Du fails to offset royalty payment rise as profit falls

Du's rise in revenue failed to offset a 10 per cent rise in royalty payments to the federal government over the course of last year. Charles Crowell for The National

Profit at du, the UAE’s second largest telecoms provider, fell by 20.5 per cent during the fourth quarter as stable revenue and operating profit failed to offset a rise in royalty payments to the Federal Government.

The telco's profit fell to Dh367.8 million for the three months to the end of December, compared with Dh462.4m during the same period the previous year, according to calculations made by The National. Du did not provide a breakdown of fourth-quarter results. The results came in well below an average of Dh462.7m forecast by analysts surveyed by Bloomberg.

Du announced preliminary unaudited annual profit of Dh1.75 billion in a brief statement posted on the Dubai stock exchange website on Tuesday, a 10 per cent drop compared with Dh1.94bn in 2015.

The operator attributed the decrease, its second consecutive drop in annual profit, to a 10 per cent increase in royalty payments to the Government over the year. Earnings per share fell to 38 fils from 42 fils in 2015.

Revenues for the year rose by 3.2 per cent to Dh12.73bn from Dh12.34bn, while profit before royalty was unchanged at Dh3.86bn. Du attributed the rise in revenue to “an increase in subscribers”, giving no more details.

The company is due to provide a fuller breakdown of its results in the coming days.

Du’s finances have increasingly come under pressure from slowing revenue growth in an increasingly saturated UAE market, coupled with a steady rise in royalty payments demanded by the Federal Government.

Osman Sultan, the chief executive, said last month that the operator had begun restructuring some of its business lines during the first half of last year, with “tens” of jobs being cut to streamline operations.

The operator last month unveiled a licensing agreement with the international mobile brand Virgin Mobile in a fresh attempt to target the UAE’s high-spending youth segment. Services under the brand are likely to become available “within weeks”, according to Mr Sultan.

Both du and fellow UAE telco Etisalat are increasingly looking to bolster revenue from managed digital services for corporate customers, leveraging technologies including cloud computing, the Internet of Things, mobile applications and big data services.

Etisalat launched a dedicated business unit, Etisalat Digital, last October to tap this market, which it estimates could be worth Dh50bn in the next five to seven years.

Du’s shares, temporarily suspended during morning trade, closed on Tuesday up 0.8 per cent at Dh6. The operator’s shares, listed in Dubai, have fallen by 3.2 per cent so far this year, compared with a 3.5 per cent gain by the emirate’s headline index.

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