By Roger Field
Second operator gains 156,000 subscribers as Etisalat’s subscriber base falls
Du, the UAE’s second telecom operator, announced record results for Q209, with net profits reaching AED115 million, more than double the AED47 million achieved in the previous quarter.
The company added 155,900 active mobile subscribers during the quarter giving it a total mobile subscriber base of 2.9 million users, up from 1.8 million in the same period in 2008.
The additional subscribers helped boost the company’s revenues by 12.4% to AED1,310.1 million in the second quarter, up from AED1,165.8 million in the first quarter.
The company, which now commands a 30% share of the market, is targeting a 35% market share by 2010
Osman Sultan, CEO, Du, said that the results proved the “momentum of growth” was continuing. “We crossed the AED100 million bar for the first time with our net profit of AED115 million before royalty, which is more than double the first quarter and is nothing to compare to Q208 where we were at loss of AED44 million.”
Du’s results contrasted with the performance of rival operator Etisalat, which lost more than 80,000 customers in the same period. Etisalat reported a profit of AED2.14 billion in Q2 and said it had a total of 7.26 million subscribers at the end of the period, a significant drop from Q109.
However, while Sultan stressed that Du has been reporting its active subscriber base, defined as subscribers who have used services in the past three month, Etisalat has yet to follow suit, making direct subscriber comparisons difficult.
“We are comfortable on mentioning the addition [of subscribers] because for three quarters now we make a point of really indicating the net active subscriber additions, so for us any clean up you might have in your subscriber base because of a lack of activity has always been considered,” Sultan said.
For Sultan, the results represent a vindication of Du’s strategy, which has seen the company attempting to woo more high value post-paid customers. The company added 17,000 post-paid customers in the second quarter, and while post-paid customers still represent a small proportion of Du’s overall mobile customer base at 3%, the results are encouraging.
Indeed, Sultan attributed some of the strong financials to the company’s post paid packages, including the Elite plan, which was launched in April with incentives including 55 national minutes, 55 SMS and 5 MB of data for an upfront fee of AED125 and a monthly fee of AED25.
“The good news is that not only are we adding subscribers but all subscribers are also using our services. Total revenues for the quarter ramped to almost AED1.3 billion, the highest in the third quarter in the history of this company.
“It is clearly the Elite plan that is driving this. At the launch of Elite we said we needed to target more [high value subscribers]. The more the time goes on we need to build the value and we are going after the post paid. The good news is that it is working.”
This is a clear break from the company’s launch strategy, when it concentrated on building up a large base of pre-paid subscribers, including low-ARPU users such as construction labourers.
Sultan said he was unsure whether the additional subscribers were gained through churn from Etisalat or were newcomers to the UAE, although he conceded that churn could also result in Du losing some subscribers to its rival.
“We always have the lion’s share with visitors or new people coming in the UAE, so I think that is continuing. Whether there is churn – there might be but churn is something that can work both ways. We know that and we are very humble on that,” he said.
Ahmed Bin Byat, chairman, Du, said that having already reached its target of 30% market share one year ahead of schedule, the company is now working towards capturing 35% of the market in 2010. However, he conceded that the company “expect to be operating in challenging times for the next one or two quarters.”
While the Q2 results represented a strong showing after the more sluggish growth in the first two months of the year, Sultan insists that the company remains cautious amid tough economic conditions.
“We are operating in a challenging global economic environment but this is the case since the beginning of the year. This is something that happened in the last quarter of 2008, and it is all over the world. We are being careful, and we want to continue being a growth story.
“I believe 2009 growth will be very good over 2008. But we are still very cautious on expenses. We want to grow but we don’t want to grow at the expense of the value created for our shareholders. We want to grow generating profit.”
To this end, the company also managed to make efficiency saving in the second quarter. Total overheads increased slightly to AED620.9 million in the quarter, compared with AED616.6 million in the previous period. However, the percentage of costs to revenue fell from 53% to 47% in Q2, which the company attributed to a “focus on cost controls and driving efficiencies.”