Investment bank sees solid revenue growth and margin expansion for du in next several years
Shuaa Capital started UAE's No 2
telecoms provider du with a "buy" rating and said it
sees solid revenue growth and margin expansion for the company
in next several years.
"Du is a top pick in our Middle East and North Africa (MENA)
telecom universe," Shuaa analyst Simon Simonian, who set a fair
value of AED4.03 on the stock, wrote in a note to clients.
Du, which is the second largest provider of telecoms
services in the UAE after Emirates Telecommunications Corp
(Etisalat), has plans to expand its fixed-line
operations across the country, putting more pressure on its
"The UAE telecom sector should remain a duopoly for the
foreseeable future, with the regulator recently reiterating no
plans for a third operator," Simonian wrote.
Du - partly owned by the ruler of Dubai's investment company
Dubai Holding and Abu Dhabi-owned investment vehicle Mubadala -
also has plans to boost its share in a market that boasts one of
the world's highest mobile penetration.
Simonian estimates du's share of UAE active mobile
subscribers reached 38 percent in 2010.
Dubai-based du broke Etisalat's monopoly in 2007 and has
been rapidly gaining ground on its larger rival, prompting
Etisalat to seek acquisitions to expand.
Earlier this month, du reported a fourth-quarter profit that
doubled, before a royalty of AED431m, on a 34
percent rise in revenue.
Shuaa's Simonian said mobile data contribution more than
doubled year over year in the fourth quarter and he sees further
average revenue per user (ARPU) growth as du continues to
attract higher spending post-paid, smartphone and data
"Implementation of mobile number portability as of the
second quarter could present an opportunity to solicit
Etisalat's high value customers," Simonian added.