Digital services now key for du

Du yesterday reiterated its plans to further expand its managed digital services business, as third-quarter earnings came under pressure from slowing growth for its traditional connectivity services business and increasing roy­alty payments to the federal government.

The telecoms operator, based in Dubai, said its third quarter profit fell 6.7 per cent to Dh457.2 million compared with the same period last year, attributable to an 11.7 per cent rise in royalty payments.

Profits before royalty grew 2.4 per cent to Dh995.1m for the period, thanks to a 2.9 per cent rise in revenues to Dh3.14 billion.

“Our net profit is growing almost by 4 per net year-on-year, it’s a decent result these days,” said the du chief executive Osman Sultan.

“I don’t see our growth of net profit before royalty offsetting this growth of 11.6 per cent.”

Telecoms operators across the world have experienced a slowdown in revenues and profit­ability growth in the face of disruptive OTT service providers such as Skype and WhatsApp, which have eaten into traditional revenue streams.

Faced with such declines, operators are increasingly branching out into the provision of connectivity solutions for enterprise customers, such as cloud computing, Internet of Things, mobile applications and big data services.

“We remain focused on delivering more innovative data solutions for our customers and continue to see data and digital services, as well as managed services, as key areas of growth for our business,” said Mr Sultan in a statement yesterday.

His remarks came following the launch of a digital services division by Etisalat last month, designed to tap a market it believes may be worth up to ­Dh50bn in the UAE during the next five to seven years.

Last month Etisalat announced a 1 per cent decline in Ebitda for its UAE operations in the third quarter, which it attributed to higher interconnection costs, staff costs and other general and administrative expenses.

“Both Etisalat and du are putting increasing efforts into developing new digital services in sectors such as smart cities, the smart home, e-commerce, the Internet of Things, and enterprise ICT,” said Matthew Reed, a Dubai-based analyst with consultancy Ovum.

“Many of these efforts are quite experimental at this stage, but the pressure will grow to identify those that have the best prospects and develop them further.”

Du’s mobile revenues grew 2.7 per cent to Dh2.22bn over the period, even as mobile data revenue slipped 0.6 per cent to Dh737.3m.

Fixed-line revenues increased 3.7 per cent to Dh681.1 mn.

Du shares have risen 19.2 per cent for the year to date, versus a gain of 5.7 per cent for the Dubai Financial Market General Index.

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John Everington

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