Zain has lessons to learn and teach

Kuwait’s Zain has realized a major achievement in redefining what it means to be a truly regional mobile operator. The recent rebranding of all its subsidiaries in Africa to Zain and, more significantly, the eradication of roaming charges between all Zain operators have done nothing less than redefine what it means to be a truly regional player.

Without question, other, more established, regional operators, such as Vodafone, France Telecom and T-Mobile International, have a lot to learn from Zain’s abolition of roaming charges. But Zain also has a lot to learn from these operators’ experiences in coping with declining ARPU levels amid intensifying competition in once-sheltered operating conditions.

Roaming and rebranding

Let’s look first at the lessons other operators can learn from Zain’s considerable recent achievements, both financial and operational.

Zain has linked its One Network service in the Middle East and Africa, meaning that its low-cost international voice and SMS roaming offering is now available on 15 country networks.

One Network is now available between Africa and the Middle East, abolishing international roaming rates for Zain subscribers in countries where Zain is present. Zain prepaid and postpaid customers can now make calls and send messages at local rates when communicating with a Zain subscriber traveling abroad in either Africa or the Middle East.

The One Network service is automatically activated when a Zain customer crosses the geographical border into one of the countries in which Zain operates, with no registration or sign-up fee required. Prepaid subscribers can also top up accounts and recharge cards bought from either their home country or an outlet in one of the 15 One Network countries.

Zain initially launched One Network under its Celtel brand in Kenya, Tanzania and Uganda, in September 2006, before extending the network to countries in Central Africa in June 2007 and to Burkina Faso, Chad, Malawi, Niger, Nigeria and Sudan in November 2007. The network was extended to Bahrain, Iraq and Jordan in April.

Compared with European operators’ efforts on voice and SMS roaming, this is nothing short of revolutionary. Zain’s European counterparts resisted calls to lower voice roaming rates and are in the process of repeating history with SMS and data roaming, with intervention by the European Commission in September looking increasingly likely.

Zain’s move has already forced other operators to react. Saudi Telecom, for instance, has said it will launch low-price roaming across a network of 30 foreign operators this month. Saudi Telecom’s Unified International Roaming service will cover most of the Middle East, Europe, Indonesia, Turkey and South Africa.

Discounts on calls in these countries will be up to 69 per cent on normal rates – still not quite the achievement of Zain, but it does price roaming services closer to cost than has traditionally been the case among European operators.

In addition to One Network, Zain rebranded all 14 Celtel operations in Africa as Zain in one clean sweep at the beginning of the month, supported by a major advertising campaign. Zain also plans to rebrand about 1 million point-of-sale outlets across the continent.

The rebranding to Zain is aimed at creating “a single, strong identity,” according to Zain Group CEO Saad Al Barrak.

Zain’s challenges

Now let’s turn to what Zain might learn from its European counterparts. Zain’s recent results are impressive reading. The operator reported strong figures for 1H08, boosted by a massive 58 per cent increase in its subscription count, which totaled 50.7 million across all its operations at end-June.

The operator had consolidated revenues of US$3.49 billion for 1H08, up 26 per cent year-on-year, while net income increased 7 per cent, to US$551 million, and EBITDA jumped 20 per cent, to US$1.3 billion.

“We have started to reap the rewards of our recent large investments, particularly in Iraq, Nigeria and Sudan, with these three countries now serving more than half of Zain’s 50 million customers, and we expect similar rewards when our operations in Saudi Arabia and Ghana commence commercial operations,” Al Barrak said.

But a closer look gives an insight into the more challenging conditions that might be awaiting the operator, ones that mirror those already experienced by operators in Europe.

Only four (Kuwait, Iraq, Jordan and Malawi) of the 19 operations Zain provided ARPU information for in its recent results saw a year-on-year increase in ARPU in 1Q08. These figures indicate that Zain has already moved from a rapid-growth phase of development to a more-stable-growth phase, just like its counterparts in Europe and other parts of the world.

What specific lessons can Zain learn from operators in mobile markets that underwent a similar development? Lessons from Europe and elsewhere show that brand is extremely important. In this area, Zain is already doing a good job, sparing no expanse in its recent rebranding exercise.

