Etisalat, the Gulf's No.1 telecom operator, reported an 18 percent drop in third-quarter profit on Monday, missing analysts' estimates as capital spending and operating expenses each rose by about a third.
The UAE former monopoly, which operates in about 15 countries across the Middle East, Africa and Asiaand is in exclusive talks to buy a controlling stake in Maroc Telecom , made a net profit of AED1.83bn ($498.23 million) in the three months to Sept. 30, according to a statement to Abu Dhabi's bourse.
This compares with a profit of AED2.21bn a year earlier.
Analysts polled by Reuters on average forecast Etisalat would make a quarterly profit of AED1.96bn.
Third-quarter revenue was AED9.59bn, up from AED8.01bn year earlier.
Etisalat said the revenue rise "was primarily due to customer acquisition, an increase in the revenues of data and handset sales".
Unlike markets in Europe and North America, Middle East consumers typically buy unlocked handsets and separately choose a mobile operator.
But slowing subscriber growth has led regional operators to increasingly sell handsets directly to persuade customers to sign up to monthly contracts. These so-called post-paid customers usually spend more on telecom services and are less likely to switch provider.
Handset sales offer little profit for operators and may help explain how Etisalat's third-quarter net profit margin fell to 19 percent, from 28 percent a year ago.
Quarterly operating expenses rose 32 percent to AED6.09bn. This was largely due to a 47 percent jump in sales costs to AED2.15bn, while staff costs and depreciation also increased.
The UAE accounted for AED6.17bn, or 64 percent, of Etisalat's third-quarter revenue.
The remaining revenue came from its international units, which rose 41 percent to AED3.4bn, partly due to the consolidation of its affiliate Pakistan Telecommunication Co (PTCL).
Revenue from Egyptian unit Etisalat Misr fell 14 percent to AED1.12bn, a drop Etisalat blamed on foreign exchange losses.
Consolidated capital expenditure rose 39 percent in the third quarter to AED1.3bn, compared with the year-earlier period, Etisalat said.
In Africa, Etisalat's earnings before interest, tax, depreciation and amortisation (EBITDA), a key industry metric, fell 38 percent due to what Etisalat described as new call taxes and increased marketing spending.
Etisalat had a net cash balance of AED5.83bn as of Sept. 30, down from AED8.13bn at 2012-end.For all the latest tech news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
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