Application of Expansion and Retrenchment Strategies: A Case Study of

Maryam Alsbaity University, College of Business Administration /Kuwait Ulfa Alvianti Narotama University Sindy Hengkeng State University Manado Siti Hajar Nurlaila Narotama University

ABSTRACT

Zain Group is a telecommunication company based in Kuwait. Zain has been dealing with many problems in its supply chain, especially its geographic divisions. the decisions made for growth and defense were applied with poor vision and strategy, poor management and strategic decision making process, In addition to economic, political, social, technological and legal factors which led to a decrease in Zain's financial performance. This paper analyzes the issues of Zain's application of the expansion and retrenchment strategies and aims to advocate alternative solutions regarding its divisions as a part of the supply chain. Based on the data collected and analyzed for the period 2012-2016, this paper shall Employ descriptive analysis, and Quantitative analysis (e.g. Market Cap., Market Share, Financial Ratios).The branches of Zain Group that shall be the focus of our study are spread in eight geographic divisions (Kuwait, , , , , , , South , Sudan). The Findings of the research indicates that great strategic management and better understanding of environmental factors have a groundbreaking impact on the Groups overall performance.

Keywords: Divisions, Expansion, Kuwait, Management, Retrenchment, Strategy, Telecommunication, Zain Group.

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Introduction

Organizations around the globe seek different opportunities in different areas. If they find a potential in certain market, they will initiate entering it to achieve their goals. A management team that applies strategic management1 will start with a clear vision and strategic planning. They will start with screening the environment for opportunities, threats and for entry, exit barriers in certain markets. Once they decide the degree of attractiveness this market has, implementation starts. Some would decide to apply Expansion strategies; when it attempts to achieve a high growth as compared to its past achievements. In other words, when a firm aims to grow considerably by broadening the scope of one of its business operations in the perspective of customer groups, customer functions and technology alternatives, either individually or jointly, then it follows the Expansion Strategy (Business Jargons, 2016). In this way they will have geographic divisions in multiple markets, this will grant them market shares and greater revenues. For some cases of unstable environment or bad decision making, companies are forced to close their divisions for survival of major losses, they apply the Retrenchment Strategy. This strategy is often used in order to cut expenses with the goal of becoming a more financial stable business. Typically the strategy involves withdrawing from certain markets or the discontinuation of selling certain products or service in order to make a beneficial turnaround (Business Dictionary, 2018).

In this report we shall study Zain Group's application of these two strategies and the entry/exit barriers they faced in the markets they have expanded in. What issues their geographic divisions have faced, and how did they choose to implement such strategies.

The report's structure starts with introducing the telecommunication industry as a whole, the telecommunication industry in the MENA region since Zain Group operates its services there, an introduction to Zain Group and its geographic divisions. After the Introduction, there will be an analysis that includes quantitative information collected and calculated from the financial statements and annual reports of Zain Group for the years 2012-2016. Finally, a summary of the findings and a conclusion.

1 Strategic Management : Is the art and science of formulating, implementing, and evaluating cross -functional decisions that enable an organization to achieve its objectives. (David & David, 2015) 23

A. Telecommunication Industry

Today, the world is witnessing a real revolution in the field of communications and information technology, and no country that looks forward to achievement and development with the aim of achieving sustainable development at all levels can achieve it without being one of its main pillars. Also communications are an expression of the progress of countries. The modern state is the state in which the means of communication are advanced and keep abreast of the different changes and challenges, while the delay of communications means the delay of countries and their backwardness on the path of civilization and technology.

B. Telecom industry in the MENA:

MENA refers to the and North Africa region it covers an extensive region extending from Morocco to Iraq, including all Middle Eastern, East and West countries however, the population in the Mena is 6% of the total world population and this percentage considered an effective Ratio. Moreover, The Economy of the MENA is ensured by its vast reserves of petroleum and natural gas, which is considered to be a vital source of global economic stability. The MENA region has 60% of the world’s oil reserves, and 45% of the world’s natural gas reserves and the instability in the MENA region (Political),due to its rich resources and location, the MENA has been in conflict since the Ottoman Empire, notably due to the creation of Israel. The conflict has increased rapidly with the incidents happening such as; the U.S Intervention of Iraq in 2003, the rise of ISIS, the Arab Spring that spread war to the whole region including the Syrian Civil War, Iraq War, Libyan Civil War, and Yemen Civil War (Oil and Gas Journal, 2015).

C. The Economy of the MENA. (PEST Analysis)

Economical

The MENA region has low economic growth, fluctuating currency exchange rate, and high-unemployment rate in the jobs related to the telecommunication.

Sociological

The MENA region has growing number of youth, an increase in the number of refugees, a frequent change of the customers’ habits because of the use of new technology, also a decline in the customer's confidence in certain topics such as; data privacy and security. 24

Technological

The MENA region has a low ranking in the global innovation indicators, although it’s a growing sector with new technology advancement every day.

Ecological

The MENA region is water-stressed area, which means that the demand for water exceeds the amount available. It considers several physical aspects related to water resources, including water scarcity; water quality, environmental flows, and the accessibility of water.

Legal

In the MENA Region the telecommunication sector is a well-regulated one with too many local regulations that differ from one country to another.

