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06 December 2023

Etisalat and du rising separately but steadily: EFG

By Yazad Darasha

More will say I du


EFG predicts du’s reported mobile phone subscriber base will increase to 1.1 million by the end of this year.


“However, we estimate active subscribers will be 20 per cent less, or 808,000."


Du said in November it has reached the one-million subscriber mark, helped by its promotion where the customer pays Dh55 to receive a mobile phone line that includes Dh54 worth of free talk-time. “Our subscriber forecast for du implies an active subscriber market share of 11.3 per cent at end-2007,” the EFG report said. “We expect du’s mobile subscribers to increase at a five-year CAGR of 32 per cent to 3.3 million in 2012, implying 35 per cent market share.


“Over the long term, we expect its share to stabilise at 36 per cent. We expect share to increase gradually.


“We forecast du’s fixed-line subscribers will grow at a 2007-2012 CAGR of 43.5 per cent to 414,000 by 2012, with a market share of 20 per cent. Over the long run, we expect du’s fixed-line market share to stabilise at 21 per cent.”


EFG’s analysts expect du to break even on the EBITDA level in early 2009. “Our forecasts imply an EBITDA margin in 2009 of 24 per cent, rising to 45 per cent in 2012.”


Du was granted a telecom licence in May 2005 to offer mobile phone, fixed-line and internet services. In April 2006, the original shareholders (the UAE Government and two wholly owned subsidiaries: Mubadala Development Company and Tecom Investments) sold a 20 per cent stake, or 800 million shares, in an initial public offering.


Following the IPO, the government retained an 80 per cent stake held directly and indirectly.


Du is listed on the Dubai Financial Market.


The company began offering both fixed-line and mobile phone services on February 11, 2007. Its mobile phone network now covers almost 85 per cent of the population, while the remainder is covered through a national roaming agreement with etisalat. In its seven months of operations, du has captured a 12.5 per cent market share, with 882,000 reported mobile phone subscribers as of September 2007. The number of fixed-line subscribers rose to 35,780 as of end-September.


Du’s third-quarter revenue grew 36.4 per cent over the previous quarter to Dh412 million.



Value and growth make etisalat more attractive


Etisalat’s attractive valuation comes from its mix of value and growth, EFG’s analysts said, with the value coming from its mature UAE operation and the subscriber growth from the fast-growing operations in Egypt, Pakistan, Saudi Arabia, Nigeria and other African markets.


With the bulk of its value generated from the relatively mature UAE operation, the downside risk to valuation from highly competitive and fast-growing regional operations is relatively limited, they said.


Etisalat is owned 60 per cent by the Abu Dhabi Government and 40 per cent as free-float shares on the Abu Dhabi Securities Market.


Its footprint extends to 16 countries following its recently announced acquisition in Indonesia, and its total population under licence is 767 million, with an implied penetration rate of 29 per cent.


Etisalat owns 35 per cent of Saudi Arabia’s second mobile phone operator, Etihad Etisalat, commercially know as Mobily. By end-September 2007, after two years of operation, Mobily had grabbed a 33 per cent market share from the incumbent Saudi Telecom Company.


Etisalat has a 26 per cent stake in Pakistan Telecommunications Company, the incumbent Pakistani operator. As of end-September, Pakistan Telecoms had a fixed-line market share of 97 per cent and mobile phone market share of 22 per cent through its subsidiary Ufone, the second largest mobile operator in Pakistan by subscriber market share.


Etisalat Chairman Mohammed Hassan Omran (pictured above, left) told Emirates Business earlier this month: “We believe our investments in Pakistan are strategically important since it is a big, promising and encouraging market for expansion. Our main objective is to make investment in Pakistan a success and to meet needs for fixed-line, mobile phone and super-speed internet lines.”


Etisalat Egypt, 66 per cent owned by Etisalat, began operations in Egypt in May 2007, where it offered 3G mobile phone services for the first time. After just six months, Etisalat Egypt had captured about two million subscribers, giving it a market share of seven per cent. Omran said: “We will cover Egypt in three to five years.”


Etisalat also has stakes in Zantel, the fourth mobile phone operator in Tanzania, and Canartel, the second fixed-line operator in Sudan.


Etisalat reported strong results for the first nine months of 2007.