Data And Efficiency Improvement Shape Mobily and Zain's Q213 Results

Mobily and Zain KSA announced their Q213 results on July 18 2013. While Mobily reported strong growth, with net profits rising 13% y-o-y to SAR1.6bn (US$426.6mn), Zain posted a net loss of SAR370mn (US$98.6mn), although still an improvement on a net loss of SAR394mn in the same period last year. Zain is making a concerted effort to improve its bottom line finances, which has largely hindered its competitiveness compared to its two bigger rivals STC and Mobily.

Mobily reported total quarterly revenues of SAR6bn (US$1.6bn) for Q213, a quarter-on-quarter rise of 6%, and an increase of 5% compared to the same period in 2012. The operator also reported exceptional growth in LTE and fibre-optic segments, with revenues from those services increasing by 89% in the first half of 2013. This demonstrates the market's move towards advanced data services following the saturation of the voice market.

Data Drives Growth
Saudi Arabia Mobile, 3G & 4G And Broadband Subscriber Forecasts, 2010-2017

As well as increased uptake of data services, we believe Mobily's strong quarterly results come on the back of its aggressive pursuit of high-value clients in the public and business sectors. The most notable of these is a contract to build, operate and maintain communication networks in the King Abdullah Economic City (KAEC), which is the largest and one of the most important of the four planned economic cities in Saudi Arabia (See 'Key Developments Prepare Mobily For Future Outperformance', July 4 2013).

Zain's quarterly revenues rose 9% year-on-year to reach SAR1.7bn (US$455mn), with subscriber acquisitions as the main growth driver. Despite the operator's continued net losses, its results show that it is making progress in reducing its operating costs and debt burden and inching its way towards a balanced budget. The operator reported a 21% decrease in financing costs, to SAR174mn, compared to SAR220mn in the same quarter last year. The company has recently taken steps to reduce its operating costs by outsourcing the majority of its network and operations management responsibilities to Huawei and Ericsson (See 'Ericsson To Give Zain A Push', June 17 and 'Zain Cuts Operating Costs Again', July 16).

Mobily's strong results confirm BMI's view that operators that leverage services in multiple sectors, including fixed-line, mobile and broadband, to pursue high-value clients in the corporate and public sectors stand to outperform over the medium term. Meanwhile, we believe Zain is moving in the right direction by making serious efforts to turn a profit and regain investor confidence. This is crucial to its survival over the long term, as it will need to invest more heavily in its network in order to compete more effectively, especially in the lucrative data market.

This article is tagged to:
Sector: Telecommunications
Geography: Saudi Arabia, United Arab Emirates, Kuwait

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