Dubai: du, the UAE's second largest telecommunications provider, is now "playing in the same playground" as rival etisalat in terms of local market share, the company's chief executive said Wednesday.
The telco, formally known as Emirates Integrated Telecommunications Company, added 171,100 new subscribers in the second quarter, taking the total number to 4,775,900 and further eroding the dominance of former monopoly etisalat.
Othman Sultan, du's CEO, says the company now accounts for almost 44 per cent of the UAE's mobile market share, up from 41.6 per cent in the first quarter. Last month, etisalat said it had 7.5 million mobile subscribers without giving comparative figures for the prior year period.
"Our market share is 43.6 per cent to be precise and in terms of pre-paid customers we are close to full parity with etisalat," said Sultan.
"We do not need to see exactly 50 per cent market share to be considered in the same playground. It is not my priority, however, to see an increase in market share; I am more interested in growth and revenues," he added.
Healthy balance sheet
du posted a second quarter net profit of Dh207.2 million Wednesday after provisioning for a royalty fee to the government, up from Dh137.4 million a year earlier, the company said in a statement to Dubai's bourse. Profit before royalty was Dh414.4 million, up from Dh274.8 million in 2010.
Revenue increased by 28 per cent year-on-year to Dh2.1 billion from Dh1.7 billion. Taking royalty provisioning into account, half year net profit was Dh413 million, up from Dh234.5 million in the year-ago period whilst revenues in the first six months of 2011 hit Dh4.2 billion against Dh3.3 billion the previous year.
du's mobile data revenues gained 74 per cent in the second quarter and the company also saw a 25 per cent increase in its fixed line customer base, adding 41,200 lines in the second quarter.
"Mobile data now accounts for a little bit more than nine per cent of total revenues and we are hoping that [figure] will reach ten per cent by the end of the year as the growth in data will be phenomenal. Our balance sheet is more healthy after the first half of the year than it was at the end of 2010," Sultan added.
Shares in du slipped 0.31 per cent to Dh3.18 on the Dubai Financial Market yesterday. Last month, etisalat, the UAE's largest telco by market value, posted a second quarter net profit of Dh1.59 billion, a 14.9 per cent drop from the Dh1.87 billion it registered in the year-before period amid higher operating costs and increased competition from du.
"There was little change in du's quarter-on-quarter net profit but that is partly to do with seasonal factors. The first quarter tends to be much busier in the UAE with more visitors leading to greater roaming revenues," said Matthew Reed, senior analyst at Informa Telecoms and Media.
According to Reed, du faces increased competition from etisalat in the next quarter as the UAE's largest telco has managed to stem subscription losses.
"Overall, du's results are pretty positive. However, it will be interesting to see how du responds to last week's announcement from etisalat that it has scrapped the annual renewal fee for pre-paid subscribers," Reed said.
"du has traditionally been strong in attracting pre-paid customers. However, there is no doubt it also wants to compete with etisalat over post-paid subscribers, which is the higher end of the market and tends to include customers spending the most money," he added.
During the second quarter, du secured a three-year club financing deal worth $220 million (Dh808 million) to help repay an existing Dh3 billion syndicated loan. The telco said the loan enabled the company to roll out its network infrastructure at a faster pace whilst helping it to put in place increased capacity.
"This is the third consecutive quarter we have seen positive cash flow in the company," Sultan said. At the end of the second quarter, we reimbursed the repayment of Dh3 billion, mostly from our own reserves but also from a $220 million club financing deal through a consortium of banks, which is a major indication of our healthy funding strategy."
UAE's top spender
du is now the top spending brand in the UAE, according to data released by the Pan Arab Research Centre (Parc).
The telco ranked above its competitor etisalat, which was in second place, as well as global heavyweights Carrefour, Sony and McDonald's during the period from January to June 2011.
"du overtook etisalat in measured advertising expenditure in the UAE in the second half of 2009 and has been maintaining a lead over its close competitor since then. In fact, du is now the top spending brand in the UAE," said Shaharyar Umar, an analyst at Parc.
Umar also said the UAE has a mobile penetration of 97.1 per cent among a survey of more than 60 global markets.
"The average household has 3.5 mobiles, or an average of 10 households has 35 mobiles, with internet penetration around 74 per cent," he said.
