The Zain Group Annual General Meeting (AGM) was held at the Zain Group’s headquarters in Kuwait, attended with a quorum of 80.1% of shareholders whereby they were presented with the Zain Group’s 2022 annual report which highlights the financial statements, Governance and Auditors reports and the major achievements of Zain Group and its operations and subsidiaries across Middle East and Africa, for the year ended December 31, 2022. Additionally, Zain Group released its 2022 Sustainability Report.
The shareholders approved all items on the AGM agenda, including the recommended cash dividend of 25% (25 fils per share) to the shareholders already registered in the company’s record date of Sunday, 7 May 2023. Cash dividends will be paid to shareholders commencing Thursday, 11 May 2023.
Shareholders to earn attractive dividends
This 25 fils dividend for H2 2022 follows the semi-annual dividend of 10 fils distributed earlier in 2022, totaling 35 fils per share for the year and reflects a 2 fils increase on the previous three years and a 78% payout ratio, one of the highest in the region.
Notably, the AGM approved Zain’s adoption of a minimum cash dividend policy of 35 fils per share for three years, commencing 2023. It is worth noting that the total recommended cash dividends of 25 fils for H2, 2022 and 35 fils each year for the next three years, will total 130 fils in cash dividends. This expected distribution based on the closing share price of Zain as of 10 April 2023, will reflect an average annual yield of approximately 8% for entitled shareholders for the three-year period.
New Board elected for three years
Furthermore, the AGM elected the Zain Group Board of Directors for the next three years. The incoming Board members now constitute the following: Osamah Othman AlFuraih, Bader Nasser Al-Kharafi, Talal bin Said Al Mamari, Zaki Hilal Saud Al Busaidi, Atef bin Saeed bin Rashid Al Siyabi, Nasser bin Sulaiman bin Hamad Al-Harthy, Alaa El-Din bin Abdallah Bait Fadel, Abdulrahman Mohammad Ibrahim Al Asfour, Yousef Khalid Abdul Razzaq. The Board of Directors will meet at a later date to assign positions within the Board.
2022 Financial Performance
During the AGM, Zain Group presented its financial results for the full-year 2022, whereby the company served 52.4 million customers, an annual increase of 7%, reflecting an addition of 3.5 million customers.
For the full-year 2022, Zain Group generated consolidated revenue of KD 1.7 billion (USD 5.6 billion), a year-on-year (Y-o-Y) increase of 14%. Consolidated EBITDA for the period increased by 7% Y-o-Y, to reach KD 673 million (USD 2.2 billion), reflecting an EBITDA margin of 39%. Consolidated net income reached KD 196 million (USD 640 million), up 6% Y-o-Y and reflecting earnings per share of 45 fils (USD 0.15).
Excerpts from the Board of Directors statement at the AGM
The Board of Directors welcomes all shareholders and affiliated parties to the Annual General Assembly of Zain Group. Zain Group has made substantial progress in laying solid foundations to achieve its ‘4Sight’ strategic goal of “Building a Sustainable Digital Communications company”, as the many strategic initiatives implemented have driven revenue growth and created value for all stakeholders.
The continued momentum of demand for connectivity, digital services, and emerging technologies, by individuals and enterprises alike has been remarkable, and this impact can be expected to grow exponentially, fueling the productivity of the economies and entrepreneurial startup ecosystems of the markets we serve.
On behalf of the Board of Directors, executive management and employees of Zain, we express our sincere appreciation for the confidence shown in us by our valued customers and shareholders, as well as the government ministries and regulatory authorities across our markets, who all play a vital role in providing meaningful connectivity to the communities we serve.
Excerpts from Zain Group Vice-Chairman and Group CEO, Bader Al Kharafi’s AGM statement
2022 offered Zain the opportunity to continue normalizing and growing its operations following the major disruption caused by the pandemic.
Management, with the support of the Board, focused on multiple initiatives during the year centred around digital transformation and innovation, 5G network upgrades and data monetization initiatives, passive network tower sales, and lucrative enterprise opportunities. These programs were executed in tandem with sound regulatory, governance, sustainability and inclusion practices that were implemented across our footprint, which were all in accordance with our 4Sight strategy, which are combining to future-proof the company.
