New Sales Tax Weighs on Zain Iraq

By John Lee.

In a statement to the markets covering the first nine months of the year, Zain Group said that the implementation of a new 20 percent sales tax on mobile servicesin Iraq, as well as wide-ranging tax increases on other sectors in the country, that commenced 1 August 2015, have hit spending on mobile services:

Zain Iraq launched 3G services at the beginning of the year and is actively rolling out 3G services across the country. This contributed to data revenues growth of 39% Y-o-Y for the nine months. Zain Iraq’s performance has been severely hampered by the escalation of social instability that has resulted in several million people being displaced internally.

“Zain Iraq also has to endure frequent temporary network shutdowns and associated higher network operational costs. In addition, the implementation of a new 20% sales tax on mobile services together with a wide range of tax increases in other sectors in Iraq were introduced on 1st August, 2015, impacting spending on mobile services.

“These exceptional circumstances coupled with intense competition and currency fluctuations, adversely affected the operation’s financial performance. Revenues for the first nine months of 2015 reached USD 924 million, with EBITDA reaching USD 359 million (representing an impressive 38.8% margin), while net income amounted to USD 102 million.

“It is worth mentioning that the Q3 2015 KPIs grew by revenues 7%, EBITDA 13% and net income 60% as compared with Q2 2015. The Zain Iraq team is committed to maintaining a resilient and efficient network despite the domestic situation. The operator also foresees significant growth in all key financial indicators due to the impact of mobile data revenue growth given the pent-up demand for broadband services. The operator now serves 11.4 million customers.”

Zain Group CEO, Scott Gegenheimer (pictured) noted:

“We are pleased to see the continued growth in data usage and related revenue metrics across all our operations, reflecting the success of the company’s primary focus to upgrade its networks and commitment to delivering an affordable and compelling digital lifestyle experience to our customers.

“Despite not witnessing year-on-year growth in several key aspects of the Group’s consolidated financial results predominantly due to the unavoidable circumstances facing our operation in Iraq, our impressive EBITDA margin of 43.5% reflects the success of Zain Group’s operational efficiency drive.”

“The positive momentum and improving financial performance of our operations in Saudi Arabia and Sudan bodes well for the future of both companies. We continue to grow our customer base in our home base of Kuwait and we are working closely with the management team there to address the major competitive challenges in this lucrative market.

“It is gratifying to see both the Bahrain and Jordan operations continue to grow their customer base and data related revenues on the back of their respective upgraded and newly installed 4G networks. We are hopeful that the social unrest in Iraq subsides soon, so the operation can fully capture its growth potential with its newly operational 3G service.”

(Source: Zain)

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