Zain SWOT and PESTLE Analysis

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.

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Weakness

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Opportunity

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Threat

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Political

1. Adverse effect of Political Polices: Lower oil prices, high youth, unemployment, large budget deficits and civil conflicts are impacting economies. Value Added Tax (VAT) at 5% has already been introduced in Saudi Arabia and United Arab Emirates (UAE) and is set to be implemented in other Gulf Cooperation Council (GCC) countries by no later than 2019. The implementation of expat levies and removal of energy subsidies have reduced the disposable income of consumers in Zain Markets. In tandem, governments continue to seek high spectrum fees, increase in mobile special taxes, excise taxes on usage, higher revenue share or introduction of additional costs through the imposition of universe service obligation. In Jordan, amount of taxes paid on top line sums up to 46.16% in addition to the revenue share of 10%, regulatory levy of 1% and corporate income tax at 24%. Analytical researchers are of the opinion that increasing tax burden will have an adverse effect on telecommunication sector. Further, consumer taxes impact consumer spending consequently lowering Average Revenue Per User (ARPU).

2. Political conflict and unstability in MENA regions: Political dynamics in the Middle East and North America(MENA) and daily events in Bahrain, Egypt, Iran, Iraq and other countries showcase current course of violence and instability in the region. It has been very evident that the region is facing demographic pressures, failures in economic development and the combination of challenges related to income distribution. Current UN, World Bank and others claim that situation in MENA countries is getting worse especially in conflict states. The pace of change and reform in most countries is far behind the actual need for change and reform. Hence, such macroeconomic factors have an adverse effect on the working of the business. Telecommunication companies such as Zain may find it difficult to effectively manage the ill effects of the political conflict and instability caused in the MENA region.

Economical

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Social

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Technological

Legal

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Environmental

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