Table 1 Shows how the telecom industry is effective in the MENA countries.

Growth Growth Growth Growth MENA Region 2012 2013 2014 2015 2016 Rate Rate Rate Rate

Market Value MENA Region 1,297,240,169, 1,403,947,255, 1,449,820,831, 1,510,388,182, 1,556,408,456, 7.60% 3.16% 4.04% 2.95% Converted from 717,879 712,253 551,054 026,784 049,879 EURO to IDR

Rate of Return 8.22% 3.26% 4.21% 3.03%

Table (1): Calculations

Growth Rate = (X2-X1)/(X2)

= (MV 2013-MV 2012)/(MV 2013)

Rate of Return= (X2/X1)-1

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= (MV 2013/MV2012)-1

(The amounts were exchanged from EURO to IDR which is equal to 1 EUR = 16,706 IDR at May 5th 2018).

Recourse of market value : Statista.com (2010).

Through the first table we note that the growth rate of the MENA is much higher than the rate of growth in the world and that for many reasons:

• Geographical, Because the Middle East is the only region in the world to be divided between three continents of Asia, Africa and Europe. • Wealth in gas and petroleum where it is Core energy and the nerve of the global economy. • Political and social stability in the Middle East.

As shown in the table, there has been a decline in the growth rate in 2014 and that caused the Global economy to fall and caused the political revolutions in the Arab world, which began in Tunisia and followed by .

This indicates that although the MENA region is attractive, yet its entry and exit barriers are high and the risks are also high.

D. Zain Group

Zain Group was the first mobile telecommunication company in the State of Kuwait under the name Mobile Telecommunications Company (MTC). In 1983 it rebranded as Zain in 2007. Zain holds a 50% interest in the consortium, which will have to be reduced to 25% following a mandatory Initial Public Offering (IPO) of the new mobile operator in Saudi Arabia and allocation to two government entities. The company underwent drastically different structural changes and restructuring until it reached to its desired as Zain in 2007. Moreover, in 2008 Zain Company became the fourth huge mobile operator in the world in terms of geographical presence, with operations in 15 African countries and 7 in the Middle East. Zain expanded regionally and internationally as Zain Bahrain, Jordan, KSA, Iraq, Morocco, Sudan, and South Sudan and in Lebanon as touch (under a management contract). With a leading customer market share in Kuwait of 62% as of 31 December 2016, the operator was able to improve its market position in 2016 reporting year on year. (Wikipedia, 2018)

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I. Zain’s mission

“To be the leading global mobile operator, providing professional, world-class mobile and data services to all our customers, we aim to achieve this by exceeding our customers’ expectations, rewarding our employees, and providing sound return for our shareholders. Meeting these objectives, we believe, will be key to creating a wonderful world” – (Zain Group, 2018)

II. Zain’s vision:

One of the most important assets of Zain is their brand. With their brand they have described their vision and what is their focus within the company. Having a strong brand that will imbed an image in the customer’s mind that their products and services are served in high quality.

Zain’s vision is to be the dominant and leading provider for newness and digital lifestyle that the customer can enjoy. They focus mostly on their customers and what they want to achieve is for their customers to have the finest and smoothest experience. Also another thing Zain is passionate about is their operational effectiveness, business growth and the development of the people around them.

E. Zain Group Geographic Divisions

Zain has initiated expansion strategies and retrenchment strategies in the previous years. Now the operate in eight geographic divisions (Kuwait, Saudi Arabia, Jordan, Lebanon, Morocco, Bahrain, Iraq, South Sudan, Sudan).

Zain Group remains one of the Gulf’s biggest telcos by subscribers — in the first half of this year it said it had 46.3 million active customers and 108 million under license — and is the market leader in six of its eight operations in Kuwait, Bahrain, Saudi Arabia, Iraq, Morocco, Lebanon, Jordan, Sudan and South Sudan.

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Financial Performance of Zain Group 2012-2016 Table 2 :

Zain Group

Financial Performance

2012-2016

(Values in Millions)

Currency: Kuwaiti Dinar

Financial Ratios 2012 2013 2014 2015 2016 1,774,094,15 Market Capitalization (Millions) 3,375,105,949 2,985,670,647 2,293,341,221 1,514,470,618 3

Liquidity Ratios Current Ratio% 0.789 1.034 0.87 0.815 0.856 Quick Ratio% 0.77 1.014 0.85 0.787 0.835

Asset Management Ratios Inventory Turnover Ratio% 107.6 83.1 74 41.2 66.2 Total Assets Turnover Ratio% 0.43 0.4 0.37 0.32 0.35

Debt Management Ratios Debt Ratios% 2.21 2.44 0.24 0.27 0.33

Profitability Ratios Profit Margin (Millions) 0.196 0.174 0.16 0.135 0.145 Return on Assets (ROA)% 0.086 0.069 0.059 0.044 0.051 Return on Equity (ROE)% 0.14 0.12 0.1 0.09 0.11

