Growing Zain

Kuwaiti headquartered Zain is an operator with ambition. The firm's stated aim is to become one of the world's top ten international operators - judged by a range of parameters from market capitalisation and revenue to the size of its overall subscriber base. Today the firm operates in 22 markets across the Middle East and Africa, which it says positions it as the fourth largest player in the world in terms of footprint.

Mike Hibberd

March 12, 2008

8 Min Read
Growing Zain
Growing Zain

Kuwaiti headquartered Zain is an operator with ambition. The firm’s stated aim is to become one of the world’s top ten international operators – judged by a range of parameters from market capitalisation and revenue to the size of its overall subscriber base. Today the firm operates in 22 markets across the Middle East and Africa, which it says positions it as the fourth largest player in the world in terms of footprint.

At the close of last year its total subscriber base was 42.4 million. And at the end of February this year, when MCI spoke with Zain’s chief communications officer, Ibrahim Adel, the firm’s market cap was $28bn. A little over four years ago, at end December 2003, the firm’s worth was just $3bn, and it recently peaked at $32bn.

2003 was the year in which Zain’s CEO, Dr Saad al Barrak, unveiled what he dubbed a ‘3x3x3’ expansion plan, intended to see Zain achieve top ten status in the cellular carrier world market. From a standing start in a domestic market of just 2.5 million people, Zain was to expand in a trio of three-year increments. The first would see it move from a single market player to a regional operator. The second would focus on international expansion and the third would see it become truly global. 2008 sees Zain midway through the second three-year period.

January 2003, some twenty years after MTC was created as the first mobile operator in the region (the firm re-branded its operations in Jordan, Kuwait, Bahrain and Sudan to Zain in September last year), the first of a series of acquisitions saw it purchase 91 per cent of Jordanian carrier Fastlink. The following April it won the second licence in Bahrain and in December of that year it was awarded one of three Greenfield licences in Iraq.

The landmark deal for Zain, though, was the 2005 purchase of pan-African carrier Celtel. This gave the Kuwaiti player a presence in 13 African markets, with particular strength in the sub-Saharan region. Under the Celtel brand African expansion continued apace, with the firm gaining presence in Madagascar, Sudan, Ghana and Nigeria – the last of which remains the firm’s largest market by customer base.

Zain’s expansionist ambition won it headlines a year ago when it was announced that the firm had won the third licence in Saudi Arabia at a cost of $6.1bn – a sum that raised eyebrows across the industry given the Kingdom’s penetration at the time of more than 80 per cent. Dismissed by some as a move that simply didn’t justify the expense, it was one in a series of strategic manoeuvres, says Ibrahim Adel, that led some observers to dub the firm “crazy Kuwaitis, spending crazy money”.

But, he says, the licence win was essential. “$6.1bn is a lot of money; it’s the most that’s been paid for a third licence,” says Adel. “But Saudi is a key strategic market for us. We couldn’t not be there.” The licence terms stipulated that Zain had to have at least a 50 per cent public offering to retail investors, an offering that was concluded in February this year. “The offering was 2.9 times over-subscribed,” says Adel. “We’re going to have eight million shareholders [in Saudi Arabia] and if we get 40 or 50 per cent of those as customers within the first 12 to 18 months, we’re going to be on easy street. The affluence of the Saudis is a huge driver.”

Money is not the sole motivation, however. Zain has operations in five markets that border Saudi Arabia; Sudan, Kuwait, Bahrain, Jordan and Iraq – where in December last year it bought competitor Iraqna from Orascom, consolidating its position, and creating its second largest market by subscriber base. Zain will this year launch a service in the Middle East that will allow customers to roam across all of its operations in the region, and be billed – and have access to services – as if they were on their home network. Saudi is a hub market, and therefore vital to the success of this offering, says Adel.

Zain Group results for year end 2007




Active customers (m)




Revenues ($USbn)








Net profit ($USbn)




Earnings per share (cents)




It is a replication of the ‘One’ network that Zain has launched across 12 of its African properties. The creation of One came at a time when roaming charges in Europe were the source of much contention. Viviane Reding, the European Commissioner for the Media and Information Society had made costly end-user roaming charges a personal crusade and was threatening legislation that would force carriers to slash their tariffs and forego a highly lucrative revenue stream (a threat upon which she made good). Reding’s office contacted Zain, says Adel, to find out how the firm had implemented the concept as part of its battle plan for the European market.

