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Zain Group Q2 2016 Analyst Call Transcript August 9, 2016

Chaired by:

Nishit Lakhotia

SICO

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Operator: Thank you for standing by and welcome to the Zain Group’s Q2 2016 results

conference call. At this time all participants are in a listen-only mode. There

will be a presentation followed by a question-and-answer session at which time,

if you wish to ask a question, you will need to press star-one on your telephone.

I must advise you that this conference is being recorded today, on Tuesday, the

9th of August, 2016. I would now like to hand the conference over to your main

speaker today, Mr. Nishit Lakhotia. Please go ahead.

Nishit Lakhotia: Thank you operator. Hello ladies and gentlemen. This is Nishit Lakhotia from

SICO and I would like to welcome you all to the Zain Group’s Q2 2016 results

conference call. It is my pleasure to host Zain Group’s senior management

today on the call. By now, you should have received the company’s presentation

earnings release and financials for second quarter which has also been uploaded

on the Group’s website.

Now without further delay, I will hand over the call to Abdulaziz Jawad, Zain

Group’s investor relations Director. Thank you.

Abdulaziz Jawad: Thank you Nishit, and welcome everyone to Zain’s Q2 2016 earnings

conference call. I’m joined today by Scott Gegenheimer, our CEO; Emre

Gurkan, our Group Chief Strategy & Business Development Officer; and

Mohammad Abdal, our Chief Communications Officer.

In a moment, Scott will begin with a review of Q2 results for both Group and

the operations as Ossama Matta, our CFO, he is out in a business trip. Before

we get under way, let me remind you that our quarterly investor relations update

and presentation slides that accompany this call are available on the investor

relations page of Zain web site. During this call, we will be making forward-

looking statements which are predictions, projections, or other statements about

future events. These statements are based on current expectations and

assumptions that are subject to risks and uncertainties. Please refer to our

detailed cautionary statement found in slide number two. With that, I will now

turn the call over to Scott.

Scott Gegenheimer: Thank you Abdulaziz and thanks everyone for joining us on today’s call. I

will walk you through the first half of 2016 for Group and then the Q2 OpCo

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results. Although we continue to face some challenges related to currency,

ongoing security conditions, and the intense competition in some of our

markets, I’m pleased to tell you that we had a good performance for the first

half and especially for Q2 2016. Smart phones and connected devices are

continuing to grow which has fueled our data growth and our cost optimization

efforts are continuing to help our financial performance.

Zain Group customer base ended Q2 2016 at 45.2 million customers, which is

a drop of 2% from the previous year, affected by the instability in Iraq and the

recent biometric launch in KSA. Looking at the key indicators in the first half

of the year, Zain Group consolidated revenues were slightly down by around

3% to USD 1.8 billion, compared to USD 1.9 billion last year. While EBITDA

grew 5% to USD 846 million, up from USD 806 million last year. Our EBITDA

margin increased to 46.2% from 42.8% last year. Net income for the period

grew by 1%, reaching USD 272 million with an Earnings Per Share of 7 cents

or 21 fils.

For the three months ending June 2016, revenue for the quarter amounted to

USD 912 million, which is 3% lower than last year. While EBITDA for the

quarter increased by 7% to reach USD 439 million with EBITDA margin of

48.1% compared to 43.7% last year. Net income increased by 14% to reach

USD 148 million.

Zain Group continues to drive its data growth. With data’s revenues (excluding

SMS and VAS) grew by 7% and now accounts for 22% of the Group revenues

in the first half of 2016. Overall data if you (include SMS and VAS) services

stands at 30% of our revenues, and this is the main result of the significant

investments in our network and LTE rollout in most of our markets.

Total Capex for H1 2016 excluding Zain KSA reached USD 167 million, which

represents 9% of total Group revenues. If you include Zain KSA, capex would

have been USD 575 million, which represents 21% of the total Group revenues

for the quarter.

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looking at the leverage side on slide 10, our net debt stands at USD 2.3 billion,

which represents net debt to EBITDA ratio of 1.36 times, which signifies a

strong balance sheet.

Looking at the operations, we’ll start with Zain Kuwait which is on page

16:

Zain Kuwait remains the most profitable company in the Group. Despite the

intense competition in the country and the high penetration rates of more than

200%, the operation continues to maintain its market lead in both value share

and customers.

For Q2 2016, revenue reached KD 81 million which is up by 1% as compared

to last year. EBITDA for the quarter was stable at KD 40 million, while net

income for the period dropped 8% to reach KD 22 million due to the increase

in depreciation and amortization. Zain continues to lead the data market in

Kuwait with data revenues (excluding SMS and VAS) services represents 35%

of the total revenue.

