Du and Etisalat go head to head for fixed-line customers

Competition between du and Etisalat for fixed-line customers began last month, said du’s chief executive on Wednesday.

According to Osman Sultan, du started offering home services, including internet and phone, outside its usual areas of operation in mid-July. TV services will not be offered until next year.

“It is certainly in the long term going to be a game changer, because it will open for us the geography of the entire country … It will help us have a greater share of the pie when it comes to fixed services and TV, and home services,” said Mr Sultan.

Du’s share of the fixed-line market is currently about 15 per cent, he said.

Currently both du and its rival Etisalat are confined to specific locations for home services.

Mr Sultan explained that the current phase of fixed-line competition between two companies is only a “controlled or a soft launch” – meaning it is only available to a limited number of customers across the UAE.

Mr Sultan added that the opening up of competition would be likely to help du retain mobile customers, who typically prefer to have a single telecoms provider, but it would not necessarily help profits, as the fixed-line business does not generate high margins.

Fixed revenue for du increased 20.2 per cent in the second quarter to Dh649.8 million versus Dh540.7m a year ago, the company reported on Wednesday.

Du’s net profit for the quarter after royalty fees, or tax given to the government, was down 8.3 per cent, the company said. Net profit was at Dh502m for the quarter after an 18.8 per cent year-on-year increase in royalty payments to the government. Net profit before royalty fees rose 3.1 per cent during the period to Dh978.5m.

“The results were marginally higher than our estimate of Dh489m,” said Nishit Lakhotia, the head of research at Bahrain-based Sico investment bank.

Du’s revenues grew 2.2 per cent to Dh3.09 billion per cent against Dh3.02bn in the second quarter a year ago.

Du proposed 13 fils per share as an interim dividend, up from 12 fils per share in the same period a year ago. The company also plans a special dividend of 10 fils per share.

“The dividend is definitely positive,” said Mr Lakhotia. “It makes the stock look much more attractive on the yield basis. It is a positive move, as the management stated earlier that they want to increase the dividend distribution as much as they can every year. They are in line with their strategy.”

Du’s average revenue per user (Arpu) – a key industry indicator – declined to Dh92.6 in the second quarter. Arpu was at Dh96.8 in the same quarter a year ago.

Mr Sultan said that demand for data continued to grow in the second quarter “as the world we operate in becomes ever more connected” helping mobile data revenue reach Dh719.3m, representing 31.1 per cent of overall mobile service revenues, up from 29.4 per cent in the same period a year ago.

Du shares closed 1.69 per cent upon Wednesday at Dh5.4.


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