Du posts $1.22 million profit in 2008

UAE’s second operator beats analysts’ expectations to make its first full year profit.

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By  Roger Field Published  February 9, 2009

Dubai telecom firm du earned 78 million dirhams ($21.24 million) in the fourth quarter as the firm recorded its first full-year profit on rising mobile phone subscribers in the second-largest Arab economy.

Du, which ended the virtual monopoly of Emirates Telecommunications Corp (Etisalat) in 2007, posted 2008 net profit of 4.12 million dirhams compared with a net loss of 885.27 million dirhams in a year earlier.

"Mobile activity is growing significantly," du Chief Executive Osman Sultan said of the profit rise.

"We are getting more subscribers but we are also getting more active subscribers and more revenue," he told Reuters.

Fourth-quarter revenue rose to 1.23 billion dirhams, nearly double revenues from the same period last year, the company said in a statement on Monday.

Du's mobile phone subscriptions doubled compared with last year, with the number of its active mobile phone subscribers reaching 2.5 million, the firm said.

Fixed-line subscribers advanced 72 percent year-on-year to to 280,000 active subscribers.

Etisalat and du together had around 9.1 million active subscribers at the end of September 2008 in the UAE, indicating penetration of more than 180 percent for a population of 5.1 million people, EFG-Hermes said in December.

As the number of customers increases, average revenue per user (ARPU) tends to decline, Sultan said.

"When you get more subscribers, you also get more subscribers that have less purchasing power ... but this natural erosion of ARPU is under control and is moving according to plan," he said.

Sultan said du was sticking to its plan to invest up to 2 billion dirhams in 2009 to strengthen its telecommunications infrastructure.

He declined to give an earnings outlook for 2009, but said du would remain profitable despite the global economic downturn.

Two analysts in a Reuters survey in December had forecast du's fourth-quarter net profit at 45.22 million dirhams and 83.03 million dirhams.

Du made a loss of 146.65 million dirhams in the fourth quarter of 2007 and a loss of 74.03 million dirhams in the first nine months of 2008.

The firm turned its first profit in the third quarter of 2008, a year ahead of plan, posting a profit of 31.47 million dirhams due to growth in subscriber numbers and a one-time gain.

Du's market share in the UAE market was around 30 percent, Sultan said, adding that the firm was not looking at expanding outside of the UAE as Etisalat has done.

Shares in du lost 70 percent in the last year to Sunday's close, underperforming Etisalat, whose shares lost only around half their value.

At 12.25 UAE time, shares in du  were down 1.63 percent lower at 1.82 dirhams per share. SICO investment bank started coverage of du last month with a price target of 2.66 dirhams. (Reuters)

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