UAE telecom sector opens to fixed-line competition

The United Arab Emirates has started to open up the fixed-line consumer telecom market to competition, the head of No. 2 operator du said on Wednesday, after years of lobbying for the move.

The liberalisation, which started in July, follows about five years of negotiations in which du has been seeking access to larger rival Etisalat’s networks.

Du, which also met expectations with a small fall in second-quarter profit on Wednesday, ended Etisalat’s mobile telecom monopoly in 2007 and both firms have long offered fixed-line broadband, phone and television packages in the UAE, but not in the same districts.

Du had been largely confined to the newer areas of Dubai until the two companies quietly launched nationwide competition in fixed-line consumer services last month, du chief executive Osman Sultan told a conference call.

He estimated du’s share of fixed services revenue was about 15 per cent.

“For the long-term it’s a game changer because it will open up the entire country,” said Sultan.

He said the deal would help du protect its mobile business as customers seek a single provider for telecom services and also boost revenue, but would not necessarily have a big impact on profit because fixed-line was a low margin business.

Du and Etisalat, both part-owned by federal fund Emirates Investment Authority, will limit how many customers can switch provider each month.

Sultan declined to reveal what this limit was, but said it would steadily increase and had been imposed due to capacity constraints.

Customers can change fixed phone line and Internet provider, but television will not be added until 2016, said Sultan.

Du made a net profit of Dhs 502m ($137m) in the three months to June 30, down from Dhs 547.7m in the year-earlier period.

Analysts polled by Reuters on average forecast du’s quarterly profit would be 500.6 million dirhams.

Du has proposed a half-year dividend of Dhs 0.13 per share, up from Dhs 0.12 for the same period of 2014, plus a special dividend of Dhs 0.1 per share, it said.

Its quarterly revenue was Dhs 3.09bn, up 2.2 per cent year-on-year.

Du paid quarterly royalties — or tax — of Dhs 476.4m, versus Dhs 401.2m a year earlier.

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