Royalty cuts du first-quarter profit margins

For 2016, du will pay 15 per cent of its regulated revenue - which excludes the likes of handset sales - and 30 per cent profit of its regulated profit in royalties.

Shoppers walk by a du store in Fujairah. Sarah Dea / The National

Du, the UAE’s second telecoms operator, posted a 1.4 per cent dip in first-quarter net profit, as it paid more in royalties to the government. However, mobile data revenues showed strong growth during the period.

The Dubai operator, which ended Etisalat’s monopoly in 2007, said net profit for the first quarter was Dh480.1 million, down from Dh487.1m last year after a 23.6 per cent year-on-year increase in the royalty paid to the Government.

Mobile data revenue increased by 8.9 per cent to Dh779 million during the first quarter. Data contributed to 34 per cent of mobile service revenue during the first quarter, an increase from 30.9 per cent from a year earlier.

Du's chief executive, Osman Sultan, also said that he did not expect the rules governing voice-over internet protocol or (VoIP) to become "more relaxed" in the UAE, after recent internet restrictions to block voice calls via the popular Snapchat app.

Phone companies worldwide are earning less from what was once their main source of revenue as people turn to cheaper VoIP services such as Skype.

The trend has encouraged phone companies such as du and rival Etisalat, which also reported earnings on Tuesday, to focus on making more money from selling data packages to mobile phone customers.

“The name of the game is to shift to data and monetising the data,” said Mr Sultan. “We should be cleverer at monetising data, which will get us more to growth.”

Du said mobile revenue totalled Dh2.21 billion, a 0.9 per cent decrease compared with the first quarter of last year. The operator has about 8 million active mobile subscribers in the UAE.

Du said on Tuesday that net profit before royalty to the Government, grew by 10.4 per cent to Dh1.02bn. Du provisioned 23.6 per cent of its profit as royalty fees to the government.

Mr Sultan said that it will be a “challenge” to offset the effect of increasing royalty fees in future. Revenue for the first quarter increased by 1.3 per cent from a year earlier, reaching Dh3.09bn. Fixed revenue climbed by 2.3 per cent year-on-year to Dh630.3m.

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