Moving on to slide 17, which is Zain Iraq.

Market conditions continue to be challenging in Iraq. The political and social

instability in the country, reductions in government spending on their budget,

and delayed payments of salaries by the government plus 20% sales tax on

mobile services as well a wide ranging tax increases on other sectors in Iraq

continue to affect the customer spending power.

The above mentioned impact on customers spending power along with the

slight devaluation of the Iraqi Dinar contributed to the negative impact on Zain

Iraq’s overall key financial metrics.

Zain Iraq’s customer base stands at 11.2 million at the end of Q2 2016,

representing 25% of the Group’s total customer base.

3G continues to be positive and we’re actively rolling it out across the country.

Data revenues (excluding SMS and VAS) services represents only 8% of the

total revenues, which grew by 5% Y-o-Y.

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Looking at slide 18, Republic of Sudan.

Zain Sudan’s customer base grew by 27% to reach 12.5 million customers,

which represents 27% of the Group’s total customer base. Zain Sudan also

contributes 21% of the Group’s total revenues, with an ARPU of USD 5.

The operation showed solid financial performance for the second quarter 2016,

where revenues grew by 8% compared to same period in last year (up 10% in

local currency SDG terms) to reach USD 193 million, mainly due to the

increase in voice and data revenues. EBITDA increased by 22% (up 24% in

SDG terms) to reach USD 87 million, due to the healthy top line performance.

Net income for the period jumped 27% (up 30% in SDG terms) to reach USD

44 million.

Data revenues (excluding SMS and VAS) only represent 12% of the total

revenues, reflecting a healthy annual growth of 44% (up by 47% in SDG terms).

We are confident in witnessing further growth during the course of the year,

post the excellent introduction of the 4G in Sudan in Q2 2016.

Going on to slide 19, Saudi Arabia.

In Q2 2016, Zain KSA adopted the new biometric system imposed by KSA

regulator, impacting the customer base of the Opco, which dropped by 6% Y-

o-Y to reach 10.7 million customers as of June 2016, this will have a negative

impact in the short term but a positive impact on the long run.

For Q2 2016, the operator recorded 4% increase in revenues to reach USD 473

million, up from USD 454 million last year, while EBITDA decreased by 14%

to reach USD 99 million, mainly from the increase in OPEX due to additional

fees for biometrics. Net losses for the quarter increased to USD 88 million up

from USD 54 million last year, due to additional fees for biometrics and

increase in depreciation and finance cost.

Zain KSA recorded a noticeable 57% Y-o-Y growth in data revenues

(excluding SMS and VAS), which represents 31% of total revenues.

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Going on to slide 20, which is Zain Jordan.

Zain Jordan delivered a solid performance both in Q2 2016. The Opco managed

to maintain its lead in the market with total customer base of 4.1 million as of

June 2016, which grew by 3% Y-o-Y and represents 9% of the Group’s total

customer base.

Revenues for the second quarter of 2016 increased by 7% compared with last

year to reach USD 121 million, EBITDA increased by 16% to reach USD 59

million, with an EBITDA margin of 49% as compared to 45% last year. Net

income grew by 9% to reach USD 26 million as compared to last year.

Data revenues (excluding SMS and VAS) represented 32% of total revenues,

reflecting a healthy annual growth of 25%.

With that I’ll hand over to Abdulaziz and we’ll move to Q&A. Thank you.

Abdulaziz Jawad: Thanks, Scott. With that, we’ll now move to the Q&A and we ask you please

that you limit yourself to one question and one follow-up. Operator, can you

please repeat your instructions?

Operator: Yes, thank you. As a reminder, if you wish to ask a question, please press star-

one on your telephone and wait for your name to be announced. If you wish to

cancel your request, please press the hash key or pound key. We do have several

questions coming in. The first question comes from the line of Karim Riad from

EFG. Please ask your question.

Karim Riad: Hello gents. Thank you for the call. Just two quick questions from my side.

Firstly, on EBITDA margins. Obviously Q2 saw one of the highest margins

since I think Q4 2010 if I’m not mistaken. Could we get some clarity on that

and whether this is sustainable or not? Second question relates to Kuwait. Just

if we could get some updates on the potential establishment of regulatory body

over there. I understand it should be established by the end of this year. Thank

you.

