UAE telco du sees profit more than double in Q4

UAE telecommunications provider du more than doubled its profit after royalties during the fourth quarter to US$270m, compared to the same period in 2011, according to the company.

The figure topped off a record year for annual revenues and profit, with du recording a net profit after royalties of US$540m, up from US$300m in 2011.

The company’s revenue increased 14.7 percent to US$2.77bn during the year, while net profit before royalties grew 55.8 percent to US$768m year-on-year.

The telco said it attracted more than 1.2m new customers in 2012, including nearly 500,000 in the fourth quarter, taking its market share to an estimated 48.7 percent, up from about 47 percent. The company competes with larger rival Etisalat in the UAE's fixed line, internet and mobile telecommunications markets.

The increase in net profit during the fourth quarter was partially due to the company writing back tax provisions.

The federal government’s new royalties formula introduced in December includes a levy worth 5 percent of revenues as well as 17.5 percent of profit.

Du had provisioned to pay 50 percent of its profit in royalty fees through the year but the new formula meant it paid less tax as a percentage of profit than in 2011, enabling it to write back some of the provisions it set aside in the first nine months of 2012.

Across the year, du paid nearly US$230m in royalties – about one-third of its profit before royalties.

There had been concerns late last year that du, which unlike the Gulf country’s other telecommunications provider Etisalat does not have any sources of international revenue, would see its earnings suffer as a result of the government raising the percentage of royalty fees it must pay.

The profit comes despite du restructuring operations and outsourcing jobs in a bid to further boost earnings.

Roles in some call centres were outsourced to du’s IT department at the start of the year and CEO Osman Sultan said the restructuring strategy would continue into 2014.

“Optimising operational efficiencies remained a key strategic driver in 2012, with efficiency improvements focused largely on network and IT outsourcing to optimise resources, streamline operations and ultimately deliver an enhanced service experience to our customers,” Sultan said.

“We also took a more granular approach to market segmentation to identify and meet the differing needs of our customers, successfully launching a number of market-leading propositions to address the diverse value and service capability requirements of our prepaid, postpaid and enterprise customers.

“2012 was a year that saw us consolidating the achievements of the previous five years and implementing a strategy to ensure our company’s continued success.”

Sultan said the company received US$700m in finance during 2012, allowing it to invest US$468m in the network and IT.

“These loan facilities will provide us with the resource and financial flexibility to meet short and medium-term capital expenditure requirements,” Sultan said.

Du chairman Ahmad Bin Byat said the company’s performance had come despite challenges, while the increase royalty levies would continue to made it more difficult to record a profit.

“Globally, the sector is experiencing increasing pressure on core revenues,” he said.  “Competition has intensified and become more complex.”