Major African Mobile Markets: Future Growth Prospects 2006-2011

Key Operator - Zain

Search Site

Claim your FREE copy of the 'Africa Mobile Factbook' now! Africa Mobile Factbook 2008
22-pages of detailed data on the African mobile industry with analysis by Country and by Operator.

Home

Subscribe

Subscriber
Log-in

Free Trial Subscription

Password Registration

Africa & Mid East Telecoms Free News

Telecoms Market Resources

Mobile Operator Statistics

Operators & Regulators

MVNOs in the Middle East

Market Research Reports

Country Reports

Custom Research

Back Issues

Events

Telecoms Market Research

Contact

About

Terms & Conditions

Privacy

Back

Company Overview

Business Strategy

Financial and Operational Performance

Recent Developments

Future Outlook
Figure 1: Revenue from the Mobile Sector (2003-2004)

Figure 2: Mobile Subscribers (2002-2005)

Table 1: Zain - Mobile Operations in Africa(2004)

Company Overview

Zain builds and provides GSM-based services in 14 countries in Africa, which include Burkina Faso, Chad, Democratic Republic of Congo (DRC), Gabon, Kenya, Malawi, Madagascar, Niger, Republic of Congo, Sierra Leone, Sudan, Tanzania, Uganda and Zambia, under the brand name Zain. The group also has fixed line operations in Tanzania. The group had more than 8.5 million mobile subscribers as of mid-December 2005.
Table 1 provides a regional snapshot of Zain's mobile operations in Africa as on 30th September 2005.
Table 1: Zain - Mobile Operations in Africa(2004)

Source: Portio Research Ltd.
Until 2004, the group provided broadband and long-distance services as well, but now the group focuses solely on offering mobile solutions only.
Zain has invested about USD 750 million in building up its network and employs about 3,500 people in Africa.
Zain is a wholly-owned subsidiary of Mobile Telecommunication Co. (MTC) based in Kuwait, since May 2005. The group operates in 18 countries - 5 Middle Eastern and 14 sub-Saharan African countries, with about 12.45 million mobile subscribers as on 30th September 2005.
Business Strategy

Mobile penetration was less than 5 percent in 10 out of the total 13 countries of its operations in December 2004. It aims to increase its subscriber base by offering innovative services and by acquisition of local operators. It also plans to expand the network in other regions in Africa, particularly in sub-Saharan countries. Broadly speaking, the company highlights the following strategies for growth of its mobile operations in the African region:
Expanding subscriber base in current markets of operation
Zain has embarked upon a strategy to increase its subscriber base in its existing markets by expanding its network coverage, offering innovative solutions and acquiring the local operators, if any. For instance, it was the first operator to introduce services such as pre-paid roaming between the DRC and the Republic of Congo and m-commerce in Zambia. It also aims to improve its customer relationships by offering better customer care services.
Seek investment opportunities in other African countries
In addition to expanding its operations in the existing markets, Zain aims to deploy its networks in other countries in Africa. As a part of this strategy, the company launched its mobile services in Madagascar in December 2005 through the acquisition of Madacom.
Position 'Zain' as a pan-African brand
Zain aims to extend its brand name across its pan-African operations. It wants to position Zain as a brand known for its quality of service, network coverage and customer care. Following this strategy, Zain undertook a study to understand consumer attitudes towards different brand attributes in the multi-cultural environment of the sub-Saharan region, and re-launched the Zain brand in January 2004.
Financial and Operational Performance

Revenue
The consolidated revenue of Zain, for the financial year ending December 2004, was USD 614 million, registering an increase of 62 percent over the previous year. The growth was driven by the increased number of mobile subscribers, which grew by 108 percent during the 2003-2004 and the acquisition of the Kenyan mobile operator KenCell in May 2004.
Profitability
The Zain's EBITDA margin declined from 33.3 percent in 2003 to 32.6 percent in 2004. This decrease was due to an additional expenditure incurred in marketing and re-branding of Zain.
Figure 1 shows the revenue and the EBITDA margin of the operator for 2003-2004 and Figure 2 depicts the number of mobile subscribers till 30th September 2005.
Figure 1: Revenue from the Mobile Sector (2003-2004)

Source: Company Website * Subscribers at Mid-December 2005
Figure 2: Mobile Subscribers (2002-2005)

