Etisalat bumps up salaries 10%

Etisalat said on Tuesday it would raise employee wages by 10% next month to help retain and recruit staff in an increasingly competitive market.

Etisalat, which lost its UAE mobile phone monopoly to Du this year, did not say how much the scheme, effective November 1 and applying to all of its around 9,000 employees in the UAE, would cost.

Higher staff costs would place a further strain on Etisalat's margins, already under pressure from expansion costs, said Wael Ziada, a telecom analyst with EFG-Hermes investment bank.

The board approved the pay increase at a meeting on Monday, Etisalat said in a statement, adding it would also improve employee benefit packages, such as accommodation and education allowances.

The average total increase in an employee's salary and benefit package would be 25%, Etisalat said."These revised benefits and salaries are designed to provide well-deserved rewards to company employees, but also to allow Etisalat to maintain its leading position in this highly competitive field," Etisalat Chairman Mohammed Omran said in the statement.

Ahmed Bin Ali, Etisalat's vice-president of corporate communications, was not immediately available for comment on his mobile phone.

Analysts said the move as partially to respond to inflation, which is surging across the Gulf Arab region as economies boom on a quadrupling of oil prices since 2002, placing pressure on employers to raise wages.

In the UAE, annual inflation surged to a 19-year high of 9.3% last year - a level Standard Chartered Bank expects will be repeated this year, mainly driven by higher rents.

"The rate of inflation and low interest rates make pay increases a necessary step to retain employees," said Walaa Hazem, a telecom analyst at HC Securities investment bank in Cairo.

The UAE pegs its dirham currency to the sliding US dollar, and last month partially matched a US Federal Reserve interest rate hike.

Strained margins

Like other Gulf Arab telecom operators, Etisalat has been hunting for foreign assets to counter competition in its home market, where mobile penetration rates exceed 125%.

Staff costs probably account for between 20% and 30% of Etisalat's total costs, according to Ziada, of EFG-Hermes. Etisalat does not disclose breakdowns of its costs.

"This is going to place further pressure on margins that are falling on a quarter over quarter basis," Ziada said, estimating the margin on earnings before interest tax depreciation and amortisation (EBITDA) could fall between 3% and 5% in the fourth quarter.

Etisalat started Egypt's third mobile phone firm in May, and runs networks through affiliates in Saudi Arabia, Pakistan and Afghanistan.

In Africa, Etisalat operates in seven countries through its Atlantique Telecom unit. This week it took over Zanzibar Telecom in Tanzania, and bought 40% of a new Nigerian operator last month.

The company's net profit rose 14% in the third quarter, missing analysts forecasts. - Reuters