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Zain SWOT and PESTLE Analysis

ID : 52437553| Aug 2018| 15 pages

COMPANY PROFILE -Zain

Business Sector :Telecommuniation

Operating Geography :Kuwait, Asia, Global

About Zain :

Zain is a mobile telecommunications company founded in 1983 in Kuwait as MTC (Mobile Telecommunications Company) and later rebranded as Zain in 2007. Zain has a commercial presence in eight countries across the Middle East with 46.9 million active customers as of March 2018. With a vision for building a sustainable and innovative digital communications company is serving consumers and enterprises with a rich and simple mobile experience. Zain group operates with a passion for providing enhanced customer experience and maintaining operational effectivenes. Zain’s strategy is based on six transformational initiatives: Customer Experience; Operational Effectiveness; Value Management; B2B; Digital Frontier and Innovation, and Talent Development. Listed on the Kuwait Stock Exchange, there are no restrictions on Zain shares as the company’s capital is 100% free float and publicly traded. The largest shareholder is the Kuwait Investment Authority with a 24.6% as of December 2017.

Zain Revenue :


KD 1029.5 million – FY ended Dec 2017(year-on-year growth of ~6%)
KD 1087.7 million – FY ended Dec 2016

Ownership / Major shareholders :

Kuwait Investment Authority - 24.6%, Oman Telecommunications - 21.9%, Nohoudh Development Trading & Contracting - 5.05%

Competitive Analysis of Zain

SWOT
PESTLE
The SWOT Analysis for Zain is presented below:
Strengths
Weaknesses
1. Consistently profitable operations
2. Market leader in Kuwait, Iraq, Republic Of Sudan, Jordan & Lebanon
3. Focus on cost effectiveness and optimization
4. Strong brand value in Middle East
5. Innovations strengthening the technology platform
6. Reduced debt to equity ratio
1. Decrease in customer base
Opportunities
Threats
1. Opportunities in business to business segment
2. First mover opportunities in 5G Technology
1. Costly license Renewals
2. Increasing risk from Cyber Attacks
3. Falling ARPU and biometric registrations putting a brake on growth
4. Increase in competition from OTT and MVNO
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Detailed SWOT Analysis of Zain

Strength

1. Consistently profitable operations: The consolidated financial results for 2017 highlight the positive developments achieved by the several of the Groups key markets in terms of operational performance. In 2017, Zain Saudi Arabia reported USD 3.1 Million net profit turnaround that saw for the first time in its history recording an annual net profit. Zain Sudan recorded exceptional performance in local currency terms, with all its financial indicators jumping to all-time highs. Furthermore, in 2017, Zain Iraq also became profitable again after previously reporting losses. Zain group also witnessed the impressive addition of two million customers and significant growth of data revenues. Even in such challenging environment where businesses are facing increasing pressure on the profit level, Zain group managed to generate reasonable profits on year on year basis for the entire group. In last 3 years, Zain has group has reported an average profit on KD 2,68,073.

2. Market leader in Kuwait, Iraq, Republic Of Sudan, Jordan & Lebanon: Zain is considered as the new global brand for leading emerging markets mobile operator. Zain emerged as market leader in Kuwait, Iraq, Republic of Sudan, Jordan and Lebanon. Zain Kuwait started its operation in 1983 as Mobile Telecommunications Company(MTC) is the most profitable company in the company. Zain Kuwait has snatched a significant market share of 37% for the year 2017. Zain Iraq commenced in the year 2003 has a market share of 41% for the year 2017. The customer base of Zain Iraq grew 16% on year on year basis to reach 14.7 million. Zain Sudan came into the business after the acquisition of a 61% stake in Mobitel for USD 1.33 Billion. As of 2017, Zain Sudan has a market share of 47%. Zain Sudan is serving 13.5 million customers which 2nd largest in the group. Whereas Zain Jordan & Zain Lebanon has also maintained its market share of 36% and 54% respectively in the year 2017. Therefore, such market share will help Zain Group to generate more revenue as compared to its peers.