Scott Gegenheimer: I’ll start with the second question first on the regulatory. The regulatory has

been established this year in February. They’re still putting some of their

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guidelines together. We’ve had initial discussions with them and they’ve laid

out a little bit of their plan and where they’re trying to go with the regulatory

environment but it’s still a little bit early to tell exactly what kind of impact

they’re going to have on the telecom market but they have talked about

liberalizing and opening up the market and talking about privatizing the

international gateway and also the fixed in Kuwait. As you know, both the

international gateway and the fixed are controlled by the governments so this

will give us new revenue growth streams going forward, but again it’s a little

too early to tell at this stage.

Regarding EBITDA margin, we did have very strong growth in EBITDA

margin. Part of it is cost cutting. Part of it is a little bit of growth on especially

on the data side which has better margins in a lot of our markets. We’ve also

reduced some of our cost structure on some overall cost optimization projects

that we’re running across the Group. I don’t necessarily want to say it’s

completely forecasting going forward on a how high we can continue to grow

our EBITDA margins, but I do expect to stay fairly strong on being able to grow

the EBITDA margin for at least going forward. But we’ve had a lot of pricing

pressure and competition is driving down some of the margins so we know that

we have to look at some of the operations and drive some of the cost structure

out. One of our goals internally is to be the lowest cost provider in all of our

markets and we’re doing that across each of our markets but a lot of this depends

on Iraq market. Truth is Iraq market’s been very difficult to grow there. I think

we jumped ahead of the competition because we started pulling out of cost out

of the Iraq market faster than our competition. We started earlier. One of the

big things that we pulled out on the cost optimization part of it is we’ve taken a

lot of the lease lines and we’ve renegotiated and instead of paying annual leases,

we ended up signing (IRUs,) which are long-term 10-15 year leases and they’re

being capitalized. So some of that cost has dropped below EBITDA which has

helped the EBITDA margin. So hopefully that answers your question. Thanks.

Karim Riad: Thank you Scott. Thank you.

Operator: Thank you very much. The next question comes from the line of Tibor Bokor

from Arqaam Capital. Please ask your question.

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Tibor Bokor: Hi. Good afternoon. First question on KSA regarding MTR cuts in Q2. Frankly

speaking we expected more positive impact for yourself from the MTR cuts

judging by what happened last year and also judging by where the pricing is so

that this year, MTR cuts should have been much stronger. So I guess there’s

some other impacts that are blurring the picture so if you could little bit talk

about that. And in terms of the tower sales, some update on that. Where we are

in the process and what you’re expecting timing this year. Thank you.

Scott Gegenheimer: Thanks Tibor. On KSA the MTR cuts a couple of things on this one. First,

they did help the company and a lot of it is because we’re the third operator we

have a lot of our traffic that goes off net so you did some reduction on the cost

for the interconnection on that which helps significantly on it, but it helps when

it allows us to be more competitive when we’re making offers for instance,

when you do the iPhone, you do a bundle on packages and you can include a

lot more minutes off net. So what happens is that even though you see the MTRs

cut it takes a little bit of time to continue to try to build some of your offers and

gain market share, but you don’t necessarily just because your MTRs drop

doesn’t necessarily see the cost come across because you have revenue cuts on

top because they’re not asymmetric. They’re symmetric rates so you have a

little bit of a reduction in your revenue and into your cost offsets as well. So but

we do expect to see in the long run this to be very healthy for us an allow us to

be able to compete more directly with the competition as the MTRs come down.

Regarding the tower sale, we were hoping to get this out before the end of Q2

and were still working on the tower sale and we expect it to be completed in

2016. There have been some rumors and some stability going on between

Mobily and STC. They have reported that they are trying to end tower sales.

We do expect the project to finish in 2016. Thanks.

Operator: Thank you very much. As a reminder, it’s star-one on your telephone keypad if

you would like to ask a question. We have another question from the line of

Dilya Ibragimova.

Dilya Ibragimova: Hello, hi. Had a couple of questions based on Kuwait. First on data pricing and

overall pricing environment. Maybe you could give us an update of what are

you seeing going into second half of the year and second on the on the cash

flow item related to investments into intangible assets there has been quite a

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substantial decline and is that purely related to a decline in handset subsidies or

how much you invested, how much subsidies you’re offering to the customer,

if you could please give us a bit more color on that front what’s driving the

reduction and investments in subscriber acquisition costs. Is that purely Kuwait.

Yes. Thank you.

