain about $300 million, whereas the impact of the instability and oscillation of foreign currency exchange rates on the 2009 income is speculated to range between $700 and $900 million.
“Zain has outdone France Telecom (Orange) in terms of expanding its business activities as a whole, and is coming close to having an equal number of subscribers and to exceed this number within the two coming years,” AlـBarrak said to the press in a conference on Tuesday.
He also added that Zain is going to continue with its same strategy and maintaining the same policies, and powerful motivation while simultaneously considering the lessons learned from the global economic downturn. Al Watan news paper cited the CEO stating that Zain is hoping to focus on achieving good profit for 2011, adding that they are aiming for the $8.2 billion for the current year’’s revenue despite the disappointing effects of the downturn on last year’’s results.
AlـBarrak explained to the press that the telecommunications sector had suffered a heavy load in the midst of the financial crisis, adding that the year 2009 is a ”tough” year for all. He also stated that the growth rate of the telecommunications sector in the Gulf market, which is normally in the range of 7ـ 15 percent, dropped to a shocking 0.2 percent this year, adding that the sector in the African market dropped from 30ـ40 percent to zero growth at the moment. He also added that new projects are not expected to make a profit in the first three years after the crisis, especially since most of their revenue is going to be spent on covering operational expenses.
Nevertheless, Zain’’s estimated 2009 revenue of $8.2 billion is not too bad, considering their 2008 revenue of seven billion dollars, and, not to mention, their unhinged deals with international telecommunications companies earlier this year.
Indian stateـowned telecom companies Bharat Sanchar Nigam Ltd. (BSNL) and Mahanagar Telephone Nigam Ltd. (MTNL) stated last week that they have put ”on hold” any plans to join a consortium looking to buy a stake in Zain. A local daily quoted Zain CEO Saad AlـBarrak stating that Zain is not in negotiations to sell a stake in the company at the time being, he said, “We are as we were… There are suitors but we declined offers we don”t like.”
In addition, on Nov. 23, 2009, Credit Suisse said that the scrapped Palestine Telecommunications Co. (Paltel) shareـswap deal with Zain is likely to impact its earnings this year. The Paltel deal didn”t go through, due to failure of obtaining appropriate government approvals, said Zain. In May of this year, Zain and Paltel had agreed to a deal that would allow Zain to own around 57 percent of Paltel in exchange for their hundredـpercent ownership of Zain Jordan. The scrapping of the Paltel deal and currency exchange fluctuations allـtogether caused a 53 percent slump in Zain’’s third quarter earnings of this year compared to the Q3 in 2008.
AlـBarrak explained on Wednesday that the failure of deal was mainly because of Palestinian and Jordanian side, adding that unexpected conditions and unfair laws caused the hindrance and eventually the complete scrapping of the deal.
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