Price/ earnings (P/E) 1.200 1.232 1.060 0.875 1.025 Earnings per share EPS (Fils) 65 56 50 40 40 Volume (Millions) 2,581,827 891,805 1,683,221 153,621 3,200,386 Revenue (Millions) 1,281,903 1,240,035 1,213,229 1,137,547 1,087,774 Net Income (Millions) 252,145 216,445 194,301 154,314 158,735 Growth Rate% -0.13 -0.3 -0.51 0.14

Table (2) Analysis As you can see from the table above, the ratios differ from 2012 to 2016. Comparing the current ratio from 2012 till 2016 it fluctuated slightly. That indicates that Zain is doing well, since it means that the company is more liquid that the company can easily convert assets to cash. The Current ratio has a positive relation with the current assets that caused it to increase and inverse relation with the current liability. The quick ratio and the current ratio are somewhat different. Comparing 2012 to 2016 it increased, which indicates that Zain has been paying its current liabilities rapidly. The inventory turnover has decreased from 28

2012 to 2015 because the current liability had increased. Having a higher total assets turnover ratio, the better the company is performing. But as you can see from the table above, it had decreased as well from 2012 to 2015 but increased slightly, which means Zain had a minimum amount of total asset account. Since Zain received its money from in 2016 and bought Fasteleco and that caused for its current assets to a slight increase and its current liabilities to decrease with the debt ratio. As the debt ratio decreased from 2.21 to 0.33 its good for the company that means that the company is associated with less risk with the firm’s operation and it is possible for them to borrow in the future with a little amount of or with no risk. The profit margin decreased from 2012 to 2015 then increased in 2016 since the net income increased as well. The profit margin has a positive relation with net income so since the net income increased it increased the profit margin. As for the ROA and ROE, since they have a positive relationship with the net income and it increased in 2016 so by that it increased the ROA and ROE. The P/E has a positive relation with the price per share, which is the closed trading price of the stock; it had increased in 2016 so it caused the P/E to increase in 2016. EPS has decreased from 2012 and it has been stable from 2015 to 2016.

Putting things into perspective, In 2010 Zain had faced huge losses because of Zain in North Africa due to the Civil wars that Sudan is facing, the hyperinflation and the currency devaluation in Sudan with the political and economic tension in Egypt in 2011.Zainthen decided to sell its operations there to the Indian telecommunication company Bharti Airtel but Zain didn't gain its money of the sale until 2016, according to that Zain had faced real major losses causing a decrease in Growth rate, The net Income and the revenues also their profits decreased due to the ROA, ROE ratios and the profit margin as shown on the table above and mentioned above during the years 2012 until 2016 The slightness of the increase is because Kuwait's economy is suffering from low oil prices but it didn't stop Zain from ridding itself from the crisis it had been facing as mentioned before and regained its power back.

Refer to Appendix 1.

1. Kuwait division

In February 2006, Zain acquired the outstanding 61% stake of Mobitel, Sudan’s first mobile operator, in a deal valued at USD 1.33 billion. The company was rebranded to Zain in September 2007 and subsequently renewed its license for a period of 20 years. (Zain Annual report, 2017)

Based on AL-Rai newspaper 13\1\2016: A report by HSBC's research and research department estimated

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"If the price of oil falls further or continues to decline in the long term, Mobily, SSC and Zain will have a higher risk because of their geographic concentration,". And the report said that the presence of three telecommunications companies in Kuwait led to increased competitiveness in the domestic market, which is characterized by high average per capita revenue and penetration rate of 200%. Zain is the local leader with a market share of 62 per cent, while the other two have two market shares of more than 30 per cent, leading to a decline in average per capita revenue, while the company has a strong 4G networks and coverage of 100%. Kuwait is an attractive market characterized by high margins and average ARPU, and it is one of the most competitive markets in the telecommunications industry. For its launch in 2008, Viva Kuwait broke the dual monopoly of Ooredoo and Zain and intensified local competition. Since its inception, VIVA Kuwait's subscription base has increased by 50 percent at the annual compound growth rate. In a short period of time, Viva Kuwait managed to acquire a third of the market. The competitive environment in the telecom sector allowed the rapid launch of 3G and 4G services and Kuwait now has one of the highest penetration rates for 4G in the world.

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Table 3: Structural Factors for Telecommunication Industry in Kuwait.

Number of Competition is high in this industry between the three dominating Competitors in companies (Zain, Ooredoo and Viva). the Industry Sizes and Growth The more competitors are equal in size and capabilities and the more the demand for products and services declines causing prices to decline, the higher the competition.

Brand Loyalty - The greater brand loyal the customers are, the higher the &product competition. differentiation - The more differentiated the products/services from those of rivals, the lower the competition. Exit Barriers The cost of leaving the Telecom industry in Kuwait is high due to legal and economic factors. Causing the company to remain in the market, which increases competition.

Cost Structure of When Fixed costs such as Salaries, Rent, Insurance etc. are high, the Industry the companies will compete on the volume to get the largest market share of the others in order to cover costs. The higher the fixed costs the higher the competition on market shares. Market share in Kuwait's Telecom industry in 2016:

Zain Ooredoo Viva Hits Telecom

16% 1%

21% 62%

Strategies The more diversified the companies strategies, the more they acquire competitive advantages among others, Which leads to high competitiveness in the industry.

