Shares in Etisalat jumped yesterday after the company said it planned to pay a dividend for last year, allaying investor fears over the company's disappointing annual profit.
The UAE telecommunications company proposed a dividend of 60 fils per share for last year - the same level as 2010 - and recommended a restructuring of operations to reduce costs.
Shareholders reacted positively to the news, which came after the disclosure on February 9 that Etisalat's net profit fell by 24 per cent to Dh5.8 billion (US$1.57bn) because of write-downs related to company's troubled affiliate in India.
"People were scared about the news from India, and they thought Etisalat would not give a dividend for 2011," said Mowafak Alerksousi, a senior trader at the financial services group MENA Corp in Abu Dhabi. "It was a surprise for everybody."
Etisalat shares, which are traded in Abu Dhabi, yesterday rose 2.15 per cent to close at Dh9.52. Mr Alerksousi said he expected further gains in Etisalat's share price. "I think it will be close to Dh10 soon."
Etisalat this month reported a Dh3bn hit in India after its operation there was stripped of its mobile licence in acorruption investigation.
The UAE company - through its Etisalat DB joint venture - was one of several telecoms operators to lose their mobile licences in India under a ruling by the country's supreme court.
Etisalat entered into its India venture after the licence had been awarded to the Indian operator that became its partner.
The court ruling had a net impact of Dh1.02bn on Etisalat's profit for last year.
Tough competition in the global telecoms business was one reason behind the proposed restructuring of Etisalat, the company said. The board "discussed the reduction and control of operating expenditures by initiating restructuring and outsourcing plans as a future strategy", the company said. "Competition and drop in prices across the region has made it difficult for telecom service providers to maintain revenue levels, especially in emerging markets."
Petr Molik, the head of the research division at MENA Corp, said the restructuring plan was likely to be in response to tough domestic competition.