Kuwait's Zain announces 1.2% rise in Q3 profit

UPDATE 1: Gulf state's largest mobile operator posts net income of $332mn.

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By  Ulf Laessing and Ola Galal Published  October 22, 2008

Kuwait's Mobile Telecommunications Co (Zain) on Wednesday said it would keep its 2008 goal of net profit growth of 5 percent after resuming profit growth in the third-quarter despite heavy investments in the Middle East and Africa.

The Arab world's third-largest telecoms operator by market value, which just raised $4.5 billion to fund an expansion, said net income in the three months to Sept. 30 rose by 1.2 percent to 87.2 million dinars ($322.7 million) after posting a 3.6 percent fall in the second quarter.

This was below the 96.20 million dinars that Kuwaiti investment bank Global Investment House had forecast for third-quarter net profit in a Reuters survey last month.

But the number of customers of Zain, which has been spending billions to expand to 22 countries, rose by 54 percent to 56.3 millions at the end of September.

Zain spokesman Ibrahim Adel said investments in an expansion such as the launch of the Saudi operation had being weighing in the quarter as in previous ones but the company kept its 2008 outlook of around 5 percent profit growth.

"Saudi Arabia is a huge investment. It is performing very well with 1 million customers in less than two months but it will take time until it will post a net profit," Chief Executive Saad Al-Barrak told newswire Reuters in a statement.

For 2009, Zain expects even 30 percent profit growth as those investments would pay off, Barrak said on Monday.

Zain said its main Kuwait market was continuing to contribute considerably to profits, while Bahrain was doing very well and Iraq, Sudan and Jordan witnessing "challenging markets". It gave no details for markets.

In Africa, where Zain plans to launch operations in Ghana by the end of the year, Zain said its Nigerian operations was undergoing heavy investments, while Tanzania, Uganda and Madagascar were doing very well.

The operator, in which the Kuwait's sovereign wealth fund is the biggest shareholder, spent $3.4 billion to buy Celtel in 2005 to enter sub-Saharan Africa.

In Kuwait, Zain, which led a group that paid $6.1 billion for the third Saudi mobile phone licence, will face increasing competition when VIVA, an affiliate of Saudi Telecom, will launch services by the end of the year.

Revenues were up 25 percent at $1.88 billion in the third quarter, Zain said, without providing data in dinar, its main reporting currency.

Zain shares fell 4.7 percent on Wednesday. The stock is down about 27 percent since September when a slide on the Kuwait bourse began. (Reuters)

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