x Abu Dhabi, UAESunday 21 January 2018

Du set to maintain its pace with subscribers

Du, the second telecoms operator in the country, is expected to continue gaining mobile subscribers from Etisalat which should bode well for revenues, Dubai-based Al Mal Capital said yesterday.

The telecommunications company du is expected to gain revenue share in the UAE despite mobile markets nearing saturation, according to Al Mal Capital.

"The country's second telecoms operator has been providing strong competition for Etisalat on the mobile front, capturing a majority of active net additions last year, a trend expected to continue," said Irfan Ellam, an analyst at the investment bank based in Dubai.

"This trend was supported by du gaining 271,000 net additions in the first quarter of this year, versus a loss of 334,000 subscribers for Etisalat," he added. Despite the mobile market nearing saturation levels, subscribers should continue to grow as a result of population growth in the UAE, projected at 3 per cent this year and 4 per cent a year from next year through to 2015. The company reported a 112 per cent increase in profits for the quarter to Dh206 million, compared with the same period last year.

Mr Ellam maintained an outperform rating on the stock, but upgraded its fair value price to Dh3.96, implying a 22 per cent upside to its current price. Shares in du fell 0.3 per cent to Dh3.23 yesterday.

There were several catalysts to watch out for that could significantly boost the stock price, the analyst said. A reduction in royalty rates, currently at 50 per cent for Etisalat, is a major potential catalyst for a rise in du's fortunes, Mr Ellam said. Negotiations are currently progressing between the UAE government and two operators, and a resolution is expected before the end of the year. The Dubai company paid a 15 per cent royalty payment last year and it has provisioned for 50 per cent this year.

If du's royalty rate was revised, it could trigger the opening up of the company to foreign shareholders, which would help to boost the company's stock price by increasing liquidity as well as widening and deepening the shareholder base, he added.

Mobile number portability (MNP), which allows a subscriber to keep the same phone number after moving to a different operator, has been implemented and is still awaiting introduction, Mr Ellam said.

"The impact of MNP on the sector will depend on how it is implemented."