Scott Gegenheimer: Thanks for the question. They’re kind of related together, but when you talk

about the cash flow intangible assets, you’re right that the subsidies have come

down. Part of it is the amount that we’re giving way, and I think cooler heads

have kind of prevailed in Kuwait and we’ve seen drop off. Those are below the

EBITDA line and what we’ve done is in the last couple of quarters we’ve

dropped it dramatically. Unfortunately, it takes a little bit of time before you

start to see them flow into the bottom line because you’re amortizing your

subsidies over a year on there, but the last two quarters we’ve seen a drop in the

subsidies that we’re giving out. Part of that is overall the amount of subsidies

we’re giving away, but also we haven’t had the new handsets come in, and we’ll

have to see what happens in September when the iPhone 7 comes out and

whether the subsidies are going up or not. It’s a little early to tell because we

haven’t seen the pricing and we haven’t seen the level of what the competition’s

doing as well on there. So that regarding your cash flow intangible.

On Kuwait and the data pricing, again it’s been kind of a shift in the market

when it comes to the competition and everyone’s focusing on data. This is one

of the problems with the subsidies, everyone continues to keep bundles out and

what we’re trying to do is reduce the amount of data given away. Some of these

packages are they’re just not sustainable in the long run. We’ve seen normally

in most markets you see one or 2 GB of data given out. In Kuwait market you’re

seeing 500 GB. You’re seeing terabytes of data given out in packages and

truthfully that’s not sustainable in the long run. So what we’re trying to do is

put through usage policy in place, reduce some of these amount of data we’re

giving away, but part of it is driven by the market. So it’s a little difficult, as the

leader in the market we’re trying to get away with trying to lead the market to

let them follow us by reducing the amount of data they’re giving away and

hopefully the competition follows us, but it’s something that I believe is not

sustainable in the long run. The cost structure just doesn’t make any sense and

we have to turn around and be a little bit more reasonable, and we want to be

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able to up sell and cross sell our packages and when you’re giving away these

packages of 500 GB or a TB, it’s too hard to up sell and cross sell because

you’re giving them basically unlimited packages away, and so we’ve been

working on that and hopefully the market will follow us on this, but as a market

leader we’re going to reduce the amount of data that we’re giving away in order

to drive some of the profitability in the company. Hope that answers your

question. Thanks.

Dilya Ibragimova: That does. Can I just ask a short follow-up please? On this first one, on

subsidies, is this something that is being done by you only, the decline in level

of subsidies or is it some, this competition or did competition follow you in the

first half? And on the pricing in Kuwait maybe I could follow up is the situation

different in voice pricing?

Scott Gegenheimer: Regarding the subsidies level. The competition has followed in some areas

and in some areas not. So it’s really hard to give you an answer on that because

it changes so quick and so fast. So in one month all of a sudden you see

competition giving two handsets instead of one and all of a sudden it jumps up.

The next quarter, they yank it out of the market and cooler heads prevail. So

I’m taking a stance that we’ve got such a strong market leader leadership in

there that we can get away with leading the market on subsidies and start to

reduce them, and we’re hoping that if our customer base doesn’t fall off and

we’re not losing some customers you’ll start to see the competition realize that

we can get away with reducing it and so they’re following us. So I think we can

do that in a lot of our markets, and it used to be you’re always trying to lead the

market and continue to give more and more subsidies to try to land grab on the

market but now that the market is saturated, it’s the other way around. So we’re

starting to reduce this and I think the competition is actually starting to see that

it’s working and we’re not losing customers because of how strong our brand

is and our customer experience and our network. So we’ve gotten away with

actually reducing some of the subsidies and I think you’ll see the competition

do that as well, but again it changes on a monthly and quarterly basis so it’s a

little difficult to give you a straight answer on that because it just changes too

quickly on it.

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You mentioned the second was the pricing on voice. One of the things is at least

on pricing on voice, I mean we’re mainly packaging a lot of our packages

include much more data and so we haven’t really focused on the voice. Most of

it is very high voice packages and everything’s moving towards data. So I think

in the over the next few years you’ll continue to see that, and the interconnection

in the country in Kuwait is fairly low. We still make a lot of money on the

international gateway even though we don’t have that because we’re building

in one-minute increments as opposed to the interconnection billing on per

second, but on voice itself it’s not we’re continuing to give higher packages

away. So I don’t necessarily think you can compete on a price per minute in

Kuwait market.

Dilya Ibragimova: That’s very helpful. Thank you very much.

Scott Gegenheimer: Thanks.

Operator: Thank you very much. We do have another question on the line. The next

question comes from the line of Maddy Singh from Morgan Stanley. Please ask

your question.

