x Abu Dhabi, UAEThursday 27 July 2017

Subscriber slowdown mars du quarter

Du added fewer than 200,000 mobile customers in the second quarter as its rate of subscriber growth slowed amid intensifying competition.

Du posted a profit of Dh325.5 million during the second quarter. Sarah Dea / The National
Du posted a profit of Dh325.5 million during the second quarter. Sarah Dea / The National

Du added fewer than 200,000 mobile customers in the second quarter as its rate of subscriber growth slowed amid intensifying competition.

The operator posted a profit of Dh325.5 million (US$88.6m) during the period.

Its revenues fell short of analysts' expectations as du added just 196,300 mobile subscribers during the period, compared with 320,600 in the first three months of the year.

Osman Sultan, the chief executive of du, said the growth in mobile subscribers was inevitably declining after a period of rapid customer acquisition since the company launched in 2007.

"These are growth rates that cannot be sustainable," he said. "The market is becoming more penetrated."

The company's share of the UAE mobile market declined by a fraction to 46.5 per cent compared with its bigger rival Etisalat.

However, Mr Sultan said the second-quarter performance was partly due to seasonality after a strong start to the year as promotional campaigns from last year paid off.

He said du was focusing on boosting revenues and an ongoing efficiency drive and expected further growth in mobile data as a percentage of its business.

While the second-quarter profits were a 2.3 per centdecline on the previous period, year-on-year figures looked rosier with the company reporting a 57.1 per cent rise in profits compared with the same period last year.

That result cheered investors, who sent du's shares rising 1.2 per cent to Dh3.22 in Dubai yesterday.

Yet the results still fell short of expectations. Analysts polled by Reuters had forecast the company would make a second-quarter profit of Dh332m.

It said revenues had increased by 12.9 per cent to Dh2.45 billion in the second quarter, up from Dh2.2bn during the same period last year.

However, revenues rose by just 0.2 per cent in comparison with the first quarter, lower than some had expected.

Petr Molik, the head of the research division at Mena Corp, said the quarter was "mildly disappointing" after a strong start to the year.

"Although the previous quarter was hard to beat, we were surprised by the lack of growth in the top line of Dh2.45bn and especially disappointing mobile revenues," he said. "We expected Dh2.55bn of revenues."

Average revenue per user for du dropped to Dh112 per month compared with Dh119 in the previous quarter. "This is the worst ... du has shown in almost two years," said Mr Molik.

Ibrahim Masood, a senior investment officer for asset management at Mashreq, said the performance in the second quarter was "pretty flat".

"The quarter-on-quarter comparison seems pretty worrying. But I think there is still room for growth," he said.

"The telecom market is definitely getting a bit challenging. These guys need to push hard for growth."

Matthew Reed, a senior analyst at Informa Telecoms & Media in Dubai, said du was "still doing very well" in the mobile market. He attributed the decline in growth to seasonality, although he agreed the market was becoming more competitive.

Second-quarter results for du come a few days after Etisalat reported positive second-quarter results. The Abu Dhabi-listed company on Wednesday revealed a turnaround in its financial performance, having posted a 17 per cent rise in net profit to Dh1.9bn in the second quarter compared with the same period last year.

 

bflanagan@thenational.ae