This year, the Zain brand will be extended across the carrier’s entire portfolio. After the acquisition of Celtel, which had itself just carried out a rebrand, the Celtel team was given the mandate to assess the MTC branding in the Middle East and the Zain brand was born. It means ‘good’ in Arabic, says Adel, and is also a name, male or female depending on the country in question. “Most importantly, though, it is a blank sheet into which we can implant our aspirations,” he says.

Those aspirations reflect an undimmed appetite for expansion. The interesting question now, is where and how that expansion will take place. Zain has participated in almost all of the Greenfield licence opportunities available to it in recent times but these are becoming increasingly rare. So will Zain hunt piecemeal, building its presence by picking off unaffiliated one-market carriers, or will it look to replicate the Celtel move, by going for the multi-billion dollar acquisition of an established international player?

“This is the main question we’re grappling with right now,” says Adel. “We run acquisition simulations all the time, theoretical exercises. What if we were to form a larger group that included Orascom, or MTN, or any of the other players. We just want to see whether there are strategic fits, or conflicts. But they are just exercises,” he stresses.

Whatever the route the firm pursues – and Adel nods to India as a desirable place to be, albeit one that is particularly hard to get into – the firm is going to need money. It spent $3.4bn on Celtel and $6.1bn on a licence in Saudi Arabia, after all. Where will it find its war chest going forward?

“We can’t keep relying on the debt market to fund every one of these transactions,” says Adel, “so we will IPO. We also want to do this to give people access to us. The Kuwaiti stock market is very exotic. It’s not that easy for individual or institutional investors to enter and we want to give access to a large base of investors.”

The share price is healthy, he says. So healthy, in fact, that after a recent exercise undertaken by the firm to assess what it would command at IPO, “a couple of our board members saw the valuation and said ‘maybe we should sell’. But in the end they decided to keep going.”

It’s not as if the firm is struggling, after all. Earlier this year it released its 2007 results with the announcement that it had achieved the highest annual net profit in the history of Kuwait’s private sector. Net income was $1.13bn on revenues of $5.91bn, growing its bottom line 12 per cent year on year.

Zain is, says Ibrahim Adel, unusual among it’s compatriots in its policy of openness and candour on everything from financial performance to strategic ambition. This has had an impact across the whole of the Kuwaiti corporate sector, he says. “We’re out in the public domain very often, even though we come from a part of the world where it was not the norm to be like that. The way we operate in terms of disclosure, transparency, adherence to world class best practices, even though they’re not imposed by the Kuwaiti stock market or local norms, had had a significant effect on the way other Kuwaiti firms do business,” he says.

The timing of the IPO will give the industry a heads up that the Zain campaign is about to head further afield. Despite the frankness with which the firm speaks about its ambition, there has been no hint of a move into Western markets, which will be necessary if the firm’s global aspirations are truly to be met. Not many more months will pass, one imagines, before the Zain purse strings are loosened once again.

Zain company history

1983: MTC established as the first mobile telecom company in the region.

1994: Introduces GSM in Kuwait. One of the 1st to do so in the region.

2001: Government of Kuwait reduces stake from 49% to 25%, after Kuwaiti market opens to competition in 2000.

2003: Acquires 91.5% of Fastlink- Jordan’s leading mobile operator for US$424 million taking total holding to 96.5%. Wins licences in Bahrain and Iraq.

2005: Acquires 85 per cent of Celtel Africa for US$2.84 billion.

2006: Celtel acquires operations in Sudan, Madagascar as well as a controlling stake of 65% in Nigerian carrier Vmobile. Launches One network across African properties.

2007: MTC Pays 6.1bn for third licence in Saudi Arabia. Market cap exceeds $30bn. Rebrands as Zain and consolidates in Iraq through purchase of Iraqna.

2008: Announces highest ever private sector profits for Kuwaiti firm.

About the Author(s)

Mike Hibberd

Mike Hibberd was previously editorial director at, Mobile Communications International magazine and Banking Technology | Follow him @telecomshibberd

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