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Tue 1 Nov 2016 02:06 PM

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Dubai's du expects to maintain dividends despite profit drop

Chief exec Osman Sultan says company remains 'healthy' despite fall in earnings for eighth successive quarter

Dubai's du expects to maintain dividends despite profit drop
(ITP Images)

Du, the United Arab Emirates' second biggest telecoms network operator, does not expect a fall in its net profit this year caused by higher taxes to affect its ability to pay a dividend, its chief executive said on Tuesday.

Osman Sultan's comments came after the company reported a 6.6 percent fall in third-quarter net profit to 457.2 million dirhams ($124.5 million), a fall in earnings for the eighth successive quarter.

"The situation in terms of cash in the company is healthy and can sustain the dividend," Sultan said on a conference call with reporters.

Du, which ended rival Etisalat's domestic monopoly in 2007, raised its 2015 dividend to 0.43 dirhams per share. The firm's half-year payout for 2016, announced in July, was maintained at 0.13 dirhams but did not include a 0.1 dirham special dividend which was paid last year.

When asked for further clarity, Sultan said in an email to Reuters, "The dividend policy is ultimately a decision for the board, who will continue to take into consideration current and expected business performance and future growth plans in their review."

Sultan said the payouts would be sustained even though its full-year profit growth was unlikely to offset an increase in royalty payments due to the UAE government. Du made a net profit last year of 1.94 billion dirhams.

Results have been under pressure since late 2014, with the pace of growth in the mobile market unable to keep up with the rise in the rate of royalties paid to the government, which have increased steadily since 2012.

For 2016 du will pay 15 percent of its regulated service revenues, which excludes phone sales, and 30 percent of its profits from regulated services, in royalties. These tax rates are up from 12.5 and 30 percent respectively in 2015.

The royalty payment in the third quarter was 537.9 million dirhams, up from 481.9 million dirhams in the prior-year period. Revenues were up 2.9 percent at 3.14 billion dirhams.

A campaign to remove unregistered SIM cards by the UAE government also continues to affect the company's subscriber base, Sultan said, adding that though a decline in prepaid subscribers was not getting worse, pressure on that segment would continue.

"We are seeing a kind of stagnation in the decline," he said.

Prepaid, or pay-as-you-go, connections are more widely used by low-income workers, who have been hit by reduced state spending across the Gulf in the wake of lower oil prices, particularly on construction projects.

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