Dubai based telecom group du said it would invest up to around $600 million to boost its network in 2010 after its fourth quarter net profit more than doubled on a surge in mobile users.
The company, owned partly by the ruler of Dubai’s investment company Dubai Holding and Abu Dhabi investment vehicle Mubadala Development Co, said it saw the biggest growth in subscribers during the fourth quarter, which added more than a third of its new customers for the year.
In a statment, Osman Sultan, chief executive, said:”Over the year, we have added a further 1.01 million customers with our total active subscriber base at 3.47 million.”
Thousands of expatriates have lost their jobs in Dubai, the Gulf’s trade and tourism hub, since the global financial crisis took hold, hitting earnings across all sectors. However, du’s results appear to signal a slowdown in the migration.
Du said net profit before provisions for a 50 percent royalty fee on profits rose to $56.90 million from $22.3 million the previous year. The figure smashed the average forecast of $30 million in a Reuters poll of analysts.
Du has made provisions every quarter for a 50 percent royalty fee paid to the government on its profits as it waits for the UAE regulator to decide on the rate. A decision was expected in late 2009 but it did not come.
Sultan said the provisions for the 50 percent royalty fee – the rate du’s competitor’s pay – would continue in 2010 as no decision had yet been made by the government.
After the royalty fee, du’s net profit for the year was $143.75 million compared with $2.17 million in 2008.
“All in all the results were very good. They have attracted more customers than we expected throughout the year,” said Sleiman Aboulhosn, senior investment analyst at Prime Group in Dubai, who forecast $25.86 million in the quarter.
Aboulhosn put the firm’s target share price at 3.37 dirhams a share. Du shares, suspended on Wednesday, closed at $0.78 on Tuesday.
The operator, which broke Emirates Telecommunications Corp’s monopoly in 2007, invested about $653.4 million in building its mobile, broadband and fixed network last year and has an investment programme exceeding $599 million for 2010, CEO Sultam said.
Aboulhosm of Prime Group said: “This is more than we expected.”
He added: “It might hurt their cash flow a little bit but that could be offset by further growth.”
Du has drawn all of a $816.7 million long term loan, which is scheduled to be repaid by June next year.
CEO Sultan told reporters the company was in talks for “lender financing” to raise the $598.96 million for the investment programme. He declined to give further details.
Sultan said the firm would benefit from mobile portability in 2010 as it aims to increase its market share beyond 30 percent.
He said the formalisation of an infrastructure sharing agreement would enable it to expand more aggressively to other emirates beyond its primary market in Dubai.
Sultan said: “We have not slowed our investment because we were in a crisis.”
He added: “On the contrary, this was the time to grow.” (Reuters)
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