Mobile operator du dials in rise

A growth in high-spending mobile subscribers contributed to a 51 per cent year-on-year profit increase for du.
The UAE’s second telecommunications operator said it had added 171,100 active mobile customers during the second quarter, taking the total to 4,775,900, as it continues to gain market share on its bigger rival Etisalat.
Based in Dubai, du, which launched services in 2007, is approaching parity with the incumbent Etisalat in terms of mobile subscriber numbers.
The telecoms company now claims 43.6 per cent of the UAE’s mobile market, up from 41.6 percent in the first quarter.
“In terms of mobile subscribers, we estimate that our market share is between 43 and 44 [per cent],” said Osman Sultan, the chief executive of du. “Our market share in prepaid is certainly getting close to full parity… We are now playing, in mobile, in the same playground,” he added.
However, du’s quarterly growth is slowing, and Etisalat stemmed its loss of mobile subscribers in the second quarter, said Matthew Reed, an analyst at Informa Telecoms & Media.
“This week Etisalat dropped its annual renewal fee for prepaid lines, so it is beginning to offer stronger competition to du in the mobile sector,” said Mr Reed.
The company, which sold itself as a low-cost operator when it launched, has fewer post-paid mobile subscribers than Etisalat. But these customers contributed 44 per cent of the growth in mobile revenues during the second quarter, the operator said.
This led to a higher average revenue per user (Arpu), said Mr Sultan.
“More than a quarter of the growth in mobile revenue can be attributed to an increase in Arpu, driven by increased usage by our customers,” he said.
Philip Brazeau, who heads the telecoms practice at the Middle East law firm Al Tamimi, said post-paid customers were generally more lucrative. “If you are going to be a true telco and have a great customer base, you have to focus on post-paid,” he said.
Total profit for du stood at Dh414 million (US$112.71m) for the second quarter, up by 51 per cent from the same period last year. The profit figure is reported as Dh207m because the company provisions half its net income as a royalty fee to the Government.
The payment for this year, which has not yet been announced, remains the “key uncertainty for investors”, said Martin Mabbutt, a telecoms analyst at Nomura.
Shares in du, which are traded on the Dubai Financial Market, closed down 0.31 per cent at Dh3.18 on the back of the income statement, which was slightly below analysts’ expectations.
JPMorgan forecast second-quarter profits of Dh215m after the royalty provision. That matched the median estimate of five analysts compiled by Bloomberg News.
Revenue growth was slightly above forecasts. The operator reported second-quarter revenues of Dh2.17 billion, up 28 per cent compared with the second quarter last year, and up 7 per cent on the first quarter of this year.
JPMorgan said in a note earlier this week it was expecting a 26 per cent rise in revenues.
Revenue growth for this year is on track to be more than 20 per cent, Mr Sultan said.