Zain Saudi Arabia announces that following a study prepared by the company’s executive management and external consultants presented at a meeting of its Board of Directors on 27 November, 2014 it has recommended to convene an Extraordinary General Meeting (EGM) to seek the approval for a reduction in the company's capital from SAR 10,801,000,000 (USD 2.879 billion) to SAR 5,837,291,750 (USD 1.556 billion), resulting in a reduction of 45.96%. The total number of shares after the reduction being 583,729,175 as compared to 1,080,100,000 shares currently. The capital reduction will involve canceling one Zain Saudi Arabia share for every 2.18 shares prior to the reduction.

The principal reason for the proposed capital reduction is to write-off all of the company’s accumulated losses up to 30 September 2014. The company explained that the accumulated losses amount may hinder its positive performance, following new rules introduced by the Capital Market Authority (CMA) regarding this subject.

The market value of Zain Saudi Arabia will not change as a result of the capital reduction, although the number of shares held by each shareholder will reduce. Therefore, the opening price of the shares on Tadawul (the Saudi Stock Market) will be calculated by multiplying the previous closing price by 1.85. This change will occur on the first trading day after the capital reduction is approved by shareholders at the EGM.

The proposed capital reduction is subject to obtaining all necessary regulatory and shareholder approvals. In the event that shareholders of the company approve the capital reduction at the EGM, the capital reduction will apply to all shareholders registered in the company register on Tadawul as at the close of trading on the day of the EGM.

Zain Saudi Arabia Chairman, Eng. Farhan Bin Naif Al Faisal Al Jarbaa commented, “This proposed capital reduction is one of several positive steps being taken by Zain Saudi Arabia to improve its financial position as part of a comprehensive transformation plan, which has been ongoing since the beginning of this year. Through a number of important steps, including expanding and developing our data network in order to keep up with the significant growth in demand for data services, as well as focusing on higher margin customers which resulted in improving Zain KSA’s EBITDA for the first nine months of 2014 by 21% to reach SAR 825 million, compared with SAR 684 million in the same period of 2013.

Since its previous capital restructuring in 2012, Zain Saudi Arabia has experienced some unanticipated challenges to its operating environment. These challenges included aspects that are linked to the telecommunications sector in the Kingdom, such as extremely competitive pricing on calls in the market and committing to new regulatory restrictions on prepaid lines. However the company successfully improved its financial indicators in the period of 9 months 2014, reducing its net losses by 26% compared to the same period in 2012 and by 19% compared to the same period in 2013.

Hassan Kabbani, Zain Saudi Arabia CEO said, “The company is on a steady path in its implementation of its ambitious transformation plan, and we have already strengthened Zain’s position in the Saudi market by enhancing the performance, developing the network’s infrastructure, expanding sales channels and increasing point of sales.”

Furthermore, Mr. Kabbani noted that this recommendation from the Board of Directors forms a positive step in implementing the comprehensive development plan to strengthen the company’s position, stating that this will not affect the Zain’s commitment to honor its   obligations under its financing agreements.
 

Zain Saudi Arabia invites shareholders who wish to receive more information regarding the capital reduction to contact Zain Saudi Arabia Investor Relations via e-mail at: investor.relations@sa.zain.com