Maddy Singh: Yes, hi. Thanks for the call. Just a follow-up question on Kuwaiti market. Do

you think the current round of price competition and data segment is coming

from having ample spare capacity at the competition’s end? Specifically,

Ooredoo which did a massive Capex in last few years or is it still being run

done by viva? So if you could clarify there, and what is your capacity utilization

in Kuwait? I wanted to understand that as well, and in terms of the margins, you

know, just wanted to follow up in Sudan. The margins are actually looking very

strong at around 45%. Were there any one-offs involved there? is that the

sustainable margins in Sudan? Thank you.

Scott Gegenheimer: Thanks for the question. Regarding the Kuwait market, I think it’s shifted

quite a bit. I don’t necessarily think the market’s driven by how much capacity’s

on the network. If you would have asked that question maybe two or three years

ago, it was definitely driven by excess capacity. It was Viva really you know

basically dropping pricing dramatically, trying to fill up their network and build

their reputation and their brand. That’s shifted. Having said that, I think over

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the last say year and year-and-a-half, Ooredoo kuwait has been pushing heavily

back into the market because they lost so much market share and so they’ve

been more aggressive on pricing, and it seems that it’s shifted now that Ooredoo

is the number three in the market and they have been a little bit more aggressive

when it comes to subsidies and the amount of data given away, and it seems

Viva has been a little bit more reasonable when it comes to subsidies cause

they’re realizing that they’re top line might be growing but their bottom lines

not growing because of the amount of subsidies they’re giving away. So I think

the market is shifting between the between Ooredoo and Viva and how they’re

actually attacking the market. Again, hopefully cooler heads are a little bit

prevailing and we’re trying to stay away from direct competition on subsidies

and pricing levels and we’ve seen at least the last couple quarters, we’ve

significantly reduced the number of subsidies. The only caveat is you know

Apple coming into the market it’s really too early to tell what it’s going to look

like because you know when they when they when they come out with their

new handsets. So I don’t necessarily think that it’s going to be a big splash this

year because I don’t from what I heard, I don’t really see any major changes in

the iPhone 7. So I don’t think you’re going to see major subsidies coming in the

market in Q3 but we’ll have to see.

Regarding your second question on Sudan on EBITDA margin there was no

real one-offs for the market. It’s still doing quite while so I see that sustainable

going forward. Thank you.

Maddy Singh: Just to clarify on the Kuwaiti market, what kind of data capacity you are seeing

on the network? Is it something you can share?

Scott Gegenheimer: I don’t have the numbers off the top of my head, but it also depends on what

you looking at the radio side or you’re looking at the back end connectivity on

there. I’ll have to come back with the numbers but there is room to grow in

there.

Maddy Singh: Do you think the Kuwaiti market as a whole can grow in revenue terms in next

year, two years’ time given the competition which continues?

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Scott Gegenheimer: It’s tough. Two things on this. For our side, we’re going to be growing in a

few years. Data’s still growing and it’s you know your voice is dropping. Data’s

improving. One of the areas that we haven’t focused on in the past as much as

we should have and right now it’s one of our initiatives downstairs is growing

the enterprise market, and I think there’s a lot of opportunity to grow on the

enterprise market and doing bundling and we just have not done it. We’ve

established a separate unit in Kuwait for enterprise. It used to be all bundled

inside so that you’re marketing was with the consumers and we’ve broken out

the enterprise into its own division and so we’ll be focusing heavily going

forward on enterprise. So I think there’s room for growth in that. We also hope

that there’ll be room for growth when it comes to the international gateway, and

also the fixed network so again part of that is waiting for the TRA to put

together, but they’ve said that they want to privatize that to be able to grow the

market as well and we think that there’s a lot of room for growth. The quality

on the international gateway, unfortunately, the operator gets beat up for the

quality on the international gateway and it’s outside of our control because

everything goes through the (MOC) so we think the rates can drop dramatically

and on the international gateway and we can still make a lot more money if it’s

privatized. So I think there’s a lot of room for growth there, but if you ask us

the overall voice and the existing base, no, there’s not a room for growth in

there, but we’ll be growing through the enterprise market. Thanks.

Maddy Singh: Just to follow up on that international gateway part, any timeline on that? When

that can be privatized?

Scott Gegenheimer: No. We don’t know. We’ve been talking about privatizing for a long time.

The TRA just got set up this year. So I’m hoping you’ll see it you know. I don’t

believe it will be before year end but probably in 2017 we might see something,

but it’s just too early to tell for sure.

