du's profit slides 16% on royalties increase

Full year profit declined 16 percent as royalties to the government increased
du's profit slides 16% on royalties increase
Net income declined to AED1.01bn (pictured: Osman Sultan, CEO)
By Claire Ferris-Lay
Tue 06 Mar 2012 10:34 AM

UAE telecoms operator du said its full year profit declined 16 percent as royalties to the government increased.

The Dubai-based firm, also known as Emirates Integrated Telecommunications Co, said net income declined to AED1.01bn (US$275m) from AED1.31bn a year earlier. That profit figure was affected by a one-off AED268m charge relating to a change in estimate for 2009 royalty payments.

Last year, royalty payments increased to AED714.6m from AED184m, the company said in a statement Tuesday.

The telco's board proposed a dividend of AED0.15 for last year. “Our strong financial performance during 2011 has led to the recommendation by the board of directors to propose our first cash dividend to share holders of 15 fils per share,” Ahmad Bin Byat, chairman of du, said in a statement.

“We believe this dividend proposal is an important step forward in shareholder value creation and sets the right basis for future dividend growth,” he added.

“Overall, revenue is up yet headline net profits have gone down but that was expected as the full royalty payment was accounted for, against a royalty of just 15 percent in 2010,” said Irfan Ellam, head of equity research at Emirates NBD.

“There are still positives for the company; it’s a nice single market cash generator, with potential for further growth when bitstream sharing and mobile number portability are introduced. [It has no] exposure to any other emerging markets [and is] without any currency risks. One of the most interesting pieces of news is that du will now start to pay a dividend,” Ellam added.

The operator, which has a 46 percent of the UAE mobile market, said five million people use its services. The company first launched its services in 2007 and first paid royalties in 2010.

Etisalat, which operates in 17 countries, usually pays 50 percent of its net profit in royalties, including money earned abroad.

UAE royalty rates are among the highest regionally. Operators such as Qatar Telecom, Oman Telecommunications, STC and Kuwait's Zain pay between 5 and 22 percent tax, according to their earnings statements.

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