By Ramia Farrage
War and weak customer spending is a nightmare for most companies, but not Iraq's largest telco. led by its ambitious CEO, Ali Al Zahid, Zain Iraq is witnessing a surge in profits
Baghdad is safer than Chicago, at least according to the CEO of Zain Iraq.
“A consultant based in Chicago asked if we can have a meeting outside Iraq, not in Baghdad, because they feared the security situation.
“I reminded them that in the first six months of the year, they had 221 people killed in Chicago. At the same time in Baghdad, we had 145 people unfortunately being killed,” Ali Al Zahid tells Arabian Business.
If you’re second-guessing his seemingly far-fetched statement, you might want to think again.
We need to have a team that understands the youth trends and the things that are hip
Under Al Zahid’s leadership, the country’s largest mobile operator has only gotten bigger. In 2018, its net profit surged 70 percent year-on-year to total an impressive $49 million compared to $29m in 2017, with full-year revenues reaching a whopping $1.1 billion, a three percent rise from the previous year, while earnings before interest, taxes, depreciation and amortisation (EBITDA) reached $423m, up 11 percent.
His secret? A young team fearless enough to take the company (part of leading MENA telco Zain Group) in a new direction.
“With my entrance, one of my requirements was being able to choose who was working in the team. I was able to put these people in place. It was natural growth and a no-brainer that these people would be in charge in their positions today.”
Al Zahid chose wisely. His team’s first move was to downsize operating costs and improve security by moving the company’s headquarters from 50 villas to a single tower in Baghdad. Their next move – naturally – was investing in digital. So far, it’s paying dividends. Zain Iraq claims the country’s largest telecoms market share at 43 percent, followed by Asia Cell with 38 percent and Korek with an estimated 19 percent, while revenue market share puts it at nearly 40 percent, Asia Cell at 43 percent and Korek at approximately 17 percent.
And with these impressive numbers, the CEO is content with the results.
“Our revenues in digital have increased dramatically and we are the leading operator in terms of data customers. In every survey, we can see we are the number one operator of choice in terms of quality of network and quality of data,” he says, grinning.
And why not boast about your numbers if you’ve outdone competitors despite having two disadvantages: close geographical proximity to war and a customer with little spending capabilities. It could be a nightmare for most companies. But not for Zain Iraq.
“Asia Cell and Korek started in the much more secure North in Kurdistan which means they never witnessed the civil war that we witnessed so at the same time, they were able to have a secure base with a bigger wallet.
“We have more customers but our customers aren’t as wealthy as the customers in the North,” Al Zahid says.
Our revenues in digital have increased dramatically and we are the leading operator in terms of data customers
It hasn’t stopped the telco from expanding its 3.9G services across the country and restore 97 percent of war-damaged sites in the West and North. This, combined with various customer acquisition initiatives, especially in core regions, won the telco over 1.3 million customers in the first quarter of 2019 versus the same period in 2018 – a nine percent increase to 16 million users.
Al Zahid credits “a very aggressive sales approach” but claims his team’s power point is knowing its strengths and weaknesses.
In a bid to tackle them, the company improved its point of sales and expanded it to over 18,000 locations, while revamping its network in Kurdistan.
The company’s ambitions remain high: 2019 net profit is expected to climb by at least two digits and even more by 2023, though Al Zahid is reluctant to reveal the figure.
He is, however, eager to share his pursuit of a 4G license this year. He suspects the Iraqi government will not charge for the license considering Zain Iraq’s massive $5bn investment in the licensing and rebuilding of 4,700 towers across the nation since 2004.
“We need the government to award the 4G license. In terms of network, ours is actually 4G ready, but what is required is that we get the green light from the government to be able to launch 4G. So we are hoping that we are talking about summer or fall to launch 4G. It would help tremendously – not us, because we have to put up a huge investment, but it would help the customer base, and it would help the demand in terms of data for the Iraqi population who are currently using a 3G network like a 4G network. We really need the 4G network to satisfy the needs in the country,” he says.
The operator’s infrastructure investments were largely made possible by the International Finance Corporation’s (IFC) financing package, allowing it to expand further into Iraq’s previously unserved areas.
A member of the World Bank Group, the IFC loan put $269m towards helping reconstruct Iraq’s telecom operations and spur economic growth. The debt package includes $100m from the IFC’s own account and a further $169m in mobilisation. The financing helped Zain Iraq enhance its capacity and quality of its 3G network.
“We know how strict IFC is about providing loans,” Al Zahid says.
“They went into a very long assessment of the company, the direction, the strategy, the management team, even the firefighting system. It’s helped us to secure the investment going forward in terms of 4G and even 5G which the Iraqi government is saying they want to implement in the next two years. Therefore, the loan from the IFC is just helping us to do what is necessary to be done.”
The nation’s massive youth population – 50 percent of Iraq’s 38.7 million inhabitants are below the age of 25 – has helped the telco profit from its superior product.
“If the youth can’t access internet then there’s going to be no increase in our youth segment. We need to have a team that understands their trends, things that are hip and things we need to focus on going forward,” Al Zahid states.