As a pioneer in digital technologies driving meaningful connectivity and socio-economic development across our footprint, Zain continues to pursue opportunities to innovate, maximizing the many developments within the core telecom business while exploring new frontiers and diversifying into emerging lucrative business verticals in the ICT, digital infrastructure, fintech, and digital services space.
The ever-growing demand for reliable, high-speed connectivity across our markets justifies our significant investment in spectrum license fees, 4G network expansion, FTTH, and 5G upgrades. We are diligently monetizing these networks, offering appealing fintech, content, gaming, and other highly demanded consumer services, as well as compelling B2B services to governments and enterprises.
At the same time, we continue to deal with multiple challenges including fluctuations in currency exchange rates, a changing taxation environment, regulatory and spectrum developments, intense competition, and the impact of inflation that is affecting consumer spending.
The brand value grows as Zain earns multiple awards
We recognize that everything we do for our customers at every touchpoint of the business impacts the Zain brand, and it was pleasing to witness the value of the Zain brand increase by US$ 200 million, up 9.6% Y-o-Y to reach US$ 2.4 billion, according to BrandFinance’s 2022 global rankings. In February 2023, the brand valuation increased a further 14% to US$2.74 billion.
Furthermore, the attainment of multiple prestigious awards by global organizations during 2022 reaffirms the sound business practices we are implementing. Most notably, the recognition for Zain as being one of the top-ten employer brands in the region by Forbes Magazine; the Best Diversity & Inclusion strategy award by Informa; and the A- score in the ‘CDP Score Report–Climate Change 2022’, ranking Zain first in the region and among leaders globally with regards its climate-change mitigation initiatives. These accolades recognize the passionate efforts of the management team and our 7,400-strong talented workforce.
Investments in network and technologies driving data and digital services revenue growth
Throughout 2022, Zain Group invested USD 936 million in CAPEX (17% of revenue), predominantly in 5G rollouts in Kuwait, Saudi Arabia and Bahrain; 4G upgrades and new sites across Iraq, Jordan, South Sudan and Sudan; expansion of Fiber-to-the-Home (FTTH) infrastructure; and spectrum license fees.
Such investment delivers meaningful connectivity to the communities we serve, in a reliable and high-speed manner. At the same time, this CAPEX is driving significant growth in data revenues, generating over USD 2.2 billion in 2022, representing 40% of Zain Group’s consolidated revenues for the year.
Fintech innovation and expansion
A key strategic initiative of Zain is to continue innovating and expanding mobile financial services across our operating markets, providing much needed services to our customer base and beyond.
With the roll-out of appealing new services, the customer and transaction growth experienced by ‘Tamam’, our micro-financing arm in Saudi Arabia, ‘ZainCash’ mobile money platforms in Jordan and Iraq were truly impressive, now serving one million customers who made over US$3.6 billion worth of transactions in 2022, resulting in a 241% increase in revenues.
In Bahrain, we acquired a digital banking license from the Kingdom’s Central Bank and expect commercial launch in 2023, while in Sudan we are currently fulfilling the necessary regulatory requirements to be awarded a digital banking license, and expect to launch in early 2023. In Kuwait, we have applied for a digital banking license with the Central Bank.
ZainTech and Operation’s B2B teams poised for impressive growth
ZainTech, Zain’s one-stop digital and ICT solutions powerhouse, has gained enormous traction since its launch in October 2021, working closely with our country operation’s B2B teams and establishing the groundwork for exponential profitable growth by being the digital partner of choice for governments and enterprises across our markets.
ZainTech’s strategic acquisition of leading managed cloud provider BIOS Middle East during the year represents a major step, as managed cloud is a highly relevant and critical business area for our region. Cybersecurity, IoT, AI, Big Data, Smart Cities, Drones, Robotics and other emerging technologies are additional services and growth areas that ZainTech is focused on, which will drive revenues and enable the company to provide the most comprehensive suite of digital and ICT transformation services in the region all under one-roof.
The 28% annual growth in B2B revenues across our footprint reflects the sound cooperative business model between ZainTech and our local operations’ B2B teams.