2. Sudan & South Sudan divisions globalization caused a negative impact on Zain’s profit worldwide. First was the Economic situation in South Africa- Sudan. Zain had dealt with a business problem due to the devaluation of the Sudanese pound against the dollar and a major difference between the official and actual exchange rate caused a big disturbance when 31 purchasing of assets. That caused the economy of Sudan to suffer from extensiveness and difficulties plus the major increase in taxations on telecom industry; which Zain has been suffering for years now. 2 Another negative impact of globalization that affected Zain in the South Africa region is the Egyptian revolution of 2011, which caused political and social problems to the country. Having a political issue will cause an effect on the economic issues as well. So by that it caused chaos in the government of Egypt that affected all the industries which Zain was one of it. 3

Zain in 2004 suffered from financial difficulties due to the deterioration of the value of the Sudanese pound against the US dollar, and many observers accused Zain as one of the reasons for the deterioration of the Sudanese pound and because of its entry to buy the dollar from the black market and the transfer of its huge assets of the pound in defiance of the laws of the Central Bank of Sudan, which adversely affect the Sudanese economy. This is why Zain lost its sharp loss in Africa.

Zain had suffered losses in years (2012-2015) because of the challenges faced by the Kuwaiti economy due to low oil prices. Moreover; in this year’s Zain received huge losses because of Zain Africa Company in 2010 :

• Due to economic and political tension in Egypt in January 25, 2011

• ’s full-year performance was affected by further currency devaluations of 60% against USD because of the inflation. And there was a civil war in south Sudan, which started in 5thof June 1983 till the 9th of January 2005. But in 2016 it regained its power in terms of the currency value.

• In 2010 Zain concludes the sale of its African operations to Bharti Airtel.

• And in 2016 Zain used the rest of the value of returns to serve its operational policy for the next stage and in this year Zain bought Fastelco Company, which support her to increase the profit and the market share in this year.

3. Saudi Arabia division

2Alrakoba news, Iszain Sudan stopping its operations, Alrakoba.com, 2013. 3Wikipedia, Egyptian revolution of 2011.

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Zain launched commercial operations in the Kingdom of Saudi Arabia on August 26, 2008, a year after it was awarded its mobile license. The Group holds a 37% equity stake in the operation, while the remaining ownership is distributed between a Saudi consortium, which owns 21%, and 42% that is free floating on the Tadawul stock exchange. Zain Saudi Arabia (Zain KSA) is listed on the Saudi Tadawul Stock Exchange (MTC KSA, 7030) with a market capitalization approximately USD 1.3 billion (share price SAR 8.3) as of 31 December, 2016. (Zain annual report, 2017)

Saudi Arabia is Zain Group’s largest market with $913m of revenues for the first half of 2015 and 11.3 million customers but it is also loss-making. One of the reasons for this is that the kingdom has some of the cheapest data in the world and this is unsustainable.

“Data usage in Saudi Arabia is huge. It has the highest usage of [video sharing website] YouTube per capita in the world and some people are using a terabyte of data a month. That’s a lot of data. If they’re paying their fair amount that’s fine, but at the moment they’re not.”

Zain Group sought to raise data prices in Saudi Arabia earlier this year by pulling out of promotions and reassessing mobile packages. Scott Gegenheimer, the CEO of Zain Group is vague on the exact increase (“Around 10 percent in Q1 2015 and a second uplift in Q2”) but says Saudi data is still 50 percent cheaper than other parts of the region and “significantly less” than other parts of the world. For example, in Europe and the US the price of 1 or 2 GB is the same as you pay in Saudi Arabia for 500GB.

Another reason why Zain KSA is still waiting to turn a profit in Saudi Arabia (its two competitors are Saudi Telecom Company and Etisalat’s Mobily, also loss-making) is that is that it paid an extremely high price for a licence. “The licence was very expensive — $6.1bn — and it’s taking us longer than expected to build a sustainable business model and break even,” Gegenheimer says.

“However, the losses are shrinking and we are continuing to grow our revenue. Some of the biggest opportunities are in Saudi Arabia — it is the biggest market in the GCC and although penetration rates for voice are still high there are pockets of growth, including data . “Our hope is that, as we start to capture the data market, we can convert the Saudis from using just the data on their handsets to using voice, too.”

33 resource : Arabian Business Website, 2015.

4. Iraq division

Zain has been providing mobile services in Iraq since December 2003. After securing a 15-year license in August 2007, the company acquired Iraqna’s network, becoming the largest mobile operator in the country. Zain Group subsequently increased its ownership in the Iraq entity from 30% to 76%, maintaining management control and attaining majority control. Zain Iraq (Al Khatem Telecoms) is listed on the Iraq Stock Exchange (ISX) with a market capitalization of more than USD 5 billion (share price of IQD 3.3) as of 31 December, 2016. (Zain Annual Report, 2017)

Leading the Iraqi mobile market with a 40% market share with a customer base of 12.7 million, which grew by 14% in 2016, Zain Iraq represents the Group’s largest overall customer base, accounting for 27% of its total base at the end of December 2016.

The continued political instability in Iraq during the year has resulted in regular network interruptions and associated higher network operational costs. These unavoidable occurrences coupled with heightened levels of price competition and the 20% sales tax levied on mobile services as well as wide-ranging tax increases on other sectors in Iraq, all contributed negatively on Zain Iraq’s key financial metrics.

