The telecommunications company du is one of the business success stories so far this year. It is adding subscribers at a faster rate than its more established competitor Etisalat and yesterday announced a Dh299 package for the FIFA World Cup that seems likely to attract more customers. The company owns exclusive broadcast rights in many of Dubai's newer communities.
The stock, however, dropped 4.82 per cent yesterday, to Dh2.17, pushing its two-day loss to almost 10 per cent. The stock has fallen close to 20 per cent in the past two weeks. The telecoms company is partly owned by Dubai Holding, which announced a Dh23.56 billion loss yesterday. The disclosure affected property companies the most but it could trickle down to du if the free zones where it has a monopoly face a more uncertain future.
The company is attractive largely because of its rapid growth - on Monday, the National Bank of Kuwait raised its subscriber growth target to 6 per cent this year, although that was before the Dubai Holding announcement. While the telecoms sector is generally more recession-proof than those such as banking and property, investors may still see Dubai Holding's difficulties as a proxy for how the emirate's overall economy will perform, and thus perceive du's growth prospects to be under pressure.
Shares in du are not accessible to foreign institutions, making the company more susceptible to some volatility. Only 20 per cent of du's shares are publicly traded, so stock price fluctuations do not represent the view of all investors. But they do represent public perception, which seems to have shifted against the company for the time being. firstname.lastname@example.org