x Abu Dhabi, UAEThursday 27 July 2017

Mixed bag expected for region's operators

Investors should expect the telecommunications sector to ring in another quarter of revenue growth when Etisalat and du announce their earnings this month.

Investors should expect the telecommunications sector to ring in another quarter of revenue growth when Etisalat and du announce their earnings this month. 

Both operators should report double-digit sales growth in the third quarter, with du expected to be up 28 per cent and Etisalat 12 per cent compared with the same period last year, according to analysts at EFG-Hermes.

Subscriber figures for both operators are also expected to increase. But when it comes to net profits, analysts have mixed expectations. Simon Simonian, a telecoms analyst with Shuaa Capital in Dubai, expects du growth to continue, with the operator estimated to report earnings of about Dh136.5 million, (US$37.1m), a 75 per cent rise compared with last year. "In terms of du, we expect the company to deliver another strong quarter in terms of growth," said Mr Simonian.

He expects Etisalat, the UAE's largest telecoms operator, to post a net profit of Dh2.04 billion, an 8 per cent decrease on last year. "I think the growth obviously has slowed down for them in the UAE," Mr Simonian said. "Earlier this year, we saw the beginning of the company being impacted by the slowdown in the UAE." Mr Simonian said increased competition from du as well as a slowdown in earnings from Etisalat's growing foreign operations base had been factored in to the company's projected profit.

"Etisalat's UAE margins are coming off a very high base of close to 70 per cent last year, but now the margin is closer to 65 per cent. This has had an impact," Mr Simonian said. "On the other hand, the contribution of international has been progressing every quarter and it really has been led by the Egyptian operations, whose performance has been fantastic." Mr Simonian does not expect issues relating to BlackBerry smartphones over the past two months to affect the revenues of either operator and should not be a factor in their third-quarter earnings.

Furthermore, any financial impact on the UAE's planned broadband-sharing regime should be felt next year, he said. Both Etisalat and du are expected to share each other's networks to provide internet and television services by the end of the year, giving consumers a choice of telecoms provider.

dgeorgecosh@thenational.ae