The devaluation of Sudan’s currency and the on-going military operations in Iraq have been blamed for the 11 per cent decrease in net profits of the Middle East telecommunication giant Zain, according to the company’s chairman Asaad Al-Banwan.
The Kuwaiti registered company had to set aside $983 million following the floating of the Sudanese currency and the decision by the company to invest in Sudanese real estate in a bid to protect the shareholders’ equity and the company’s assets.
Zain has expanded its operations, spending a reported $220 million in Sudan to introduce 4G coverage in May 2016, initially connecting the capital Khartoum and major towns like Medani, Port Sudan and El Obeid. The company has activated nearly 300 sites and connected a further 21 cities throughout the year and 4G services now cover over 20 per cent of the network.
The fall in revenue comes as customers in Sudan struggle to meet the rising data cost of using the internet and phone services and are switching to texting on cheaper data services such as Whatsapp and Facebook’s messenger. Last month’s February inflation figures of 33.53 per cent and the continued rise of food and energy prices have further curtailed the ability for customers to spend on telecommunications.
Last year, Zain paid an estimated 349.6 million Emirati dirhams ($37.4 million), a 92.3 per cent stake, for Abu Dhabi-listed Etisalat Group, the fixed line operator Canar Telecommunication Company in Sudan. The deal, still subject to approval from the Sudanese authorities, will enhance Zain’s presence in Sudan, where it is among the top mobile operators and has been looking to add a fixed-line licence to its operations.
In 2015, Sudan accounted for 19 per cent of Zain’s total revenue and 26 per cent of its subscribers. The firm had a 42 per cent mobile market share in Sudan and reported profits of $335 million, a rise of 66 per cent on the previous year. The total economic benefit to the Sudanese economy, recorded almost a decade ago, was around four per cent providing over 40,000 jobs to the Sudanese economy and recent figures suggest that the percentage of GDP continues to increase.
Two years ago, the company in partnership with the Bank of Khartoum, launch Sudan’s first mobile money service, dubbed Hassa, which allows registered mobile users to perform services including deposits, transfers, withdrawals, utility payments and airtime purchases. “Only 15 per cent of the adult population is served by financial services but with the mobile phone network there is a potential penetration of 75 per cent,” said Fadi Salim Al Faqih, CEO of Bank of Khartoum.
Last year, Zain’s overall customer base across the Middle East grew by three per cent, reaching more than 47 million customers. The outgoing group chairman, Asaad Al-Banwan, voiced optimism that the Sudanese market would flourish following the removal of US economic sanctions and the optimistic expectation that military operations in Iraq would soon come to an end.
Zain’s operation in Iraq began in 2007 when the company purchased Iraqna from Orascom Telecom for US$1.2 billion, merging it with its existing Iraqi operator MTC Atheer. The operation has been marred by the on-going violent conflict in Iraq and by disputes with the country’s Finance Ministry over the imposition of capital gains tax on the company following its acquisition of Iraqna. The dispute, settled last year, resulted in the lifting of restrictions on trading of Zain Iraq’s shares, access to the company’s bank deposits and the wavering of interest penalties on taxes.
The company reported net profits of 32 million dinars ($105 million) for the final quarter of 2016 as compared to 36 million dinars announced in the previous year. Zain operates in seven major middle eastern countries and is the market leader in five of those territories.