UAE Telco Du Q1 Net Profit Drops 0.6%, Misses Estimates

Du, the United Arab Emirates’ No.2 telecom operator, reported a 0.6 per cent fall in first-quarter profit on Tuesday, missing analysts’ estimates as its mobile subscriber base shrunk slightly and it paid a higher tax rate than a year earlier.

The company, which ended Etisalat’s domestic monopoly in 2007, made a net profit of Dhs487.1 million ($132.6 million) in the three months to March 31, down from Dhs490.3 million from the prior-year period.

Analysts polled by Reuters on average forecast du would make a quarterly profit of Dhs564.7 million.

First-quarter revenue was Dhs3.05 billion. This compares with Dhs2.96 billion a year ago.

The operator had 7.48 million mobile subscribers as of March 31, down 0.9 per cent from 12 months earlier, a drop du’s Chief Executive Osman Sultan attributed to a government-led campaign to re-register mobile accounts in an effort to tackle misuse of mobile phones for criminal activity.

“Probably, the second quarter will still see the effect (the drop in du’s) subscriber base because we suspended a significant number in Q1,” Sultan told a conference call.

“When we suspend a batch (of numbers), it doesn’t mean all of this batch will be disconnected. We have a percentage coming to re-register.”

Du’s quarterly mobile revenue was Dhs2.24 billion, almost flat compared with the prior year’s Dhs2.23 billion.

Mobile data provided 30.9 per cent of this mobile revenue in the first quarter, up from 27.6 per cent a year ago.

“People are using mobiles for more and more activities – the challenge is how to keep monetising this,” added Sultan, warning there was a “disconnect between growth in usage and growth in revenue associated with these activities”.

Du paid royalties – or tax – of Dhs437.9 million in the first three months of 2015, up from Dhs375 million in the prior-year period.

For 2014, du paid 10 per cent of its regulated revenue — which excludes the likes of handset sales — and 25 profit of its regulated profit in royalties. These taxes have risen to 12.5 and 30 per cent, respectively, this year.

Quarterly fixed revenue rose 20 per cent year-on-year to Dhs616.1 million, but wholesale revenue fell 12.5 per cent to Dhs151.3 million over the same period.

Sultan said du had no plans to raise any debt in 2015.

The company’s shares were down one per cent at 0943 GMT, while Dubai’s index was up 0.4 per cent.