Zain Sudan expects new taxes to affect 2012 earnings

Zain Sudan expects new taxes to affect earnings in 2012 despite the anticipated addition of 2-3 million mobile phone subscribers in the country. COO Ibrahim Ahmed Elhassan told Reuters that mobile users have been tightening their budgets, giving firms little room to pass on higher costs to customers. Sudan has raised sales and services taxes for telecom firms to 30 percent from 20 percent and the profit tax to 30 percent from 15 percent in a push to make up for diminished oil revenues. Elhassan said Zain would have a hard time hiking prices enough to make up for that because the company has to remain competitive and then because pricing sensitivity is not that flexible. A tax break on the 30 percent corporate profit tax also expired for Zain Sudan last year, Elhassan said, adding that the profit will definitely drop by 30 percent. The company was looking at ways to "optimise costs" like more specifically targeting its advertising. Zain competes with South Africa's MTN and the local Sudani brand in Sudan's mobile phone market. The unit pulled in about USD 1 billion a year in revenues, Elhassan said. Zain Sudan will continue to add subscribers in 2012, despite the fact that the mobile market is starting to become saturated in the bigger cities, he added. The unit has also faced other challenges operating in Sudan, like difficulty repatriating its profits, Elhassan said. Zain Sudan's chief executive said in November the company would spend USD 280 million improving its infrastructure in 2012. The company has also finished splitting off its operations in South Sudan, which seceded from Sudan in July under a 2005 peace deal that ended decades of civil war.