Maddy Singh: Thank you very much Scott and congrats on a good set of results. Thank you.

Scott Gegenheimer: Thanks. Appreciate it.

Operator: Thank you very much and the next question comes from the line of Sam Hosn

from Lazard. Please ask your question.

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Sam Hosn: Yes, hi, gentlemen. This is Sam Abul Hosn from Lazard Asset Management in

Dubai. Just have a question about the dividend payout. If you have any

guidance. Typically, it’s been about close to 85% of earnings. Can you give us

an idea of what we can expect?

Scott Gegenheimer: Truthfully our guidance on dividend hasn’t changed. So you know we’re

somewhere 70, 90% of our net income is paid out generally in dividends. We

didn’t have discussion on this subject to the board and to the shareholders. So

we just haven’t had that discussion this quarter with the board, but I expect the

dividend policy from the previous one to continue to stay for the time being.

Thanks.

Sam Hosn: OK, thank you very much.

Operator: Thank you. The next question comes from the line of Sarah Shabayak from CI

Capital. Please ask your question.

Sarah Shabayak: Good afternoon, gentlemen. My question is in regards to the recent expression

of interest that you made on (4G license) in Egypt. I was wondering about the

rationale for your interest and the market percept become a four-player market.

I understand also that Zain had a delegation meeting with the Egyptian

telecommunication ministry. So I was wondering if you can kindly elaborate on

the rationale of the considering such an investment and the discussion for the

Egyptian government.

Scott Gegenheimer: Thanks Sara for the question. Regarding any opportunities in the MENA

region on the telecom side, we generally are active in looking for new

opportunities, but actually it has to make financial and strategic sense. I think

Egypt makes a lot of strategic sense. Financially having a standalone 4G

license, I don’t necessarily think that makes a lot of sense but there’s always

lots of opportunities to come into the markets in other ways whether it’s

MVNOs, whether it’s having management contracts, but I don’t necessarily

think that a standalone 4G license is the way to go on the Egyptian market and

I think that might be difficult, but there’s other opportunities there. We did meet

with the ministry of telecom and also the prime minister and we had some very

interesting discussions on opportunities there, but I don’t necessarily think

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you’ll ever see a standalone license, and they’re talking about the four licenses

going to the existing operators already because they uniform the license there.

So telecom Egypt will probably end up getting the fourth license. So I don’t

necessarily think that you’ll see us going in as a standalone license, but there

are opportunities there. So we are looking to them and we’ll continue the

conversation with them. Thank you.

Sarah Shabayak: Thank you. That helps.

Operator: Thank you very much. The next question comes from the line of Dana Sawan

from SICO.

Dana Sawan: Hi. I just have a question regarding Jordan. What’s the reason of EBITDA

margin improvement? Thank you.

Scott Gegenheimer: Thanks Dana. On Jordan on EBITDA. Part of it was the top line growth

which we had a 7% top line growth in Jordan in Q2. Some of it is a decrease in

OpEx. Part of it is some of the lease lines that were converted into IRUs. No

major adjustments in Jordan. Thank you.

Operator: Thank you. The next question comes from the line of Talal Alkhamis from NBK

Capital. Please ask your question.

Talal Alkhamis: Hi gentlemen. Thank you for having the call. I just wanted to know if there’s

any updates with Iraq legal issues and if you expect any further provisions to

be taken?

Scott Gegenheimer: Thanks. Iraq’s always a tough question when it comes to legal issues that

we’re facing there. We have sent letters to the government regarding the exit

claim. There’s a bilateral trade agreement between the government of Iraq and

the Kuwait government. So if things don’t move forward with our conversation

with them and try to resolve some of the legal issues, then we expect some time

in probably Q3 to actually go to file an exit claim and go through arbitration

with the international courts and the ICSID courts. So we do have at least legal

remedies outside of the country of Iraq and I think just to be able to file the

international case will help move along some of the local issues we’re having.

But again it’s a little early to tell on that. Thank you.

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Operator: Thank you very much. We do not have any further questions at this time. Again,

as a reminder, just press star-one on your telephone keypad if you would like to

ask a question. Again, we do not have any questions at this time. So please go

ahead.

Abdulaziz Jawad: Thanks operator. Please refer to the investor relations website for additional

updates and feel free to contact the IR team for further information. We look

forward to your future participation in our Q3 2016 update. The date for which

we will announce in the forthcoming months. Meanwhile, thank you all for your

continued interest in Zain and have a nice day.

Operator: That does conclude our conference for today. Thank you for participating. You

may all disconnect.

END