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29 March 2024

Etisalat profit drops 15%

Published
By Reuters

Etisalat , the UAE’s largest telecoms carrier, said on Monday its second-quarter net profit fell 14.9 per cent, missing analysts' forecasts, as operating costs rose amid increasing competition in its home market.

The former monopoly, which operates in 18 countries, reported a second-quarter profit of Dh1.59 billion ($433 million), down from Dh1.87 billion in the year-earlier period.

Analysts polled by Reuters forecast the firm would post a quarterly profit of Dh1.88 billion.

"Revenues were lower than our expectations while costs were higher," said Nishit Lakhotia, telecoms analyst at Securities & Investment Co. (SICO) in Bahrain. "Etisalat has been facing tough competition at home, which is its key market, contributing more than 70 per cent of etisalat's revenues."

Quarterly staff costs climbed 17.5 per cent to Dh1.25 billion compared with a year ago, etisalat said in a statement.

Etisalat, which dropped plans to buy a controlling stake in Kuwait's Zain earlier this year, posted second-quarter revenue of Dh7.93 billion, down from Dh8.05 billion a year earlier.

"Etisalat must be aggressive defending its home market share - it has lost a lot of ground to du over the past year, especially in the post-paid segment," Lakhotia said.

He estimates etisalat's share of domestic post-paid mobile subscribers fell to 75 per cent in the first-quarter of 2011 from 92 per cent in the corresponding period of 2009. Rival du ended etisalat's domestic monopoly in 2007.

"Post-paid are the high-end customers that provide significant revenues and higher margins and this segment is growing, but du is taking the majority of this expansion," he said. "For etisalat, it's a matter of time - a lot of its international operations are in their initial phases either making losses or only marginal profits."

For the first half of 2011, etisalat made a net profit of Dh3.4 billion and revenue of Dh15.97 billion. It set an interim dividend of 25 fils per share for the year.

The firm said it had 7.5 million mobile subscribers in the second quarter, up 0.9 per cent compared to the three months ending March 31.

However, unlike du, etisalat reports total mobile subscribers including inactive ones, Sico says, estimating etisalat's active subscribers to be around 1 million lower than those stated in its results. Fixed line subscribers fell slightly to 1.1 million.

Etisalat also said it recorded Dh318 million as a provision for estimated indirect tax liabilities from one of its overseas subsidiaries.

Earlier this month, the firm said its Indian mobile phone joint venture partner had brought proceedings against it and various group companies.

"There's a lot of uncertainty over etisalat's India operations and that will put pressure on the stock because markets don't like ambiguity," added Sico's Lakhotia.