Du slashes capex outlook on delayed investment in 5G

Telco is aiming to build 700 to 800 5G-enabled stations in the UAE by the end of this year

Osman Sultan, EITC’s chief executive, says digitising of services will ensure bright future for telcos. Reem Mohammed/The National

Emirates Integrated Telecommunications Company, also known as du, cut its capital expenditure guidance for this year to close to Dh1.5 billion – almost Dh200 million less than earlier estimates.

Delayed investment in 5G infrastructure is one of the main reasons behind this subdued outlook, EITC’s chief executive Osman Sultan told reporters in an earnings call on Wednesday.

“Our capex guidance will be around the Dh1.5bn mark for this year … [may be a] little bit less than this,” said Mr Sultan.

“We planned an investment in 5G infrastructure and network roll-out early in the year but the technology was not ready by that time,” said Mr Sultan, adding that this was a global issue as “vendors were a little bit late” in delivering products. The 5G network roll-out started in March and April, he added.

Earlier this year, Mr Sultan had predicted capex in the range of Dh1.6bn to Dh1.7bn for 2019, which the telco planned to spend on the 5G rollout and upgrading its existing technology amid a digital transformation effort. This figure was an increase on the Dh1bn of capex spent last year.

“For capex to be recognised as a capex, the project has to be delivered, with visible results,” Mr Sultan said.

“But 5G is a reality now in the UAE and it will continue attracting increased capex in the coming years,” he said, although he declined to give guidance on the company's spending plans for 2020.

EITC, which reported a 13.5 per cent slide in its third quarter net profit as revenue and mobile subscriptions fell, is aiming to build 700 to 800 5G-enabled stations in the UAE and cover all emirates by the end of this year.

The UAE's second-biggest telecoms operator saw its net profit after royalty payments for the three months ending September 30 decline to Dh381m, according to accounts filed on the Dubai Financial Market, where its shares trade. Total revenue for the third quarter dropped to Dh3bn, a 7.9 per cent decline from a year earlier.

However, Mr Sultan, who is leaving the company on December 31 after a 14-year spell at its helm, said it will take some time to achieve widespread coverage of the 5G network.

“It will take a few years to have the type of [5G] coverage that we have in 4G. It’s not that like by 2020 the whole country will be covered … it will require significant investment and time.”

In 4G, the UAE has one of the highest standards of coverage globally, he added.

Du last month announced the appointment of industry veteran Johan Dennelind as its new chief executive. Mr Dennelind, who is currently group chief executive of Telia, the largest Nordic operator, is expected to join the company in the first quarter of 2020.

“I will continue to work to ensure a smooth transition,” said Mr Sultan.

EITC’s fixed-line customers grew 1.5 per cent to 771,000 during the third quarter but the number of mobile subscribers slipped 10.6 per cent to over 7.7 million. The dip the in mobile business is not new and Mr Sultan predicted this trend to continue further.

“We and the entire [telecoms] industry are challenged by the squeezed margins … there is continued pressure on mobile. But in our case, it was partially offset by fixed-line business.”

Mr Sultan said the company will look to improve upon revenue by monetising data use and offering more digital capabilities as demand slows for phone calls.

“More digital capabilities will mitigate pressure on revenues," he added. "Reduced data prices will attract more customers … compensating the whole cycle.”