3. Focus on cost effectiveness and optimization: The telecommunications industry is undergoing a radical transformation and its moving towards digital and cloud services. It is very evident that the profitability levels of telecommunication companies are under increasing pressure in the challenging operating environment. It becomes very difficult for the companies to meet increasing capital expenditure requirements and rising operating costs. Hence, Zain is aggressively focusing on cost optimization programs. In line with this strategy, Zain sold and lease-backed the passive infrastructure of Zain’s mobile tower portfolio in Kuwait for USD 165 million to IHS Holding Limited. The transaction will not only reduce future expenditure but will also allow the company to increase investment in modern technologies and focus on enhancing the mobile experience for customers. In such a way Zain Group is motivated enough to exploit and enhance every cost-benefit opportunity.

4. Strong brand value in Middle East: Brand value is defined as a premium that accrues to a brand from customers who are willing to pay extra for it. Zain group is constantly developing its customer base and contributing to the development of solutions for government and mobile services entities, cloud services, Internet of Things and smart city solutions. Thus, one of the core focus of the Group now revolves around the enabling enterprise growth. The Zain Brand is one of the most important assets of the company and accordingly, it continues to invest in it for the benefit of all stakeholders. Brand Finance, the leading valuation and strategic consulting firm, valued Zain as the second most powerful brand in the Middle East in 2017, amounting to USD 2.34 billion, up 9% from its evaluation in 2016.

5. Innovations strengthening the technology platform: Telecommunication industry is very dynamic in nature. Telecommunication companies need to be highly innovative in nature to be competitive in the market. Therefore, Zain Group is investing heavily in innovation and up-gradation of services. Zain is focused on identifying opportunities in the smart city space, E-entertainment, m-health, e-education, online gaming, online commerce, m-advertising, m-payments, m-insurance and other financial technology services domain as well as cybersecurity. In 2017, Zain enhanced their Zain Cash service in Iraq and Jordan to support the vast unbanked population estimated at 90% in Iraq and 75% in Jordan. In 2017, Zain Cash is capable added new services such as virtual MasterCard, In-app services, QR code store payments, paying at an agent, loyalty programs and e-commerce platform. Zain is planning to introduce this platform to other geographies in Zain footprint.

6. Reduced debt to equity ratio: In 2017, Zain sold 9.8% worth of treasury shares to Omantel at a total valuation of USD 846.1 million. The liquidity from this transaction brought many immediate and significant benefits to zain as the deal allowed to reduce the debt levels and increase shareholder equity. In 2017, Debt to Equity ratio has reduced to 0.44 from 0.69 of last year. Reduced debt portion in capital employed will reduce interest burden on the company’s bottom line will help to generate more earnings per share for the shareholder. Further, a transaction has helped the Zain group with enhanced financial flexibility which will allow seeking opportunities in the digital space and investing in up gradation of mobile networks. The transaction also demonstrates Omantel confidence in the strength of Zain group business and in Zain’s strategic direction.

Weakness

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Opportunity

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Threat

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Major Competitors :

Etisalat, Mobily, Ooreedoo, Du, MTN, Omantel.

Major Brands :

Zain, touch, Paltel, MTC Bahrain.

Recent Acquisition / Mergers / Alliance / Joint Ventures / Divestitures :

Name
Business Segment
Year
Type
Objective/Synergy Achieved
IraqnaTelecom2007Acquisition Helped in becoming the number one telecom player in Iraq
MobitelTelecom2006AcquisitionBecomes the leading mobile operator in Sudan.
Source: Company website and other reliable sources. The detailed table is available in the Complete Report.
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TABLE OF CONTENTS
DELIVERY AND FORMAT
WHY CHOOSE US?
References used in Zain Analysis Report

1. Zain Annual Report 2017: https://www.zain.com/en/investor-relations/financial-reports/
2. Kuwait's telecoms sector adapts to increasingly digitised world: https://oxfordbusinessgroup.com/overview/loading-industry-players-look-get-ahead-increasingly-digitised-world
3. Market share of Zain in the Middle East in 2017, by country: https://www.statista.com/statistics/670975/middle-east-zain-market-share-by-country/
4. Kuwait telecoms market report 2018: http://www.analysysmason.com/Research/Content/Country-reports/Kuwait-country-report-RDRK0/

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Zain SWOT and PESTLE analysis has been conducted by Kushal Shanbagh and reviewed by senior analysts from Barakaat Consulting.

Copyright of Zain SWOT and PESTLE Analysis is the property of Barakaat Consulting. Please refer to the Terms and Conditions and Disclaimer for usage guidelines.

Zain SWOT and PESTLE Analysis
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