Sale of passive Tower networks creating efficiencies and value
One of the key parts of the 4Sight strategy centers on portfolio optimization, extending to the sale and leaseback of the passive infrastructure of our tower network, thereby unlocking capital and allocating resources for more effective and sustainable use.
Following our pioneering sales of the towers in Kuwait and Jordan in recent years, in early 2022 we entered into an agreement with the Public Investment Fund in Saudi Arabia to sell 8,069 towers for US$ 807 million, which was finalized in January 2023. Similarly, in January 2023, Zain Iraq entered into a 15-year agreement to sell and leaseback, as well as the management rights of the passive physical infrastructure of its 4,968 tower portfolio in Iraq to TASC Towers for US$ 180 million.
By injecting the sale proceeds into the business, these deals provide greater flexibility for the operations to invest in network upgrades and technologies to meet the ever-increasing demand for reliable and fast broadband. In some markets we share passive assets with competitors, a process that helps reduce our carbon footprint.
Regulatory initiatives and Corporate Governance are key
The growth of the future digital economy in which Zain operates depends on developments across multiple industries, technologies, and sectors that have material impacts on the regulatory landscape, which is becoming increasingly complex.
As an organization subject to laws, regulations, policies, and mandates issued by regulators on telecommunications, financial services, data protection, cloud computing, civil aviation, and climate change, Zain engages with authorities through participation in industry forums, regulator-led workshops, meetings with Ministers and policy officials, and responses to public and industry consultations initiated by regulatory bodies.
Furthermore, Zain has taken proactive steps to ensure regulatory compliance by instituting a robust Regulatory Compliance program across the Group, establishing internal controls, governance, monitoring, and risk-prioritized resolution approach to regulatory matters.
A Group-wide emphasis on Sustainability
Across its footprint, Zain is guided by the four pillars of its five-year corporate sustainability strategy, which are centred on Climate Change, Social Business, Inclusion, and Generation Youth.
Our emphasis on sustainability and safeguarding the environment was evident in our 2022 thought leadership report, entitled “The Climate Crisis – Achieving Net-Zero for a Sustainable Future,” which explored various important topics related to working towards a Net-Zero economy, including understanding the role of the telecom sector in achieving this ambition; assessing science-based targets; emphasizing the importance of multisectoral cooperation; and leveraging digitization and innovation.
Notably, the A- score that Zain maintained in the latest ‘CDP Score Report–Climate Change 2022’, positioned us first in the region and among leaders globally with respect to climate control initiatives. Zain has been one of the most active and vocal telecom operators in the region with regards its support of climate change actions, as we wholeheartedly believe protection of our environment should be a key priority for every organization and individual on the planet.
Diversity, Equity and Inclusion programs creating a vibrant culture
Our focus on nurturing a diverse, equitable and inclusive culture through a series of programs and initiatives has become a key part of the fabric of the company, transforming how we hire, plan for succession, support and develop our people, which all work towards positively contributing to a vibrant, productive, and inclusive culture.
As a responsible listed entity accountable to multiple stakeholders, we believe corporate purpose is a strategic imperative. Accordingly, we created a new executive position of Chief Purpose Officer (CPO), whose role will be to bind company purpose with employee purpose, to guide, inspire, and drive innovation within and outside the organization. The CPO will be responsible for mobilizing employees and effectively leading the strategic purpose of the company’s management goals and shared values in an inclusive and collaborative manner. The role also involves overseeing the company’s reason for being, and the positive impact Zain delivers for employees, stakeholders, and society.
As part of its 4Sight strategy, Zain is proactively embedding its shared values into its DNA to drive our business, sustainability, and DEI agenda, enriching our purpose for being as an organization.
Conclusion
As we enter 2023 on the back of these impressive 2022 results, Zain is primed to further execute on its 4Sight strategy, building on and maximizing the many opportunities within the core telecom business while diversifying into new lucrative business verticals in the ICT, digital infrastructure, fintech and digital services spaces. We look ahead with confidence as we continue to make considerable progress and help deliver a significant and lasting positive impact on the societies we serve.
