Du owner EITC to increase capex as much as 70% as it prepares for 5G

Company's net profit after royalties dipped 12.3% yearly in the first quarter of this year

EITC’s chief executive Osman Sultan. Reem Mohammed/The National

Emirates Integrated Telecommunications Company, the parent company of Dubai operator Du, will increase capital expenditure by as much as 70 per cent this year as it plans to roll-out the 5G network in the coming months.

“Our capex guidance for 2019 will be in the range of Dh1.6 billion to Dh1.7bn … from Dh1bn last year. This is the continuance of increase we saw in the first quarter,” EITC’s chief executive Osman Sultan told reporters in an earnings call.

Telco’s capex spend in the first quarter of 2019 was Dh181 million, up 74 per cent compared to the same period last year, as the telecom prepares to roll out 5G and enhance its existing technology amid a digital transformation effort.

EITC is aiming to roll out a full-coverage 5G network in the country in time for new 5G-enabled devices hitting the market, building more than 700 5G-enabled stations by the end of this year.

EITC’s net profit after royalties declined 12.3 per cent year-on-year in the first quarter of this year, while revenue fell nearly 6 per cent to Dh3.1bn from a year earlier.

In the first quarter of 2018, EITC recorded a one-off related to regulatory costs that positively impacted the company’s profitability. Mr Sultan pointed out that if that exceptional one-off benefit was not considered, then net profit jumped 14 per cent year-on-year in the first three months of this year.

Meanwhile, pressure on revenue was mainly driven by a decline in mobile subscribers, said Mr Sultan.

UAE's second-biggest telecoms operator saw a nearly 2.5 per cent increase in fixed lines while an 8 per cent drop in mobile subscribers in the first quarter.

Besides, what inserted more pressure on revenues and margins during the first quarter was a significant increase in competitive activities on the mobile front, Mr Sultan said.

“Companies started reacting to each other… it is good for customers but had an impact on the first quarter and will also have a rolling impact on future quarters.”

On a future outlook, Mr Sultan said the company will improve upon revenue in the next quarter by monetising data use as demand slows for phone calls.

“Postpaid is decent and we are vulnerable only in prepaid. We acknowledge this and we will figure out an action plan," he said.

“Our strategy is to monetise better on data usage … by offering more incentives. At least it should be able to offset the pressure that we are having on voice revenue.”

EITC, which was founded in 2005 as the UAE’s second licensed telecommunications provider, includes Du, launched in 2007, and Virgin Mobile which was rolled out in 2017.

EITC has started looking for a new chief executive to replace Mr Sultan, who said he is helping select his successor.