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Abu Dhabi, UAEThursday 20 September 2018

Zain Saudi shares surge on first ever annual profit 

Rising data revenues help lift operator's finances in competitive market

Zain Saudi shares surged on the company's first ever year in the black. Yasser Al Zayyat / AFP
Zain Saudi shares surged on the company's first ever year in the black. Yasser Al Zayyat / AFP

Shares in Zain Saudi Arabia surged to their highest level in three weeks on Wednesday morning, after the troubled operator announced it had achieved profitability for the first time since its launch 10 years ago.

The telecoms operator, the third largest in the kingdom by subscriber base, on Tuesday evening announced a profit of 12 million Saudi riyals (Dh12m) for 2017, compared with a loss of 979m riyals the previous year. Revenues rose 5.5 per cent to 7.3 billion riyals. Zain Saudi Arabia's stock rose as much as 3.7 per cent in early trading, approaching highs for the year.

“The strong turnaround performance [in 2017] is attributed to the disciplined execution of our strategy to increase monetisation of data and digital services and ongoing focus on the improvement of the company’s operations and prudent efficiencies and optimisation of its cost structure,” said Zain Saudi Arabia’s vice chairman Bader Al Kharafi.

“It is an impressive outcome in the context of a very competitive market with fewer overall subscribers in 2017 and general decline in industry revenues.”

Zain Saudi Arabia, which is 37 per cent owned by Kuwait’s Zain Group, attributed the rise in profits – which came in below eight of nine analyst forecasts compiled by Bloomberg – to a lower cost of sales attributable to higher data revenues and lower international call costs, together with lower distribution and marketing expenses.

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“Despite what appears to be a weak market, the company was able to maintain a stable Ebitda margin of 34.4 per cent [in the fourth quarter], exactly in line with our estimate,” said Omar Maher, an analyst with investment bank EFG Hermes.

“This was likely due to good cost control measures, which we believe displays the company’s ability to adapt to a quickly changing market.”

Zain Saudi Arabia has struggled to compete with incumbents STC and Mobily since its 2008 launch and has had to restructure its loan commitments multiple times.

The kingdom’s tough operating conditions are expected to continue into 2018, according to Mr Maher, due to macroeconomic pressures, tough competition and the impact of a biometric verification campaign that has seen operators cut subscriber numbers.

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