There will be increased competition in the telecoms sector next year, affecting the earnings growth of the UAE’s two operators, analysts said.
The third quarter of this year, however, should still show a positive performance for both du and Etisalat, helped by a rise in mobile data revenue, ahead of the opening up of the fixed-line market by the end of this year.
"If the infrastructure sharing goes ahead, it's thought that the first phase will allow for competition between du and Etisalat in fixed voice and fixed broadband access," said Matthew Reed, the practice leader for the Middle East and Africa at Ovum.
“Competition in triple-play services – fixed voice, fixed broadband and TV – will come later, in a second phase,” he said.
Currently, consumers are obliged to use either Etisalat or du for home and fixed-line services, depending on their location.
They will have a choice between the two operators once infrastructure sharing is introduced, likely to be by the end of this year according to comments made in April by the regulator the Telecommunications Regulatory Authority.
According to analysts this could lead to better profitability from more efficient business models.
Du is expected to benefit more than Etisalat, as its infrastructure is limited to new developments in Dubai.
Beltone Financial expects du to report a net profit after royalty of Dh585 million for the third quarter of this year. Bahrain-based Sico forecasts profits at Dh569m. Net profit after royalty in the same period last year was Dh474m, a jump of 45 per cent on a year earlier.
“Higher data revenue will be the driver for du’s third-quarter earnings,” said Nishit Lakhotia, the head of research at Sico.
Karim Riad, a telecoms analyst at Cairo-based Beltone, said: “Du is a simple and strong story. We expect the company to post revenue of Dh3.13 billion in the third quarter, driven by a higher number of subscribers and stronger mobile data revenue.”
He added that he sees an improvement in du’s efficiency ratio – or how well a company uses its assets compared to its earnings – in line with the company’s plan to lower its operating expenses.
“The telecoms sector is highly penetrated, with mobile penetration rates close to 180 per cent,” Mr Riad said. “We expect growth to come from the mobile data segment going forward.”
According to a research note from the UAE brokerage Naeem, du’s market share growth is expected “to slow down because of intense competition from Etisalat and two-fold market penetration.”
The UAE remains the biggest market for Etisalat, generating about 51 per cent of the international communications company’s total revenue.
It will, however, also be looking to its operations outside the UAE to boost its earnings, with Maroc Telecom expected to contribute about 24 per cent of its revenue.
Etisalat was only able to book six weeks of Maroc Telecom’s revenue in its last results, as it only finalised a deal to acquire a majority stake in the North African operator in May.
Meanwhile, Etisalat’s Asian operations are expected to account for 12 per cent of total revenue, driven mainly by a strong performance in Pakistan which had been a drag on profits a year earlier. Egypt is forecast to report Dh1.1bn in the quarter and African operations will account for 5 per cent of the company’s revenue, according to Beltone.
Beltone expects Etisalat to post a net profit of Dh3.3bn in the third quarter, while Sico forecasts a net profit of Dh2.7bn. In the third quarter of last year, net profit after royalty was 18 per cent lower-year-on year at Dh1.8bn because of rising staff costs driven by the consolidation of its operations in Pakistan.
“For Etisalat, earnings will reflect full consolidation of Maroc Telecom for the first time,” said Mr Lakhotia. “We expect growth to continue in the domestic operations for Etisalat.”
Shares in du and Etisalat closed TK.
selgazzar@thenational.ae
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