It is through a number of initiatives that his team is capitalising on Iraq’s crucial youth market. They include the “Hassa Eliya” or “Now for Me” marketing campaign which focusses on inspiring and empowering young Iraqi talent by encouraging them to explore their skills and potential by inviting them to present their business ideas to the Zain Iraq team. A total of 8,700 entries made it to the final round of the competition.
“It was a pure youth empowerment programme where we focussed on giving the youth a platform where they can share their ideas and their hopes and their demands,” Al Zahid says enthusiastically.
It was the same campaign that inspired him to start a Zain incubator which helps aspiring entrepreneurs develop their ideas with the telco’s own technical and management team, as well as on-the-ground consultants that provide support in setting up small businesses.
But the initiative is not solely to help young Iraqis fulfil their entrepreneurial dream. It’s helping Al Zahid’s team identify market trends.
“We believe in such ideas because the Iraqi market needs young new entrepreneurs and I think it’s not only part of our social responsibility to do this but it’s helping us to understand and to feel the market,” Al Zahid admits.
It’s also winning Zain Iraq new customers as the team keeps track of popular products and makes them readily available before their competitors.
“We are the only operator offering this very famous game PopG. Millions are playing it around the world and we were the first operator who made a direct agreement with them, which means you can actually buy editions of this game directly through us. We are trying to follow a certain trend that’s in the market and we are trying to set up new things where we see the potential for growth,” Al Zahid says.
Part of what distinguishes Zain Iraq’s new leadership team from its more traditional predecessors is the fact that it’s championing gender diversity, with female employees at the telco having grown to comprise 29 percent of employees.
By the end of 2019, the goal is to raise the number to 33 percent. Not only are female employees growing in numbers, they’re moving up the corporate ladder to secure more powerful positions.
For the first time in its history, the telco has appointed a woman to the senior leadership team: Rasha Barakat, chief human capital officer.
“Iraq was always, in the past, a quite open society but it changed during the years of the dictatorship and now we’re trying to support females in taking more of a leading role in the company.
“When we give women support within the organisation, they are able to contribute as much as their male counterparts,” says Al Zahid.
And it is their male counterparts who he is targeting to drive gender equality across the nation. Each senior leader within the organisation, starting from directors to chief executives, is required to participate in female empowerment lectures.
When we give women support, they are able to contribute as much as their male counterparts
“We know that supporting females alone in a big company like this is not going to make it. We need to emphasize on the male side what female empowerment means, the challenges they are facing in an organisation and in a society like ours and discover how we can actually support this going forward,” Al Zahid says.
Perhaps the nation’s biggest private investor after oil companies may get investors to think twice about Iraq – not in terms of its safety, but in terms of its opportunities.
Many countries in the Middle East have substantial mobile infrastructure in place, particularly in the urban areas. It is encouraging to see that some governments and operators are now focussing on improving services in the rural areas.
Apart from investment from key players in the industry, government support is imperative to the growth and improvement of telecoms infrastructure, with many countries in the Middle East and the Gulf region having strong back-up from their governments.
In Bahrain, for example, there are a number of developments underway which will improve both telecoms services and infrastructure and it is the Telecommunications Regulatory Authority (TRA) which is the primary driver behind many of these plans.
Several countries are at the forefront of 5G development at a global level. The UAE and Saudi Arabia, in particular, are demonstrating significant progress towards 5G. The UAE, for example, has the appropriate infrastructure in place to take advantage of 5G as it boasts one of the world’s highest mobile penetration rates, substantial 4G LTE infrastructure and is considered one of the leaders in the region. It has already allocated spectrum frequencies to Etisalat and Du for 5G deployment use.
Courtesy of the Middle East – Telecoms, Mobile and Broadband – Statistics and Analyses Report
Nationwide digital transformation is driving Iraq Vision 2030’s diversified economic growth and job creation, and will spur GDP growth by 8 percent in 2020.
These are the figures the undersecretary for Administrative and Financial Affairs at the Iraqi Ministry of Communications, the German Ambassador to Iraq, and global technology company SAP announced last month at an event on the future of Iraq’s digitisation.
As the Iraqi government advances Vision 2030 and invests in reconstruction, Iraq’s real GDP growth is set to nearly triple to 8.1 percent in 2020, especially thanks to an increase in diversified economic growth, according to a recent report by the World Bank.
“Achieving Iraq Vision 2030’s nationwide transformation goals requires a government with real-time insights across every ministry and level of government,” said Dr Karim Mezel Shebbi, Undersecretary for Administrative and Financial Affairs at the Iraqi Ministry of Communications.
“Public-private partnerships, such as with SAP, can provide digital government services that can make Iraq’s government more responsive and predictive to citizens’ needs, and foster new levels of diversified economic growth and youth job creation.”
Showing the strong trade opportunities, the European Union (EU) is Iraq’s second-biggest trade partner. Bilateral trade ranked at €16.6bn ($18.5bn) in 2017, according to a recent report by the EU.