Revenues for the year reached U S D 1.1 billion, down by 11% , which still represented a valuable 31% of Zain Group’s total consolidated revenues for the year. EBITDA amounted to U S D 394 million, down 18% Y-oY. Zain Iraq ended 2016 with a net loss of U S D 5.2 million, severely impacted by a one-time hit of U S D 93 million payment of a capital gain tax settlement and other taxes, which resulted in the lifting of the restrictions on the company’s blocked cash in Iraq.

For the first time in the country, November saw Zain Iraq, in cooperation with Huawei, announcing the successful commission of the installation of a state-of-the-art converged billing and charging platform that replaces legacy infrastructure with a modern, unified charging, billing and CRM (customer relationship management) solution. This system is capable of effectively handling all services and customer types, bringing a fluidity to services including voice and data, billing options, and customer segment offerings.

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The time-to-market from concept to product launch has been dramatically reduced and customers will now enjoy a wider range of services at attractive price points. Another highlight for Zain Iraq during the year was the award of CommsMEA’s Best Marketing Campaign of the Year to the company for its ‘ Hassa Eliya’ ( Now for Me) campaign, which inspired and empowered young Iraqi talent by encouraging them to explore their potential, and helped equip them with the necessary tools to achieve their goals. Among many distinctive new customer centric services and numerous Corporate Sustainability initiatives, Zain Iraq launched the country’s first online payment solution, “ZainCash”. This life-enhancing service is set to boost e-commerce and support families in sending and receiving much needed funds. The service has been recognized by multiple award-giving institutions, all acknowledging the importance that such a service fuels in Iraq.

Zain Iraq is also actively working at increasing its geographical presence, coverage and capacity within the country. The operator invested U S D 96 million in CAP EX in 2016, mainly in network expansion in the northern region of Iraq. Zain Iraq counted 4,327 sites across the country at the end of the year, with population coverage of 99%. Data revenues (excluding S MS & VAS) represent 9% of total revenues, reflecting an annual growth rate of 21%.

5. Jordan Division

In 1994, Zain Jordan revolutionized the telecom sector in the Kingdom by becoming the first to introduce mobile services (as Fastlink). In 2003, the operator notched up another first by joining Zain Group’s Middle East portfolio, and despite intense competition in this liberalized market, the operator has remained the leading telecom player in the country. (Zain Annual Report, 2016)

Significant competition and falling voice prices characterize the telecom market in Jordan, though Zain Jordan maintained its market leadership of 36% as of the end of 2016. The operator served 4.3 million customers, a base which grew by 5% , representing 9% of Zain’s total customer base at the end of 2016. For the full-year 2016, revenues improved by 5% , to U S D 483 million, as compared to U S D 459 million 2015, while EBITDA decreased by 5% to U S D 240 million with an impressive EBITDA margin of 50%. The strong EBITDA margin was mainly due to improved gross margins, with net income for the year reaching U S D 105 million, down from U S D 122 million in 2015.

Data revenues (excluding SMS & VAS) represented 34% of total revenues, and grew by 23% as compared to 2015. Zain Jordan’s strategy is focused on identifying new revenue streams and exploring new opportunities and concepts such as home security. During the course of the year the operator became a major 35 player in the enterprise and connectivity management arena. The operator’s strategy is to become a one-stop shop to customers, where all communication services can be accessed. To raise awareness of this, massive campaigns were undertaken to educate customers about the range of services and products offered at Zain shops across the country.

Zain Jordan recognizes that enterprise technologies and services powered by 4G/LTE will be the major revenue drivers in the coming years, compensating for the decrease in voice revenues. The company is investing in fixed LTE service, which will allow it to increase data revenues especially in lower A R P U regions in the Kingdom. Zain Jordan’s network covered the entire population, increasing its total number of network sites to 2,401, of which 1,482 are 4G sites.

There were many highlights throughout the year for Zain Jordan as it continued to be recognized by establishments across the globe for its innovation in providing customers with compelling digital services and products. Innovations that we introduced include multiple attractive data packages such as a new youth product “Social Mix”; and a postpaid product named Private, in which customers can customize their packages based on their needs by choosing a special optional bundle. The package also delivers a choice of numerous OTT video services with MBC Shahid, Starz Play and I CFLIX. Content also extends to OSN and beIN services provided over Zain Fiber and Zain Ethernet products as part of a full Home Product solution which includes the OTT video content. 2016 also saw Zain Jordan recognized at the Global Telecoms Business (GTB) Innovation Awards in London and at the Telecoms World Middle East Awards in Dubai for offering the best consumer service with respect to its efforts to expand access to financial services. Zain Jordan introduced a mobile wallet offering to hundreds of thousands of unbanked people through its “Zain Cash” secure and convenient mobile money service, which was launched in partnership with eServGlobal.

6. Bahrain Division

Zain Bahrain began commercial operations in the Kingdom in December 2003. At the time, it was known as MTC Vodafone. With its progressive introduction of 3.5G, WiMAX and most recently 4G LTE, Zain has tapped into a rich seam of telecommunication records, placing the company and Bahrain on the global telecom map. Zain Bahrain is listed on the Bahrain Bourse (ZAINBH) with a market capitalization approximately USD 98 million (share price BD 0.100) as of 31 December, 2016. (Zain Annual Report, 2016).

