Bright outlook for du as subscribers sign up

Increasing competition in the UAE market bodes well for the telecommunications company du, which is expected to report positive financial resultstomorrow.

Du has succeeded in attracting thousands of mobile customers from its rival Etisalat, which has reported a decline in net profit over the past two quarters.

Shares in du edged up 1.58 per cent to Dh3.22 yesterday after JPMorgan said in a research note it expected "healthy growth" in du's second-quarter results.

Du is forecast to report net income of Dh215 million for the second quarter, a 56 per cent increase on the same period last year. Revenues are forecast to grow at 26 per cent over the same period, JPMorgan said.

That is slightly above the growth expectation forecast by Martin Mabbutt, a telecoms analyst at Nomura. "We think it's a pretty positive picture for du," Mr Mabbutt said. "Etisalat is clearly showing quite a few signs of pressure in the domestic market.

"We're looking for something like 24 per cent revenue growth for the second quarter." Du more than doubled its first-quarter profit compared with the corresponding period last year, as it rose 112 per cent to Dh205.8m.

The rise was partly on the back of subscriber gains. Du added 272,000 active mobile subscribers in the first three months of the year, bringing the total to 4,604,800, a market share of more than 40 per cent.

Du pays a royalty fee to the Government, for which the company provisions 50 per cent of net profits. While the royalty fee was just 15 per cent last year, analysts said the uncertainty over the level of the payment this year could be troubling for investors.

"The royalty is the big issue on valuation," Mr Mabbutt said. "Without that, it's a hard one for investors to make a decision about."

Mr Mabbutt forecasts a 20 per cent increase in revenue for du this year. He expects that to be followed by a "significant slowdown" in growth, which is forecast at 9 per cent next year and 5 per cent in 2013.

bflanagan@thenational.ae