Etisalat’s group chief executive, Ahmad Julfar, does not anticipate any increase in the royalties the telecoms operator pays to the UAE federal government.
Amid the decline in hydrocarbon revenue because of falling oil prices over the past 18 months, analysts at EFG Hermes have said that risks to the company’s valuation include any future decision by the government “to alter the current royalty structure upwards, or even charge a different tax on services”.
More than 60 per cent of the federal budget is funded by hydrocarbons sales.
"For the royalties we pay to the government there is already a regime [in place] that is renewed every two years and I think it will remain as it is for the time being," Mr Julfar told The National on the sidelines of Ericsson's Change-Makers Forum in Dubai yesterday.
“We haven’t heard anything from the government yet, but that is our expectation.”
During the past 12 months, Etisalat's shares have gained more than 62 per cent, since it opened up its ownership to foreign investors and its stock was included in MSCI's emerging markets benchmark index.
EFG remains fairly bullish on the company’s stock outlook this year.
The royalty paid to the UAE government was one of the factors Etisalat singled out as causing an 8.6 per cent drop in the company’s profits for the third quarter of last year, together with forex losses in Morocco, Egypt and Pakistan.
Mr Julfar said that Etisalat was changing its operating model in an effort to increase efficiency across its operations.
“We do a lot of sharing whether it is passive infrastructure or [in other areas], we’re doing more collaboration with telecom operators and internet players … internet players that will help us to reduce the drop in margins,” he said.
“But also because we’re big we operate in many countries we can capitalise on [economies of] scale to keep our profit margins intact,” he said.
Etisalat’s UAE-based operations continued to grow in the third quarter of 2015, with revenue and profit increasing year on year by 5.7 and 6.6 per cent respectively.
However, the group’s total revenues fell by 1 per cent during the period partly on “aggressive price competition in certain markets”.
jeverington@thenational.ae
Follow The National's Business section on Twitter