Despite the high rate of mobile penetration in the Kingdom, Zain Bahrain’s customer base surged to 971,000 at the end of the year, up 22% from 795,000 at the end of 2016 as innovative products and services offering 36 a fully integrated digital lifestyle continued to attract customers. The operator also benefited from growing awareness of the compelling performance of its world-class 4G LTE network. For the full-year of 2016, Zain Bahrain’s financial results were impacted by the fierce competition in the Kingdom, with revenues reaching U S D 175 million, down from U S D 191 million in 2015. EBITDA for the period amounted to USD 66 million, reflecting an EBITDA margin of 38%. Net income for the year fell by 17% to U S D 11 million. Data revenues (excluding SMS & VAS) represented 41% of overall revenues, up 11%.

The operator’s network currently covers the entire population, with a total of 499 network sites. With severe competition in this dynamic mobile market, Zain Bahrain’s A R P U amounted to U S D 15 for the year in 2016. The operation was active throughout the year in its service promotions, which included a New Year offer of a free television and PlayStation 4 with certain home broadband packages. Several tie-ups with major content and service providers, including Google Play, I CFLIX, MBC Shahid, and Booking.com, added value to Zain Bahrain’s digital lifestyle offerings. In line with its commitment to innovation and enhancing customer experience, Zain Bahrain introduced the Kingdom’s first ‘ Truly Unlimited Social Media’ prepaid and postpaid packages, with customers not being billed for data used via social media applications beyond their initial subscriptions.

With respect to Corporate Sustainability, Zain Bahrain worked in collaboration with the Ministry of Labor and Social Affairs and the Ministry of Industry, Commerce and Tourism, together with various educational institutions to help jobseekers better compete in the job market. The company also continued its support of the Zain Bahrain E - Learning Center. 2016 saw the signing of a partnership with AIE S EC, the world’s largest youth run organization, with the aim of fostering youth empowerment and development. Zain Bahrain continued its support of Bahrain’s burgeoning entrepreneurship community, participating in the ‘Kun Muntijan’ event organized by Tamkeen in which the Kingdom’s micropreneurs were invited to participate in Zain Bahrain’s in-house learning and development courses. The entrepreneurs were also invited to participate in ‘Khameesna Zain’ (Zain Thursdays), a showcase for local startups held every week at the company’s headquarters. Additionally, Zain Bahrain rolled out cutting-edge mobile learning (mLearning) and Augmented Reality (A R) technologies to enable all employees to access learning materials on-the-go via their smart phones, laptops, and tablets.

7. Morocco Division

Zain invest in Moroccoan operator ‘Wana’ (2009). US $324 million co-investment with Al-Ajial investment Fund holding as a consideration for a 31% stake in Wana. Zain in a 50/50 partnership with Al Ajial Investment 37

Fund Holding (“Al Ajial”) has agreed to invest through a newly established joint venture “Zain Al Ajial” an amount of MAD 2.850 billion (USD 324 million) in return for 31% of Wana Corporate SA (“Wana”), the third mobile telecom operator in Morocco.

This new investment by Zain and Al Ajial will provide Wana with the funding requirements and operational contributions to continue on its ambitious growth plan and to successfully launch its new GSM license in late 2009. Under the agreement Zain will assist Wana for the deployment of the new GSM Network. Wana is an integrated telecom operator currently offering fixed and restricted mobility wireless services (branded as “Bayn”), full CDMA mobility services (branded as “Wana”) and Internet and data services throughout Morocco.

According to Wireless Intelligence data, Wana had 1.95 million mobile connections by the end of 2008, giving it an 8.1 percent market share. The market leader is Maroc Telecom, which had 14.5 million connections (60 percent share) by year-end, while second-placed Meditel had 7.8 million (32.3 percent share).“With 22.5 million mobile customers representing about 70% penetration, Morocco is an exciting new region for Zain to extend our footprint to 23 countries,” said Dr. Saad Al Barrak, Chief Executive Officer of Zain.

Along with the investment, Wana and Zain will enter into an operating framework agreement that will give Wana the possibility to access Zain’s expertise, purchasing power, products and services, including Zain’s ‘One Network’.One Network is the world’s first borderless mobile telecoms network service launched by Zain in September 2006 now offering over 500 million people in 17 countries preferential communications across geographical borders without roaming call surcharges and without having to pay to receive incoming calls, enjoying the benefits of being treated as ‘local’ customers in any of these countries. These countries are Bahrain, Burkina Faso, Chad, the Republic of Congo, the Democratic Republic of Congo, Gabon, Ghana, Iraq, Jordan, Kenya, Malawi, Niger, Nigeria, Saudi Arabia, Sudan, Tanzania and Uganda. 4

Key Investment Highlights Favourable Strategic factors: · Exposure to the attractive and growing Moroccan telecommunications market · Total population of approximately 35 million

4 Resource : Zain invests in Moroccan operator ‘Wana’. (n.d.). Retrieved May 30, 2018, from https://zain.com/en/press/zain-invests-in-moroccan-operator-wana/ Zain enters Morocco via 31% stake in Wana |. (2009, October 26). Retrieved from https://www.mobileworldlive.com/latest-stories/zain-enters-morocco-via-31-stake-in-wana/ 38

· Young population with more than 30% under the age of 14 · A stable political background, advanced regulatory and legal environment · Moderate mobile penetration at c.70% · Fast growing economy (11% per capita GDP growth during 2008) · Only two other national competitors · Wana has fixed, 2G and 3G telecom licenses · Wana has more than 2 million active customers by the end of 2008 · More than 420,000 customers adopted Wana’s full mobility services by the end of 2008 · More than 20% market share on the internet access.