Source: Company Website
Capital Expenditure
The capital expenditure (CAPEX) of Zain in 2004 was USD 253 million, registering an increase of 140 percent over the previous year. A major share of CAPEX spending involved infrastructure investment as part of the group's core expansion strategy.
Operating KPIs
The total number of mobile subscribers of Zain had reached 5.2 million at the end of financial year 2004, increasing at a CAGR of 92.7 percent since 2002. This growth continued further and had reached 8.5 million as of mid-December 2005.
The monthly ARPU of the group was USD 21 for 2004. ARPU had decreased by 16 percent over 2003, primarily due to Zain's operations in countries with low average per capita income. The group had to keep tariffs low so as to attract the maximum number of subscribers, putting pressure on ARPU.
Zain's EBITDA margin declined from 33.3 percent in 2003 to 32.6 percent in 2004 due to marketing and re-branding expenditure incurred by the group. The monthly churn rate was reported as three percent in the same year.
Ownership Structure
The group started its operations in 1998, with MSI Cellular Investments as the holding company. In January 2004, the name of the holding company was changed to Zain International. After its acquisition in May 2005, the group became a wholly-owned subsidiary of MTC. MTC acquired an 85 percent stake in Zain for USD 2.84 billion and agreed to acquire the remaining 15 percent stake within two years for USD 520 million.
Recent Developments

Mergers & Acquisitions
In recent years, Zain has ventured into a number of mergers and acquisition deals emphasizing its renewed focus on its core business of offering cellular telephony services. For instance: - In December 2005, Zain acquired a majority stake in Madacom, a mobile network operator in Madagascar. This flagged the entry of Zain in its 14th African market. Madacom serves about 200,000 customers. - In August 2005, Zain International entered into an agreement with the government of Tanzania to separate the telecom network deployment and broadband services from the mobile business of Zain Tanzania. Following the agreement, the business of telecom networks deployment and broadband services was allocated to Tanzania Telecommunication Company Limited (TTCL), whereas the cellular telephony business was retained by Zain Tanzania. - In April 2005, Zain sold its satellite voice and data traffic subsidiary, Link Africa, to Gateway Communications for USD 50 million. - In March 2005, Zain divested its subsidiary, Celpay, a mobile payment processing company with operations in Congo DRC and Zambia.
In March 2005, Zain announced a deal worth USD 3.4 billion for its acquisition by MTC. As part of the deal, MTC immediately acquired 85 percent of the issued capital of Zain, while the rest will be completed in the next two years. According to the group, the acquisition by MTC will enable it to acquire more licences as per its strategy of expansion and invest more in building its infrastructure.
In May 2004, Zain acquired KenCell, the mobile operator in Kenya owned by Vivendi Telecom International, and renamed it as Zain Kenya. The acquisition resulted in an increase of the group's subscriber base of 1.2 million.
Network & Service Expansion
Zain signed a contract with Ericsson, in November 2005, to upgrade its GSM network in Kenya.
Top of page
Future Outlook

With Africa surging forward as one of the fastest growing mobile markets in the world, Zain, with its presence in 14 countries across the continent, seems to have good future prospects in the region. The groups operations are primarily located in the less developed countries of Africa, where the average per capita income is low, but this gives Zain the advantage of being "in from the start" in many markets, and the firm clearly understands its markets and relates well to its subscriber base. As Zain expands its network in such regions, the operator's ARPU and profit margins are likely to feel the pressure. Much of the development in its mobile operations depends upon the political and economic conditions in the countries where stability and growth are rather fragile.
Zain is planning for an extensive network roll-out in Kenya. The recent signing of the contract with Ericsson for the upgrade of its GSM network is likely to offer more advanced mobile services in Kenya, which in turn should stimulate growth in its subscriber base in the country.
Zain already has a contract with Ericsson for its network upgrade in Tanzania and Uganda. This should eventually help the company to double its subscriber base in East Africa (Tanzania, Uganda and Kenya) and reduce problematic network congestion as well. Moreover, the base stations being deployed by Ericsson support GPRS/EDGE technologies and thus will enable Zain to upgrade its network further, to higher speeds, in the future. ,
Top of page blycroftblycroft

Copyright © 1998-2009 Africa & Middle East Telecom Week