Etisalat posts profit of Dh1.9 billion in turnaround

Etisalat reports a turnaround in its bottom line having posted a profit of Dh1.9 billion after months of decline. Growth of its international operations proved a major boost.

Growth of Etisalat’s international operations proved a major boost, the company said. Pawan Singh / The National

Etisalat has reported a turnaround in its bottom line having posted a profit of Dh1.9 billion (US$517.2 million) after months of decline.

The Abu Dhabi-listed telecommunications firm yesterday said its net profit had risen by 17 per cent in the second quarter compared with the same period last year.

That followed several periods of declining profits during which Etisalat was hit by both increased competition in its domestic market and setbacks in its international expansion.

Growth of Etisalat's international operations proved a major boost, the company said. Its business outside the UAE now accounts for 28 per cent of its top line, with revenues having grown 14 per cent to hit Dh2.3bn. However, the company reported quarterly revenues of Dh5.64bn in the UAE, a 0.4 per cent drop on the second quarter last year.

The Etisalat chairman Eissa Al-Suwaidi said the growth in overall profits was "on the back of strong market development in Egypt, Benin, Gabon, Togo, Afghanistan and Sri Lanka".

Petr Molik, the head of the research division at Mena Corp, said the increase in net profit was largely down to an efficiency drive previously announced by Etisalat.

"It's more cost saving than revenue growth," he said.

Revenues reached Dh8.25bn during the second quarter, a rise of 4 per cent on the same period last year, Etisalat said.

Mr Molik said he was "slightly disappointed" revenues were not growing faster outside the UAE.

"[The] UAE represents constantly 72 to 73 per cent of total revenue over the last several quarters, which is not good news for the other countries as they can't seem to grow faster than the mature UAE operation," he said. "The foreign parts of the group should definitely grow faster than the domestic part."

Matthew Reed, a senior analyst at Informa Telecoms & Media in Dubai, said the primary indicators were good for Etisalat. "There has been some improvement in the main metrics, so that is a positive development," he said.

However, he said Etisalat's second-quarter financials were not as rosy as they appeared when compared with the same period last year, which was a particularly disappointing one for the operator.

"The comparison ... is a little flattering because [the second quarter last year] was quite a bad quarter at Etisalat, with net profit then falling 15 per cent year-on-year," he said.

Etisalat, which is 60 per cent owned by the federal Government, operates in 17 countries across the Middle East, Africa and Asia.

It has been hit by several setbacks to its further international expansion, including last year's aborted US$12bn (Dh44.07bn) bid for a controlling stake in the regional operator Zain Group.

This year, Etisalat's joint venture in India was among several operators to have their mobile licences revoked in what was one of the country's largest corporate scandals.

The operator chose to exit the Indian market, having sustained a Dh3.04bn impairment charge over its operation there.

Etisalat was not implicated in any wrongdoing in the scandal over the allocation of 2G licences in India, which occurred before it entered the market.

Etisalat has reported declining profits in eight of the previous nine quarters, according to Reuters. The company recently replaced its chairman as part of a wider reshuffle of its senior management.

In its domestic market, it has come under increasing pressure as its rival operator du has rapidly gained market share in the mobile business.

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