Another lesson Zain can learn from European operators is to outsource as much network maintenance as possible, enabling it to become a nimble outfit whose primary areas of focus are what really matter to end-users: the development, selection and marketing of services. This will help Zain focus on being a high-quality mobile services provider that can charge a premium for its services, compared with competitors that undercut it. To that end, its One Network offering is a great idea: It provides meaningful differentiation from rivals.

Zain should also learn from European operators and launch mobile broadband services, such as dongles and embedded modules in laptops, as soon as possible to secure the high-value segment of the market before it becomes commoditized, as has already happened in Europe. Finally, Zain’s economies of scale will also enable it to strike good deals with equipment manufacturers.

Zain is perfectly placed to be a truly modern telecoms operator – light on infrastructure and heavy on the launch of innovative and compelling services. Rivals should take note.

Take a look at our recent company profile on Zain


  1. Avatar Saad AL-Barrak 13/08/2008 @ 9:35 pm

    Dear Paul :
    Your article is excellent and your notes and remarks are to the point and well taken. We are working very hard to adress the issues you raised. Thank you so much for your interest in zain.

    With best personal regards

    Saad AL-Barrak
    CEO – zain

  2. Avatar Khalid Alia 14/08/2008 @ 1:59 pm

    Dear Paul,

    Thanks for your article, all what you have mentioned above (Re branding + One Network) helped Zain to become a major player in the region…

    I believe Zain has the 2 most important elements to become the number 1 operator

    1. They have the technology
    2. They are becoming international all around the region

    Having said that, there are 2 points that might also help Zain progress more, and enjoy more customers…

    1. Zain subscribers in different countries can call each other at a very low cost or at no cost, and this can be done through Zain international gateways.

    Connecting all Zain international gateways together, means Zain will not be charged any termination rates once calling from one country to another.

    This is will help Zain load more subscribers, specially between Jordan, Saudi, Iraq, and Kuwait..

    2. Mobile Broad Services, and Mobile advertising is the next coming revenue generator Zain can address as an opportunity they can benefit form.

    Best Regards,
    Khalid Alia
    Products VAS Manger @ Itisaluna
    ([email protected])

  3. Avatar Fadi Chehimi 17/08/2008 @ 12:15 pm

    It is really something significant and brave for an operator outside the European, East Asian, and US markets (where big leaps in telecoms usually take place) to take such a gigantic and promising step. I have been following up Zain’s news for a short while and I believe that the operator might even compete to be a top five operator position in 2011, not only top ten. But in order to get into that hot zone I think, and this is my personal speculation, Zain must add to its portfolio another strategic market which I describe as the “Next Big-Bang”: The Indian Subcontinent!

    Considering how many citizens from India, Pakistan, Bangladesh and Sri Lanka reside in the operational regions of the operator (especially in the Gulf), and that the Indian market will rocket in terms of mobile subscriber and population bases, I believe that Zain has a significant opportunity to link-in that region to its already wide-spreading blanket.

    This would make a lot of sense if we think of Khalid’s point where he mentions ‘mobile advertising’. Yes, Zain will be approaching an open stream of flooding revenues from advertising when targeting the same audience whilst being in their home country, and when they are in one of Zains operated countries. Bridging the distance between ‘home’ and ‘new-home’, and speaking their same language and interests across the channel when in the two places I think would be a remarkable touch-down!

    I know that getting into that market is not easy, especially that other international operators are aiming their antennas towards the region, and that Zain is busy stretching its arms into Africa, and that there are only 3 years left to hit 2011. But like all big steps Zain has take so far this would be an achievable target with a lot of planning, preparation and courage which I am sure Zain already has.

    All the best

  4. Avatar Javaid Malik 10/11/2008 @ 10:58 am

    While the effort of ZAIN is being applauded; one must think of the unfair and anti competetive behaviour being adopted by the Zain. The Regulators of the Region must take stalk of the issue in the name of level playing field and bound the Operator to offer his facility to any operator requesting it. Or alternatively they can bar the ZAIN from offering it in the name of unfair practice/anti-competitive as it is against the spirit of competition.

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