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Dec / Jan 2008
Zain in the Membrane

WRITER: Ziad Jabbour

In 2003, Dr. Saad Al Barrak, the Deputy Chairman and Managing Director of Zain, set out an exceptionally ambitious nine year plan that many sceptics thought unfeasible. Almost six years on, Zain has achieved more than most companies will dream of in a lifetime.


If you did not already know, Zain is the year-old rebranded name of the Kuwaiti business ‘Mobile Telecommunication Company’. Previously referred to as MTC, the company was actually the region’s first mobile operator when it was launched in 1983.

A pioneer of sorts, Zain was always a solid company but it was not until Dr. Saad Al Barrak, a Kuwaiti electrical engineer with degrees from Ohio and London, was appointed to the helm in 2002 that it started to become a major international player. Almost from the get go Al Barrak defined his profitable expansion strategy which he set to the motto, “Be first, be daring and be different.” This plan known as ‘3x3x3’ sought to make Zain a global player in three stages: regional, international and global, with each stage completed in three years.

The plan set massive growth expectations that were to be realised through acquisitions, partnerships and green-field opportunities. Now, six years on, the fruits of his labours are demonstrated by key figures. The company has gone from operating in just one country with a subscriber base of 600,000 customers to operating in 22 countries with more than 56 million customers. Additionally in this period, the company’s market capitalisation has grown by a multiple of ten, to hover around 25 billion USD and this year’s projected revenues are expected to exceed 7 billion USD with profits of around 1.2 billion USD.

In Arabic, Zain means beautiful, good and wonderful. But interestingly Zain translates from Latin as dark horse, which is a term coined by literary figure and former British Prime Minister Benjamin Disraeli to metaphorically allude to an unknown horse winning a race.

Perhaps it is due to this element of surprise that Al Barrak waited till last year to initiate his rebranding exercise. Whatever the reasoning, the official company line is that the name Zain was chosen primarily because, “it fulfilled the philosophy of simplicity being the soul of strategic management.”

In August this year Zain shocked the communications industry by connecting most of their African and Middle Eastern businesses through a new One Network solution, basically banishing roaming charges. Now, any Zain customer who travels to another country where Zain operates can make calls and send sms’ at local rates while also receiving incoming calls free-of-charge. Not only that but to really make life simple One Network allows users to replenish their credits with top-up cards brought from their home country or any other country that Zain operates in. This was such a revolutionary rethink of the mobile operators’ business model that it begged the question - why had this never been done before? Dr. Barrak, not one to mince his words, threw down the gauntlet in his usual style, “As a person coming from the IT world I thought telecommunications is really a dinosaur industry. But from now on, with the competitiveness of the market, the operators are being exposed.”

A month later Zain once again brought a bolt from the blue when it managed to raise almost 4.49 billion USD in capital despite difficult and unfavourable financial markets both locally and globally. This capital increase, which was the largest in the history of Kuwait, was in many ways a vote of confidence by the company shareholders. The proceeds will be used to finance future strategic expansion plans.

So what is next for Zain? “Now, we are entering a new and dynamic chapter in our history,” Dr. Al Barrak, conferred, “one that will take us into the top ten of global mobile telecommunications companies.” But his corporate ambitions do not stop there. He wants Zain to attain a 6 billion USD EBITDA. He also hopes to have as close to 150 million customers as possible and most of all he craves to be the first communications company to enter the global list of top 100 brands. Certainly a tall order but it would be ill-advised to bet against him.

Where were you born and raised?
In Kuwait. I came from a big family who occupied a prominent and leading social position. The central authority was my father. All the family and extended family were living together in a very large house. My two elder brothers, who were married, lived in an attached guest annex called a diwaniya.

What was your childhood like?
My mother was an affectionate but tough disciplinarian. My father passed away when I was 16. I was very close to him and I attended with him many meetings in various diwaniyat where I got to learn the discipline and behaviour of the traditional Arab male. I was acting as a grown up from an early age.

What did you dream of being when you were a kid?
My first hobby in primary school was music. I was the maestro for the school band. But I was raised in a conservative family and they did not encourage this pursuit.

