Dubai

Dubai-based telecom operator du reported a flat second-quarter profit after witnessing a slump for the past two years due to the percentage change in royalty structure.

It paid a little more than 55 per cent of its net profit as royalty fees in 2016.

The operator reported a net profit of Dh447 million compared to D445 million during the same period a year ago due to growth in fixed line business.

Osman Sultan, Chief Executive Officer of du and Emirates Integrated Telecommunications Company PJSC, said that du has been reporting strong profits for the last two years but the decrease was due to the royalty fees paid to the UAE Federal Government.

He said that the second quarter has been a good quarter compared to the first quarter, although “we had Ramadan which is a quiet period”.

The telecom operator reported a 24 per cent fall in first-quarter profit.

Sultan said fixed line revenues grew 9.3 per cent to Dh707 million compared to Dh647 million. In the market today, fixed line is more the driver of growth than the mobile revenue, which grew 5.2 per cent to Dh2.3 billion.

“The main challenge we are facing is on the pre-paid market. That segment, by nature, is more volatile and it depends on the macroeconomic dynamics. It was also further impacted by ‘My Number My Identity’ campaigns,” he said.

Sukhdev Singh, vice-president at market research and analysis services provider AMRB, said that the economic pressure in the region is expected to continue for the remainder of 2017, and it will have an impact on the bottom line of telecos. The third quarter, in particular, is usually difficult for mobile revenues due to summer vacation for telecos.

“So, one expects business pressure to continue into the third quarter. Given higher and reliable data speeds, more consumers look for online callings and other OTT (over the top) solutions, which adds to the pressure on voice margins,” he said.

Du’s mobile customer base increased 1.5 per cent during the quarter to 8.2 million customers, up from 8.1 million in second quarter of last year.

Sultan attributed the growth in mobile subscribers largely due to its strategy of focusing increasingly on attracting and retaining higher quality customers, with solid growth in postpaid customer additions.

The operator’s total revenues increased by 6.2 per cent to Dh3.26 billion compared to Dh3.06 billion a year earlier.

Despite a steady performance during the quarter and the first half of the year, Sultan said that EITC continues to be impacted by challenging market conditions, with pressure on mobile rates and data monetisation.

The operator announced its plans to distribute Dh589.3 million of interim dividends to its shareholders for the first half of 2017 at 13 fils per share, subject to approval at the general meeting in September 2017.