By Osama:

I still haven’t met anyone who gets ripped off by Zain more than I do. Honestly, I barely talk on the phone and have my blackberry service fee, therefore, I should be paying just about KD20/month. But on every 11th day of the month, I get the most beautiful morning message from Zain: Dear customer pay KD65 or else. And happily I go to the Zain website month after month and pay.

WHY? Is the service Zain provides worth more than the services of other Telecom companies? No, however, with Zain I get my phone service, my internet service, my bb service, I use their one network when I’m travelling, and I know that a portion of my bills will be spent on greater causes. Do I get that with other telecom companies? No. For that reason: I choose Zain.

I’m really sick and tired of people who play around with financial models and fictional numbers, try to be smart and evaluate Zain on previous performance. Frankly, I still haven’t met a person whose an expert on the economic stability of every single one of the 24 countries Zain operates in neither have I met a person with a crystal ball that can predict the future . Nevertheless, I believe in real numbers and I believe in evaluating the competition. I know that  Zain is trading at a very high multiple of 7.9X EV/EBITDA, but still recommend people to buy it either for short term gains (sell at KD1.800) or long term capital appreciation with a company that has shown that it sets very high standards and reaches them. Yes, they play around with the balance sheet but GAAP asset valuation methods changed in March, hence, if auditors believe that the financials fairly reflect the company’s current state then that’s the end of the story.

Compared to its regional peers, Zain is way ahead. It is perfectly positioned in its home market, secured the Levant, progressing in Iraq, blossoming in Saudi, and breaking records in Africa. Most of it markets have dense bottomed population pyramids, economic growth, and specifically Africa has very low penetration rates. Currency swings, high interest payments, and so on will naturally have an effect on the company’s bottom line. However, Zain is building relations with the world (a wonderful world).

I have great trust in Zain’s management and wouldn’t be surprised if Zain were to make a 7X oversubscribed bond offering and reschedule their debt. In my view of the Telecom industry, no company can increase their customer base more than Zain, MTN, and Bharti Airtel. These three companies’ operations add value to societies and to others. Hence, in a time where liquidity is very apparent in banks around the world and investments are made based on a company’s ability to  provide solid cash flow; everyone wants a bite. So if Mr. Khorafi wants to sell his stake, there are many willing buyers. The remaining question is: At what cost?

In my view, at a cost much higher than what many believe the company is worth or at least double that.

P.S. I’m not expecting a cash sale. What I’m expecting is a share swap which will give Zain an even more steady income stream and add more value. But for those of you who love the quick buck, sell the stock the day you see high value and its at limit up (KD1.800).  Then, buyback at  around KD1.400. Try to time it, but if you get caught its your fault. What I advise is long term investing in this company even at current prices.

* This article is a guest contributor article. Further, it does not represent the views of Alpha Dinar.

Tags: Bharti Airtel, Kuwait, Long Zain, MTN, Zain, Zain Africa, Zain Bullish, Zain Kuwait, Zain sale, Zain Telecom

This entry was posted on Friday, August 21st, 2009 at 5:53 pm and is filed under Kuwait. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.