Where did you start working?
I started in Information Turnkey Systems KSC, an IT company where I began as a project engineer. It was at this time that my skills were identified. After four years I moved to sales. By the fifth year I was made General Manager.

May I ask how it was that you came to be the ceo of MTC/Zain?
The major shareholder, Nasser Al-Kharafi, liked me and had heard good things about me; I don’t know from whom. I arrived at MTC by sort of an accident, or if you wish because of the political culture of Kuwait. I knew the company because it was a client of mine and I had been its supplier with computer systems but I knew nothing about telecommunications as I came from the IT world.

In what state was MTC before your appointment as ceo in 2002?
Since its founding in 1983, MTC was among the first pure mobile operators that did not have the involvement with the beast of landline communications. However, it was a monopoly that was a 50-50 partnership between the government and the private sector and it was the government who appointed the ceo. Effectively MTC was government controlled and it was ultra-conservative in the way that it managed its business. It did well because it was the only company in its market and it had cash reserves plus near-cash reserves of 500 million USD. It also had zero debt in 2002 so if you looked at the state of the company you would have said that change is suicidal.

So why were you convinced that change was necessary?
From 1999 or 2000, competition entered the market as the Kuwaiti government not only licensed a new operator but also reduced its stake in MTC from just over 50 per cent to about 24 per cent because it had also taken a stake in the new operator. By 2002, the market share of the second operator approached 50 per cent and this was really a big change for MTC. The upside was that because the government had cut its stake in the company, control was now in the hands of the private sector.

But MTC was in danger of losing its market value?
Yes, in July or August of 2002, we called upon the consulting firm McKinsey. I told them that I had just joined MTC and that we needed them to do a diagnosis of the business. Their findings showed the company was at risk of losing 70 per cent of its market value within three to four years. We had the choice of either committing suicide or fighting and thereby risking everything. Essentially, we had a company that was in shambles, to put it in very nice terms. Our choice was either to focus on the company in order to try to solve its operational problems as well as the problems of being embedded into an Arabian political environment or we could go about changing the context under which we operate and create huge pressures from the aspirations of the new context that will change the content naturally. We went with the latter.

Where did you see the possibility for changing the context?
At the time [in 2002] the world was chasing telecommunications and the industry was booming. In the Middle East and Africa, we had very large markets that were still untapped.

What made it possible for MTC/Zain to develop so quickly from 2003?
For us it was the time to become strategic. We said we have three years to make our future. Strategy is really the art of zooming. You have to zoom and learn in real time every second and put what you have learned back into your business and zoom further and further onto your strategy direction and target image of the future and that is what you should do to succeed.

Are you saying that strategy is more than the art of planning?
It was obvious that we would have to multiply our size and existence in order to survive in a global market that does not know any barriers. Therefore we said simply that we want to build scale and then leverage this high growth market that we are in especially in the years 2003 to 2005, to create a global brand. Luckily, it worked. So the emphasis in our strategy is on growth through action, on getting results fast and learning by doing and making strategy and change simultaneous activities. There is no time to do strategic diagnostics and reviews all the time. You must learn, act and change in real time and that is tough.

That is the famous 3x3x3 plan then?
Yes, we want to be a global company and by global company we mean among the top ten telecommunications companies by any criteria you care to name. At the beginning of 2003 we were only in Kuwait. Today we are in 22 countries (7 in the Middle East and 15 in sub-Saharan Africa) and we cover a huge area. So in managing the strategic challenge we wanted to leverage our size as well as our diversity. We want to build strategic capabilities as we go along because one cannot aspire to be a global company without having better practices than the best companies in the world.

How will Zain be affected by the recent economic meltdown?
As globalisation is progressing, any slowdown in a major economy will have an impact on other economies. A drop in consumer confidence will obviously have an effect but communications have become like food. People can save on their clothing but not on their nutrient needs and likewise not on their communication.

Expansion is an expensive thing, how leveraged in debt is Zain?
In recent years, Zain has invested heavily in new acquisitions as well as network expansion and upgrades. This has been to the tune of over 10 billion USD over the past three years alone. Our current debt hovers around 6 to 7 billion USD. The capital increase that we did on September 18th this year has provided almost 4.5 billion USD of funds to be used to service such debt plus assist in new acquisitions and network upgrades.

