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Royalty burden on operators may be cut
etisalat may no longer be obligated to pay half its profits to the state under discussions taking place at the highest levels of government.
- By Ivan Gale, Staff Reporter
- Published: 00:00 May 18, 2007
Dubai: etisalat may no longer be obligated to pay half its profits to the state under discussions taking place at the highest levels of government.
Both etisalat and du shares were buoyed this week amid speculation of the change, which centres around the royalty fees that etisalat has traditionally paid in exchange for its monopoly status.
Now that the entry of telecom newcomer du has broken the monopoly, the UAE Supreme Committee for the Supervision of the Telecommunications Sector has taken up the issue, according to a top government official.
Mohammad Al Ganem, director general of the Telecommunications Regulatory Authority (TRA), said, "The royalty programme is being decided by the Supreme Committee. The issue is still pending."
Victor Font, a telecom analyst with Delta Partners, said the discussions are likely the result of efforts to put UAE telecom policies in line with global norms. "This is probably a matter of making conditions more standard for all players. In fully open markets, the revenue share with the government does not happen."
Performance
Earlier this week, etisalat shares recorded a one-day gain of 3.5 per cent on talk of the fee cut.
In 2006 the telecom operator recorded net profits of Dh5.86 billion, meaning it would have paid nearly Dh3 billion directly to the government. du may also benefit from the committee's decision, as it also pays royalty fees.
Nabeel Farhat, managing director of Al Fajr securities in Abu Dhabi, said the market is speculating that the royalty fees might be cut 10 to 20 per cent.
du CEO Osman Sultan said yesterday he looks forward to any relief in its royalty obligations. "We will welcome any decision the authorities make," he said.
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