Etisalat results fall short on back of expenditure and more competition

Etisalat has posted a 8.5 per cent drop in first-quarter net profit.

Etisalat has reported an 8.5 per cent decline in first-quarter profit, amid high capital expenditure and greater competition in the UAE market.

Net income for the period was well short of analysts' expectations, falling to Dh1.82 billion (US$495.5 million) from Dh1.99bn during the same period last year.

The group had Dh1.11bn of capital expenditure during the quarter, and said net earnings had been hit by its investment in new networks in the UAE.

"Etisalat heavily invests in the modernising and development of infrastructure in the UAE, as the total cost of building the fibre-optic network has reached Dh6bn, in addition to investments in a 4G network," said Mohammed Omran, the company's chairman.

"These costs have constituted extraordinary pressure on net profits in previous periods but they are considered a long-term investment in the country's economy, while building the latest networks to a global level," he said.

First-quarter revenue stood at Dh8.04bn, 2.2 per cent higher than the same period last year.

Irfan Ellam, a telecommunications analyst with Al Mal Capital, said the first-quarter results were "weak" relative to the fourth quarter of last year.

"Revenues are down quarter-on-quarter by 6.6 per cent, which is not good. Earnings are down 10.3 per cent," he said.

Etisalat reported 7.43 million mobile subscribers in the UAE for the first quarter of this year, compared with 7.71 million in the same period last year.

Part of the reason for the lower revenue in this year's first quarter versus last year's fourth quarter was greater competition in the core UAE mobile market. The telecoms operator "du appears to have gained traction in the UAE mobile space", Mr Ellam said.

Etisalat last month scrapped a $12bn plan to buy a controlling stake in Kuwait's Zain, although some analysts predict the UAE telecoms company could submit a revised bid.

Mr Omran said Etisalat continued to seek potential investments in the Middle East, Asia and Africa.