How easy is it for Zain to get such loans from banks?
Over the years, financial institutions have been very receptive to our needs and have generally extended us funds as requested. I believe that this is due to our strong financial position and cash flows in addition to our excellent track record. It has yet to be seen how this recent financial crisis will affect future borrowings though.

Money is normally an easier commodity to gather than qualified personnel. Given this point, how is the structure of the company changing with the expansion project?
Human capital has been the key to Zain’s success and we now have over 100 nationalities working at Zain. But something we do not publicise is that one of our ACE targets [Acceleration, Consolidation, Expansion] is to develop a world class management team that will be ready for the challenges ahead as we go global. Many programs are in place, such as our recently created careers website, that will further develop our people and we are always on the lookout for professionals that can further contribute to our ambitions.

People often fear the emergence of large multinationals and the power they can wield over national governments in furthering their own self-interest. How would you address this?
I think the world would be much more secure if there is more influence from businesspeople and economists than from the politicians. Secondly we have a mission to re-humanise business and create the business romance with our community and nations through more commitments to Corporate Social Responsibility, transparency, fighting corruption, upgrading education and improving the wellbeing of the poor.

What is your personal management style?
I am famous for a style they don’t teach you in books, which is known in Zain as management by chaos. I made my career by always being on the edge of getting fired. That is how you make history. If you try to preserve your seat and your place, you will become a dinosaur and disappear in no time. All I need to do is be as chaotic as I am and confuse you and out of confusion will grow some substance. The other point is that intellectuality is positively correlated with happiness. The happier you are, the more intellectual you are.

How long is your working day?
My working day is very elastic. I work from two hours to 22 hours; I don’t believe in a fixed spectrum of productivity so I keep my schedule dynamic.

Other companies are already copying your formula. Does that make you upset?
Imitators will always be there. This gives us a feeling of pride because it endorses our leadership. The more imitators we have, the better we are.

Why has the head office moved to Bahrain?
As I said we have operations in 22 countries and the dynamic nature of the business means that many of our core functional units – such as Group Finance, Group Procurement, Group HR (all of which work across the dispersed operations) – are continually travelling to distant countries. We often had problems obtaining visas at short notice in our previous Kuwaiti HQ. Bahrain was the most appropriate and most cost-efficient location. Air travel is good and we can hire locally as the people of Bahrain are among the highest skilled in the Gulf region. Lastly with the current boom in Bahrain’s economy and infrastructure, we had good and reasonably priced office accommodation offers. The Bahrain’s government has made every effort to make the re-location seamless and hassle-free.

What changes were you not able to bring about in Zain?
I have focused on and I believe that I have made many positive changes to the way Zain people respect and love each other in the workplace and beyond. Unfortunately some of our personnel have not adapted to my preferred way of dealing with each other. But with over 16,000 people on our payroll, let’s be real, conflicts of personalities will always occur somewhere.

What would you most like to change about your industry?
I would like more people within our industry to recognise how important the people who actually use our products and services are to the way we work. If a customer is ignored then why are we trying to provide them with a service?

What was your moment of greatest pride?
Family-wise it is seeing my children grow up every day. And professionally-wise it is witnessing Zain people grow into future leaders.

Do you give back to the community in any way?
As a company Zain prides itself on the many community projects we support. We are focused on improving the livelihoods of the communities we serve. In every country where we operate we view good Corporate Social Responsibility (CSR) programs as paramount. This is as much part of our business plans as is technology deployment and network expansion. Aside from our responsibilities to our shareholders and the need to provide them with good returns on their investments, each region and each country has its distinct priorities. Generally speaking, each year we spend millions of dollars on key themes of education, health and social welfare.

What has been your greatest lesson in life?
The greatest lesson in my life is that real worth of an individual is not in how much you have, but how much you have developed for people and how much people love you. It is your moral chequebook rather than your cash one; that is what truly transcends not only your life and the next generation's but goes even further into the future beyond.

What do you hope to be doing 10 years from now?
I hope to be happily retired and teaching at the University of Kuwait.

Dr. Saad Al Barrak in three words?
Fun, love and respect.

Zain in three words?
A Wonderful World.

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