Du becomes profitable for the first time

The Dubai-based telecoms firm reports that net income surged to Dh31.47 million in the three months to Sept 30.

A du shop in the Mall of the Emirates in Dubai. The telecoms company hopes to secure a bigger market share with the increased investment.

The UAE will have more than 10 million mobile subscribers by the end of the year, with the country's second mobile network becoming profitable for the first time and surging ahead of Etisalat in the race for new customers. For the three months to Sept 30, du today reported that net income had surged to Dh31.47 million (US$8.4m), up from a loss of Dh241.94m a year ago - a sign that the business has transformed from a loss-making startup into one capable of ongoing profitability. Revenue more than doubled to Dh1.06 billion compared with Dh412.23m a year earlier More significantly, du signed up 2.5 times as many mobile subscribers and three times as many fixed-line telephone subscribers as Etisalat in the same period. It is the second consecutive quarter that du has signed up more than twice as many new customers as its competitor. "Obviously a large number of people are very attracted to what we offer," said Osman Sultan, du's chief executive. "It is a simply better deal, a better way of spending your money." Mr Sultan also said he hoped to make an announcement by the end of the year regarding rolling out the company's integrated "triple play" service, which will deliver internet, television and landline phone over a single line. It is currently only available in certain areas of Dubai, but Mr Sultan said a national launch could be just months away. The company now holds 27 per cent of the UAE mobile market, up by two percentage points since June. Etisalat reported 7.05 million subscribers in third-quarter results released two weeks ago. Combined with du's 2.67 million, it means the country is a little over a month away from its ten millionth subscriber at current growth rates. In becoming profitable, du had shown it could sustain growing revenues and dropping expenditures, Mr Sultan said. "It shows that we have momentum on the top line, driven by this huge customer growth we are witnesssing. And it also reflects better operational efficiency." Since launching its services early last year, du has added more than 100,000 new customers every month, but had yet to have a profitable quarter, as the costs of rolling out a national mobile network weighed heavily on results. In the second quarter of the year, the company became profitable in Ebitda (earnings before interest, tax, depreciation and amortisation) terms for the first time. Ebitda gives a snapshot of a company's underlying profitability, as is excludes the costs of long-term investments. The highlight of the quarter for du was the launch of a new mobile service targeting expatriate labourers. Branded as Alo, the service gives low-income workers a new mobile line with no upfront cost, instead charging a Dh5 monthly fee. Launched in co-operation with Dubai's Permanent Committee for Labour Affairs, the special packages will also be used as a tool to help the government communicate with the labour force, and will include a hotline for workers to contact labour authorities. Like many of du's promotions, the Alo launch reflects the company's focus on offerings that appeal to price-sensitive segments of the market. The company's rapid growth in subscribers - evocative of a low-penetration boom economy such as Egypt or Nigeria rather than the saturated UAE market - suggests the approach is working. "I have always said du would be a growth story," Mr Sultan said. "This is what I was talking about." [e-mail] * with Reuters