Dubai's du tries to maintain optimism amidst plunging profits
Shares of du fell 5.63 per cent after the company witnessed a 42.65 per cent plunge in fourth-quarter net profit to Dh570 million after a royalty, compared to Dh994 million during the same period last year.
Du needs to pay 7.5 per cent of revenues and 20 per cent of net profit as royalty fees to the UAE Federal Government in 2013 compared to five per cent of revenues and 17.5 per cent of net profit.
Revenues for the quarter increased by 8.3 per cent year on year to Dh2.74 billion, up from Dh2.65 billion in third quarter of last year.
“The company has been recording high growth in the last three years and we are still in the high rates of growth,” said Osman Sultan, Chief Executive Officer of du.
Demand for connectivity
Customers’ demand for connectivity remained strong. The demand translated into significant growth in mobile data revenue, which increased by 33.8 per cent, from Dh1.77 billion in 2012 to Dh2.36 billion. As was the case last year, data now represents a larger percentage of mobile service revenues at 27.7 per cent up from 22.6 per cent in 2012.
He said the industry is continuing in the journey of moving from voice centric to a position in the market of being more and more data centric. “The voice revenues will flatten, it is flattening, but it is fuelled by data,” he said.
The company has added 348,300 net active mobile customers during the fourth quarter, bringing the total mobile customer base to 7.24 million.
“Reorganisation of its business and the higher royalty fees have made a dent in their fourth-quarter profit. The regulatory charges are increasing for du compared to last year,” Bhanu Chaddha, senior telecom analyst at research firm International Data Corporation.
He said the regulatory charges will be the same for both the operators in 2016.
“Growth in mobile data was phenomenal and everything is moving to data. Mobile data will remain a cash cow for the operators in the future,” he said.
“Mobile data is the trend going forward and name of the game. The investment in 4G LTE is continuing and we are accelerating our investment compared to our initial plan. With Smart Government and Smart City initiatives, ICT will certainly play a key role through Vision 2021,” Sultan said.
Mobile revenue for the full year reached Dh8.37 billion, a 9.6 per cent increase year-on-year while mobile data revenues increased by 33.8 per cent, from Dh1.77 billion in 2012 to Dh2.36 billion, with data now representing 27.7 per cent of mobile service revenues, up from 22.6 per cent in 2012.
“Yes we know that our SMS and voice revenues are falling but a lot is happening in the ecosystem. I believe that lot of content will be there to stimulate the data usage,” he said when asked about falling SMS revenue due to WhatsApp and Facebook Messenger.
There is an “overall transformation” taking place in the telecom sector.
Sultan said that du will be investing around Dh1.6 billion on infrastructure investment this year.
Du shares closed 5.63 per cent down at Dh6.20 on Dubai stock exchange.