UAE’s du Sees Q4 Profit Jump On Tax Write Back

Telecom operator du’s quarterly profit more than doubled as it wrote back tax provisions and saw an increase in its subscriber base, the United Arab Emirates’ No. 2 telco said on Tuesday.

The firm, which ended rival Etisalat’s domestic monopoly in 2007, made a fourth-quarter net profit of Dhs994 million ($270.62 million)in the three months to Dec. 31, up from Dhs440 million in the year-earlier period.

Analysts had forecast average profit of Dhs809.7 million, in a Reuters poll.

Fourth-quarter revenue was Dhs2.74 billion. This compares to Dhs2.4 billion a year ago.

UAE telecom operators are taxed via royalties under license agreements with the federal government. The latter announced a new formula in December that includes a levy on revenues as well as profits.

Du had provisioned to pay 50 per cent of its profit in royalty fees through the year, the same rate as the longer-established Etisalat.

But the new formula means it pays less tax as a percentage of profit than 2011, enabling it to write back some of the provisions it set aside in the first nine months of 2012.

Du paid Dhs844 million in royalty fees for 2012, while pre-royalty net profit was Dhs2.82 billion, which is equivalent to a tax rate of about 30 per cent.

This compares with 2011’s royalty of Dhs715 million and pre-royalty net profit of Dhs1.81 billion, which equates to a tax rate of 39.5 per cent.

Du has proposed a cash dividend of 30 fils per share.

The operator’s share of the UAE mobile subscribers increased slightly to 48.7 per cent, while average revenue per user – a key industry metric – rose to Dhs117 in the quarter from Dhs110 in the third quarter.

The company has sought to sign up more mobile customers to monthly, or post-paid, contracts, with these customers typically spending more and being less likely to switch provider. Post-paid subscribers accounted for 25.35 per cent of du’s fourth-quarter mobile revenue of Dhs2.18 billion, and 7.9 per cent of mobile subscribers.

Since December, du has secured a $500-million, five-year club debt facility to fund its medium-term capital expenditure, a $100-million loan from Singapore’s DBS Bank and another $100 million financing deal with Standard Chartered . The money will be used largely for capital expenditure, du said at the time.