du is closing gap with Etisalat

Mobile operator rapidly catching up with older telco after five successive quarters where it has added more new customers than its rival.

The telecoms operator signed up 266,000 new mobile subscribers in the first quarter.

The du mobile network is rapidly closing the gap with Etisalat, and yesterday reported the latest of five successive quarters where it has added more new customers than its rival. Since the beginning of last year, du has added more than 1.25 million subscribers, while Etisalat added about 400,000.

At the current rate, it would take du about six years to become the country's largest mobile provider. In the first three months of this year, du gained 266,000 new mobile subscribers. Etisalat lost about 30,000 in the same period, in only the second quarterly subscriber decline in its history. About one third of the mobile market is now controlled by du, although direct comparisons between the two companies reported subscriber numbers can be misleading.

Etisalat reports its total number of users, while du reports only "active" subscribers, meaning those that have sent or received a call or text message in the last three months. The surge of new customers, an increasing number of which come from the higher-spending market segment prized by Etisalat, led to a 36 per cent rise in revenues. Profit at the company, which first broke even in late 2008, reached Dh194 million (US$52.81m), almost four times higher than the Dh47m it recorded in the first quarter of last year.

Etisalat pays half of its net profits to the Federal Government as a royalty, and du continues to set aside similar payments as it awaits a ruling from the Government. The record results come as du plans to raise Dh1 billion from its shareholders in a rights issue aimed at funding a new phase of growth. It said yesterday it would offer new du shares at Dh1.75 each to its shareholders. Its shares traded at Dh2.52 at the close yesterday.

The proceeds will be used to boost the company's network capacity to accommodate an increasing number of smartphones that are being connected to the network. It will also be invested, in partnership with Etisalat, on improving the national fibre-optic broadband network. The UAE's broadband networks are divided into two geographic monopolies, with du controlling many of the newly developed suburbs and business parks of Dubai, and Etisalat is the sole provider for the rest of the country.

The prospect of a national infrastructure-sharing agreement, which would allow each company to serve the other's customers, remains likely, du said yesterday without providing details. Osman Sultan, the chief executive of du, said the company was "also in the process of exploring opportunities in the fast growing universe of digital content and the internet through joint ventures and partnerships".

The company is preparing to launch what one staffer told The National would be "a sort of iTunes for the Middle East, along with a Facebook for the Middle East". People familiar with the plans say the new online service is expected to be rolled out by the end of the summer. [e-mail]