8. Zain Lebanon (Touch Lebanon)

In June 2004, Zain Group won a four-year management contract to operate one of Lebanon’s two GSM networks. The operation is branded ‘touch’, and Zain has developed the operation in Lebanon to a high level by providing unprecedented services.

At the end of 2016, touch counted 2.3 million customers – an increase of 1%, accounting for 5% of Zain Group’s total customer base. With 1,307 network sites, the operator covers all the populated areas of Lebanon. Touch’s strategy is based on working closely with the country’s Ministry of Telecommunications with the view to further enhance the operator’s customer experience, diversifying its product portfolio, and monetizing data to strengthen the operator’s leadership position while maintaining earnings. One of touch’s driving objectives is to become a significant digital player in Lebanon, focusing on innovation in its offering of new services and enabling a digital lifestyle experience for its customers.

The operator also aims to develop enterprise ( B2B) services and actively participate in the smart city revolution sweeping the region. Touch is also eyeing entering the e-market ( E-health, E-education, etc.). Several highlights for touch during 2016 include winning two prestigious awards at the Global Telecoms Business Innovation Awards in London. The first in recognition of the company’s strategy to develop its digital portfolio having introduced the touch app on Apple watch. Created by FOO Solutions, a mobile solutions entity in which Zain took a strategic investment, the distinctive app allows customers to check their online balance, credit and validity, in addition to bundles (voice, SMS and/or data) consumption, on the-go and in real-time.

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The application builds on touch’s strong app positioning, having achieved in excess of one million downloads since its launch. The second award recognized touch for introducing an augmented reality feature to engage customers using a unique mobile app, again created by FOO Solutions that saw over 800,000 downloads during the holiday seasons. Furthermore, touch received an award from Teknotel for the “best customer service offered by a telecom operator in the Middle East”. In December, and following a Zain Group master agreement, touch partnered with Booking.com, the world leader in online accommodation bookings to provide its customers with cash back rewards.

Customers can simply access the dedicated section of the touch website/mobile app to book their next stay anywhere in the world and benefit from up to 4% cash back of the booking value on their touch line. Additionally, touch introduced the Vinli solution bringing in-car Wi-Fi, cloud-based connected car apps, and advanced safety services to vehicles in Lebanon. The offer consists of a device that plugs into any vehicle’s On Board Diagnostics-II port to connect any car to touch’s 4.5G advanced high-speed internet network. Passengers can then enjoy a wide range of applications from Vinli such as car diagnostics and maintenance, vehicle locator and theft alert, driver monitoring and family locator. To enhance customer experience, touch is currently renovating six service centers into a more personalized and digitized experience including a digital kiosk, Smart Quality Management.

Conclusion

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Global expansion has always been the strategy to go for, It's risky but promising over the long term. Seeking this opportunity will grant businesses greater revenues to generate due to acquiring a market share, growth opportunities, exposure to new culture, knowledge of different legal, and economic factors, and granting a strong competitive advantage among competitors. Also, many businesses expand globally to diversify their assets, as a way of protecting the company against unforeseen events. For instance, companies with global operations can offset negative growth in one market by operating successfully in another. Companies also can utilize global markets to introduce unique products and services, which can help maintain a positive revenue stream, an take the opportunity of utilizing local human resources to support their product/service diversification strategies.

That has been Zain's goal from the beginning, when decided to expand, but did these entry and exit strategies succeed. As we have seen in the previous key divisions, Zain hasn't always made successful entries and exits, especially in Sudan and South Sudan. Until today, Zain Group hadn't recovered from its losses of 14 branch in Africa. This was due to lack of strategic planning, they applied the same strategies used in Kuwait on other geographic areas, neglected the culture, and neglected the political situation Sudan is going through at that time.

The previous key subjects had shown us that although Zain had gone through many obstacles, they tried to surpass it by adopting and introducing technologies in different regions to enhance the infrastructure, it used different marketing tools and corporate social responsibility to support it. With the not so great competition in the areas Zain expanded to, It is enjoying a great market share of revenues. Its expansion strategies hadn't always succeeded or were implemented correctly, but they worked eventually due to lack of competitors and global businesses legislations effectiveness. Zain is still the market leader in its homeland Kuwait.

APENDICIES

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Key Financial APPENDIX 1 Definitions

Market it is the market value of a company's outstanding shares. Capitalization Calculation: the stock price multiplied by the total number of shares outstanding. The higher the better.

Liquidity It measure a company's ability to pay off its short-term debt Ratios obligations.

