A RECORD YEAR

Saudi Arabia 2016 | TELECOMS & IT | INTERVIEW

TBY talks to Hassan Kabbani, CEO of Zain Saudi Arabia, on achieving growth in a competitive market and the emergence of mobile data connectivity.

Hassan Kabbani
BIOGRAPHY
Prior to his appointment as CEO of Zain Saudi Arabia in 2013, Hassan Kabbani headed mobile operations within Orascom Telecom Group in Egypt, Algeria, Sub-Saharan Africa, Yemen, and Syria. He also held key commercial and customer-focused roles at France Telecom Mobile Lebanon. He was also previously Advisor to the Chairman and board member of Oger Telecom as well as a board member of mobile operator Cell C in South Africa. A Lebanese national, Kabbani graduated from the Lebanese American University and undertook a post-graduate programs at INSEAD Institute France and Ecole Superieure des Affaires ESA, Lebanon.

How would you assess the performances of Zain in 2015?

The year 2015 was an excellent year for Zain Saudi Arabia by all measures. Financially, it proved to be a record year. In a very competitive market, we increased revenues by 9%, reaching SAR6.7 billion (nearly $1.8 billion). We increased our gross margin by 7 full percentage points, up from 52% to 59%. Likewise, EBITDA rose by 48%, reaching SAR1.6 billion. The record I am most proud of is that, for the first time since its inception, the company broke even at an operating level (EBIT) during two quarters of 2015. We ended the year having reduced operating losses by 73%, down from SAR534 million to 141 million. We continue to focus on offering our customers the best possible mobile video streaming experience and friendly service from our ever-expanding network of refreshed retail outlets. Of course, we have continued to improve customer experience, as a result of our recent SAR4.5 billion investment in our network infrastructure. In 2015, we experienced a significant increase in data traffic carried by the network as we expanded both its reach and capacity in urban areas.

What other challenges do you see in this country for the sector's development?

As the third mobile telecommunications operator in Saudi Arabia, it would be natural for me to call for measures that enable Zain to grow. An independent economist would observe that the telecommunications sector in Saudi Arabia is too concentrated and that regulatory measures are required to correct this situation. We have seen the start of this process with the decision to decrease mobile and fixed termination rates, both in 2015 and again in 2016. Our sector, the ICT sector, is core to Saudi Arabia's Vision 2030 objective to create a diversified, knowledge-based economy. Saudi Arabia is a global leader in terms of a digitally connected society, often being cited as the highest per capital consumer of streaming video content and social media usage. Citizens leapfrogged an entire generation of web 1.0 directly to web 2.0, and also leapfrogged the traditional slow, inconvenient fixed-internet connections, choosing to connect with modern fast, convenient mobile internet connections. In fact, during 2015 mobile data connections outnumbered fixed-data connections by more than nine to one. Our industry now faces the challenge of needing additional radio spectrum to keep up with the ever-increasing demands of our customers. Of course, allocating more radio spectrum is good for both the economic and social development of the Kingdom. The Kingdom had the wisdom to include the allocation of more radio spectrum as a strategic objective of Vision 2030. Mobile penetration rates in the Gulf region are as high as 200%, while in Saudi Arabia this figure is 169.3%.

What opportunities do you see for growth?

Mobile data is changing the face of the telecommunications industry across the globe; many of the old-school approaches and old-school indicators are rapidly becoming obsolete. Our industry now connects more people in more ways than ever before, and in many cases each of the device that we use has its own unique connection. Therefore, the old voice paradigm of a ceiling on penetration has been blown away by the emergence of mobile data connectivity and the Internet of Things (IoT). I believe that the customer experience remains a big issue for consumers in Saudi Arabia. Zain's focus, and indeed our entire “Winning through Caring" strategy, aims to address this market opportunity. Of course, we are rapidly digitizing our services, making it more convenient for our customers to connect with our brand. We now see the opportunity to move into other core services that would be beneficial to our customers. Like many other leading telecommunications operators, we see that it may be beneficial to our consumers if we offload some of their traffic onto a fixed network. Fortunately, Zain has many different strategic options to achieve this goal either directly or through business partnerships.