Strategy Note /
Saudi Arabia

Earnings Call Summary – Zain Q2 22

  • In Q2 22, revenues increased by 16.4% yoy (+1.3% qoq) to SAR2.21bn

  • Zain’s 5G customer base grew by more than 170% yoy

  • Gross profits for Q2 22 decreased by 0.6% yoy (+1.2% qoq) to SAR1.25bn

SNB Capital
31 July 2022
Published bySNB Capital

Revenue and other KPIs

  • In Q2 22, revenues increased by 16.4% yoy (+1.3% qoq) to SAR2.21bn driven by higher B2B, 5G, digital platforms and higher demand for visitor packages. However, the growth was partially mitigated by a decline in FTTH and prepaid data only revenues.

  • Revenue growth breakdown: 50% of the revenue growth is contributed by postpaid, prepaid, mobile broadbands, 5G and B2B segments. Around 15% of the growth is attributed to inbound roaming while Zain payments contributed 7% to the revenue growth.

  • Zain’s 5G customer base grew by more than 170% yoy while 5G profits grew by more than 130% yoy in Q2 22. 5G services accounted for c7% of total revenue in Q2 22.

  • Revnues of the fintech division (Tamam), a micro-lending platform, grew by over ten folds yoy to SAR23.3mn in Q2 22 vs SAR2.0mn in Q2 21. Tamam’s revenue reached SAR33.7mn in H1 22 vs SAR15.6mn in full year 2021.

  • FTTH revenues declined due to higher churn in subscribers following the open access regulation. This has resulted in over 20% decline in FTTH ARPU.

  • Zain’s 5G coverage reached to 53 cities at the end of Q2 22 with more than 5,000 towers, covering 62.5% of populated areas.

  • Zain’s total active subscribers reached 8.9mn by the end of Q2 22, with an ARPU of SAR63, a decrease of 12% yoy. Decline in ARPU came as result of Zain offering device bundles with current packages, without increasing the bundle rates. Revenues from devices sales was recorded separately, as a result ARPU was calculated net of device sales.

  • Zain’s data revenues accounted for 48% of total revenue with an average data traffic of 13,052 TB per day. Going forward, the company expects the data revenue to remain around c50% of the topline.


  • Gross profits for Q2 22 decreased by 0.6% yoy (+1.2% qoq) to SAR1.25bn while gross margins declined to 56.7% compared to 66.4% in Q2 21. Gross margins contraction was due to growth in low margin segments’ revenue like handset installments and national roaming revenue.

  • In Q2 22, EBITDA stood at SAR767mn (flat yoy) increasing 6.1% qoq. EBITDA margins declined to c33% from c40% in Q2 21 driven by 1) increased revenue from low margin segments 2) absence of CITC waiver of SAR41 which was recognized in Q2 21. Adjusting for CITC waiver, Q2 21 EBITDA margins stood at c38%.

  • Opex in absolute terms remained stable on yoy basis while opex/sales ratio declined to 22% in Q2 22 from 26% in Q2 21 driven by the company’s cost optimization programs.

  • The company recorded a 64.4% yoy (+30.3% qoq) growth in EBIT for Q2 22 to reach SAR262mn vs SAR159mn in Q2 21. EBIT margin improved to 11.9% in Q2 22 vs 8.4% in Q2 21. The improvement in EBIT was mainly due to the decline in depreciation and amortization expenses resulting from the acquisition of Zain’s tower portfolio.

  • The tower sale transaction has resulted in the reclassification of tower assets to assets held for sale and a saving of cSAR90mn on depreciation of these assets was recorded in Q2 22.

  • The company reported a financing cost of SAR127mn, an increase of 6% yoy. The increase in financing costs is driven by the hike in LIBOR and SIBOR rates despite a reduction in debt by SAR633mn compared to Q2 21.

  • Net profit increased by 219% yoy to SAR134mn vs SAR41.7mn in Q2 21 while net margins reached 6.1% as compared to 2.2% in Q2 21.

  • Tamam has over 80% of gross margins and generated SAR7.6mn of net profits in the first half of 2022 vs SAR12.6mn in full year 2021.

 Capex and Cashflow:

  • Total capex in Q2 22 stood at SAR173mn vs SAR34mn in Q2 21, while capex to revenue stood at 8% vs 2% in Q2 22. The increase in capex is mainly due to network expansion.

  • The company has capex plans of worth SAR481mn to incur on execution of its network expansion projects.

  • At the end of Q2 22, the company had a cash balance of SAR436mn vs SAR734mn at the end of Q2 21. The cash balance decline was mainly due to the increase in B2B receivables and higher capex.

  • Total debt decreased by SAR633mn and stood at cSAR9.34bn at the end of Q2 22, representing 49.79% of the capital structure, compared to 50.25% at the end of Q1 22.

  • More than 1/3 of the company’s debts are fully hedged against interest rate hikes.

  • Net debt remained at cSAR8.9bn at the end of Q2 22 resulting in a Net debt/EBITDA ratio of 2.86x vs 2.90x at the end of Q1 22.


  • The company’s prepaid customers declined in the past two years as expats left the country during COVID-19 period. With the removal of travel restrictions, the management expects an increase in prepaid subscribers.

  • The management stated that accounts receivables have been increasing due to growth in the Enterprise and Tamam segments.

  • The company stated that its not planning to focus on the low margin businesses to support the the topline and increase its market share. However, higher customer acquisition costs would have negative impact on margins in the short run.

  • Currently, Tamam provides only cash loans, and the company plans to launch multiple products under Tamam division to grow its business which will help in improving the overall margins.

  • Zain wants to leverage its network infrastructure by sharing it with two new MVNOs and expects a positive revenue contribution from these MVNOs.

  • These MVNOs will cover all the associated costs by themselves, and Zain will not incur any costs associated with the MVNOs interconnectivity or other costs.

  • Although there were less number of visitors during Ramadan season compared to 2019, Zain’s market share improved in Q2 2021.