UAE telecom growth sees Q4 slowdown - analysts

EFG-Hermes research note says fourth quarter earnings for Etisalat, du likely to be flat.

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By  Soren Billing Published  January 22, 2009

Subscriber growth at UAE telecoms Etisalat and du probably slowed in the fourth quarter, while Saudi Arabia’s Mobily may beat analyst forecasts following a strong Haj season, EFG-Hermes predicts.

“We continue to believe that MENA telecom stocks will perform relatively well over the next few months, as telecommunications remain one of the sectors least affected by the global economic conditions,” analysts Marise Ananian and Nadine Ghobrial wrote in a note to investors.

Fourth quarter earnings at Etisalat are likely to be flat on the quarter, as UAE population and economic growth begins to decelerate. The second largest Arab economy is responsible for 90 percent of the company’s revenue.

Mobile subscribers in the UAE may have risen to 7.3 million at the end of December, implying a market share of 74 percent and a total mobile penetration of 172 percent.

Fixed line subscribers grew to 1.38 million, implying a market share of 84 percent, EFG-Hermes said.

The investment bank is forecasting a 28.2 percent rise in full year net income to 9,351 million dirhams ($2.5 billion) on net revenue that rose 20.7 percent to 25,763 million dirhams ($7 billion).

Rival du is estimated to have had 3.05 million subscribers, of which around 2.3 million were active, by the end of December, implying a market share of around 26 percent.

Revenue is expected to have grown by 8. 6 percent on the quarter, boosted by strong mobile revenue growth.

“We believe that du’s results for the fourth quarter could surprise positively, especially after the extensive offers related to the Haj and new year,” the analysts wrote.

In December, du became the first UAE operator to introduce unified roaming tariffs in the GCC, whereby subscribers pay 1.25 dirhams($0.34) per minute for local and incoming calls.

du may post a net full year loss of 41 million dirhams ($11 million) and a 152 percent rise in revenue to 3,874 million dirhams ($1,055 million), EFG said.

The bank revised estimates for Saudi Arabia’s Mobily upwards following what it believes was a strong Hajj season.

Net profit in the fourth quarter is believed to have risen 24.3 percent to SAR670 million ($179 million) on revenue that grew 9.9 percent on the quarter to SAR3.1 billion ($0.83 billion).

Net income for the year is seen rising 43.8 percent to SAR984 million ($529 million) on revenue that was up 28 percent to SAR10, 800 million ($2,880 million).

EFG Hermes estimates that Mobily added 500,000 new active mobile subscribers during the fourth quarter, resulting in 11.4 million subscribers by the year end.

A 36 percent market share estimate is based on the assumption that Zain Saudi ended 2008 with 1.6 million active subscribers, or a 5 percent market share.

“Media reports have quoted Saad Al- Barrak, Zain Group' s CEO, as saying that Zain Saudi ended the year with 3 million subscribers, which we believe is the closing rather than the active number of subscribers,” the analysts said.

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