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Zain’s 2009 profits plummet

Company reports 39% fall in net income for full year 2009 compared with 2008, as revenue growth slowed.

Zain's revenue growth and profits declined in 2009.
Zain's revenue growth and profits declined in 2009.

Kuwaiti telco Zain suffered a 39% drop in profits in 2009 as a sluggish global economy, combined with mediocre performance of its African unit, dented growth.

The company, which is the process of selling most of its African assets to India's Bharti Airtel, reported a net income of KWD 195 million (US$ 675 million), a drop of 39% compared with 2008's figure of $1.2 billion.

Zain's revenue growth, which reached KWD 2.318 billion (US$ 8.056 billion) for 2009, representing a rise of 15.7%, was also significantly slower than the previous year, when revenues grew by 26%.

Despite operating in 18 countries in Africa, including some of the world's lowest ARPU markets, Zain's customer acquisitions also disappointed. The company said that total managed active customers reached 72.5 million, an increase of 14%. This compared with a far more impressive 50% rise in active customers in 2008.

Asaad Al Banwan, chairman of the Board of Directors, Zain Group, admitted that 2009 had been a tough year and attributed some of the company's difficulties to currency volatility. "The 2009 fiscal year was the toughest in the company's history with the biggest challenge coming from the sharp volatility in several currencies, which effectively cost the group KWD 38 million (US$ 133 million)," he said.

However the results are likely to vindicate the board's decision to sell most of its African operations to Bharti Airtel. Zain's CEO, Nabeel Bin Salamah, said that the group's "overall strategy" was to increase value to shareholders and that this was "already borne out by the recent definitive agreement to sell Zain's African assets."

"We will seek to seize any attractive investment opportunity, as well as focus on the markets in the Gulf and Middle East, which currently account for the largest proportion of revenue and profitability," he said in a statement.