According to its Assistant Chief Executive for Business Development and Government Relations Barrak al-Subeih, Zain’s possible decision to sell its African operations would be made in order to “look for expansion opportunities in other areas with higher growth rates, such as the Middle East or the Far East.” Hitherto, the Kuwait telecom firm has spent upwards of US$12 billion in Africa since 2005 (when it purchased Celtel International), including roughly $3b in Nigeria alone, the continent’s most populous nation, while continuing to expand and operate in 23 countries across the Middle East and Africa. Per Bloomberg, Zain has around 40.1 million subscribers in Africa, a figure that constitutes nearly 62% of its client base. Additionally, more than half of its $7.4 billion of annual sales in 2008 came from Africa.
The strategy of chasing higher growth rates is not without concern, however. A study published last year by Booz & Company, a global management consultancy, concluded that most markets in the GCC were quickly reaching “saturation levels”. Further growth, it noted, would thus have to adopt strategies that address both the scale and scope of their services. In terms of scope and growing revenues, operators must extend and diversify their business to include offerings that go beyond basic telecom services. “As for extending scale, operators must acquire and/or pursue strategic alliances, either with local or international players, to create a much sought-after critical mass,” remarked Ghassan Hasbani, a Booz VP. And as for scope, he continued, operators must extend and diversify their business to include offerings that go beyond basic telecom services.
Yet as of late, at least, Zain has shown a propensity for both. Two months ago it expanded its scale in West Bank and Gaza (a region with a paltry 35% penetration rate) through a 56% ownership stake in Paltel. And several weeks ago the company announced the implementation of ZAP–a new service allowing customers to make cross-border payments and transfers between Kenya, Tanzania and Uganda with no extra charge.