Du unable to monetise on increased traffic amid lockdown

Dubai: Two and a half months ago, when Johan Dennelind took over as the new chief executive officer of du, the world looked very different. Dubai was prepping to host Expo 2020, and despite some geopolitical challenges, the economic outlook was positive.

Today, Dennelind is facing arguably one of the decade’s biggest economic and social challenges: a global lockdown due to the coronavirus pandemic. And in the midst of that, he is spotting some issues with the business model of telecom operators.

“Generally, we are resilient as an industry. People need our services. But the business model is somewhat revealed now to have its weaknesses,” he told Gulf News in an interview. “One is on the revenue side as we are not able to really monetize on the increased demand for our services – it’s not just us, but lots of companies in our industry.”

As more and more people shifted to working from home amid the pandemic and all students started remote learning, demand for internet services around the world has spiked. But du – and other operators – has not been able to turn that into revenues.

The company on Tuesday reported a 21 per cent decline in its profits for the first quarter of 2020 as the number of mobile subscribers dropped. Revenues also fell by 4.8 per cent year-on-year to Dh2.98 billion, and du said it expects its finances to be “severely impacted for the year,” as a result of the pandemic.

Some experts argued that the internet infrastructure in place is not equipped to handle such a spike in demand. Dennelind said that he believes on the medium and long terms, the infrastructure will be able to handle the rise in traffic. On the short term, however, there may be challenges. He said du is increasing its investments to upgrade its capabilities going forward.

Inefficiency in capital expenditure

Another weakness that has been highlighted by the pandemic is an inefficiency in capital expenditure (Capex). As new CEO, this is an issue Dennelind is planning to address.

“We have invested a lot of Capex in our networks and we have always had additional capacity available versus the actual capacity needed. You could say that is an inefficiency in the Capex because we don’t want to over-invest and have a lot of free space in the network,” he said.

With the transition to remote working, that extra capacity proved essential, the CEO admitted, but it also meant that the company has been “inefficient in our Capex use in the past, and we have to think about that going forward.”

Dennelind believes that the wider roll-out of 5G networks will greatly help as the new technology is more efficient in allocating capacity based on patterns of moving traffic.

“I think 5G has an even more natural place in times when communication is critical and you need stability and security and to be flexible on capacity. 5G has much better characteristics than existing 4G and 3G networks, so we are not holding back on our mission to deploy 5G,” he said.

The CEO said du is doing a gradual roll-out of the network in 2020 and 2021, but as to when 5G will be the predominant network, that will take some more time.