Current Ratio It is a liquidity ratio that measures a company's ability to pay short- term and long-term obligations. it indicates a very strong, safe liquidity position. Calculation: dividing current assets by current liabilities.

Quick Ratio It is a measure of how well a company can meet its short-term financial liabilities. Calculation: Deducting inventories from current assets and then dividing the remainder by current liabilities.

Asset It measures how effectively the firm is managing its assets. Management Ratios

Inventory It is a key measure for evaluating just how efficient management is at Turnover Ratio managing company inventory and generating sales from it. Calculation: Dividing sales on inventories.

Total Assets It measures a company's ability to generate sales from its assets by Turnover Ratio comparing net sales with average total assets. Calculation: Dividing sales over total assets.

Debt It measures how much of a company's operations comes from debt Management instead of other financing, It measures the company's risk and Ratios likelihood of a default.

Debt Ratios It indicates the percentage of a company's assets that are provided by debt. Calculation: Dividing total debt over total assets.

Profitability It is used to assess a business's ability to generate earnings compared Ratios to its expenses and other relevant costs incurred during a specific period of time.

Profit Margin It measures net income per dollar of sales.

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Calculation: Dividing net income by sales.

Return on Assets It illustrates how well management is employing the company's (ROA) total assets to make a profit. Calculation: Dividing net income by total assets.

Return on Equity It is a measure of profitability that calculates how many dollars of (ROE) profit a company generates with each dollar of shareholders' equity. Calculation: Dividing net income over common equity.

Market Value They are used to evaluate the current share price of a publicly-held Ratios company's stock.

Earnings per Is the portion of a company's profit allocated to each outstanding share (EPS) share of common stock. It indicates the company's profitability. Calculation: Subtract the net income of dividends on preferred stock and dividing it over average outstanding shares.

Volume It is the amount of a security that were traded during a given period of time.

Revenue It is the income that a business has from its normal business activities. Calculation: multiplying the number of a product sold by the sales amount.

Net Income It is a company's total earnings. Calculation: taking revenues and subtracting the costs of doing business.

Growth Rate It is the percentage change of a specific variable within a specific time period, given a certain context. Calculation: Subtract the present value of the past value and divide the result over the present value. Price/ Earnings It is the ratio for valuing a company that measures its current share Ratio price relative to its per-share earnings. Calculation: Dividing price per share over Earning per share.

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REFRENCES

JOURNALS

Kuwait University, Z. A., & Kuwait University, M. A. (2017). Strategic Management. Zain Group, 1-60. Retrieved May 5, 2018.

Boursa Kuwait, Zain Group, (2012 - 2016). Zain Annual Report. Retrieved May 7th, 2018.

Oil, Middle East, and the Global Economy, M. T. (2015). THE OIL MARKET, OPEC AND THE MIDDLE EAST. ECONOMICS AND POLITICS. Retrieved May 5th, 2018, from https://dornsife.usc.edu/assets/sites/955/docs/Takin_presentation_slides_USC_Conf_1-2Apr_2016.pdf.

Zain annual report. (2016-2017). Retrieved May 5th, 2018, from https://d2eiv94jj0lpuu.cloudfront.net/media/filer_public/05/f0/05f03946-8257-4355-a591- 33e2f9ccbd60/zain_annual_report_2016_english.pdf.

BOOKS

David, F. R., & David, F. R. (2017). Strategic management: Concepts and cases ; a competitive advantage approach. Boston: Pearson.

WEBSITES

Wikipedia contributors. (2018, March 19). Zain Group. In Wikipedia, The Free Encyclopedia. Retrieved 06:36, May 9, 2018, from https://en.wikipedia.org/w/index.php?title=Zain_Group&oldid=831222108

What is Expansion Strategy? definition and meaning. (2016, June 13). Retrieved from https://businessjargons.com/expansion-strategy.html retrenchment strategy. BusinessDictionary.com. Retrieved May 05, 2018, from BusinessDictionary.com website: http://www.businessdictionary.com/definition/retrenchment-strategy.html

Statista.com, Statista portal, Global & MENA telecommunications services market value from 2012 to 2019, by region (in billion Euros). www.statista.com

Kuwait Stocks Exchange, (2010) Market Capitalization, Financial Performances, Financial statements. Kuwait New Agency (KUNA). Bharti Airtel Buys Zain Africa Article. www.boursakuwait.com

Doyen of data: Challenges facing the CEO of Zain Group. (n.d.). Retrieved from http://www.arabianbusiness.com/doyen-of-data-challenges-facing-ceo-of-zain-group-607855.html

About Zain. (n.d.). Retrieved May 3, 2018, from https://www.zain.com/en/about-us/

Alrakoba news, (2013) Is zain Sudan stopping its operations (translated from Arabic), www.Alrakoba.com.

Resource : Zain invests in Moroccan operator ‘Wana’. (n.d.). Retrieved May 30, 2018, from https://zain.com/en/press/zain-invests-in-moroccan-operator-wana/

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Zain enters Morocco via 31% stake in Wana |. (2009, October 26). Retrieved from https://www.mobileworldlive.com/latest-stories/zain-enters-morocco-via-31-stake-in-wana/

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