Zain Group upbeat despite fall in profits

by James Anyanzwa

The telecoms operator, Zain Group, suffered a 17 per cent drop in net profit for the nine months period ended September 30, 2009.

The Kuwait-based firm’s net income fell to $677.1 million (Sh50.8 billion), from $815.8 million (Sh61.2 billion) in a similar period last year.

The company, which owns Zain Kenya, attributed the dismal performance to currency fluctuations, which climbed 125 per cent to $130 million (Sh9.8 billion), as well as increased financing and depreciation costs due to network expansion.

"The global economic crisis, unfavourable foreign currency fluctuations, particularly in many of our African operations, coupled with reduced interest income and investment income, plus higher financing costs, have had an significant impact on the company’s overall profit," said Dr Saad Al Barrak, the Group’s chief executive.

Al Barrak said these challenges were associated with ‘start-up’ capital, and operational expenditures in two large and promising operations that were launched in the last 12 months in Ghana, and the Kingdom of Saudi Arabia.

He said network expansion in many of Zain’s markets had increased fixed costs charges.

According to the firm’s interim financial results released on Tuesday, Zain Group’s consolidated revenues grew 24 per cent to $6.2 billion (Sh465 billion), while Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) jumped 37 per cent to $2.6 billion (Sh195 billion).

Earnings Before interest and Taxes (EBIT) rose 33 per cent to reach $1.6 billion (Sh120 billion), while earnings per share stood at $0.18 (Sh13.5).

Impressive growth

The year-on-year customer base on the two continents across which Zain operates grew 28 per cent, to 71.8 million active customers.

The company added over 15 million new active customers, relative to the same time last year.

Al Barrak was, however, upbeat that the company would continue posting impressive growth, owing to the vast, and capital intensive network expansion and marketing programs that are attracting new customers, and further enhancing the company’s young award winning ‘Zain’ brand.