Focus on costs as du targets fresh boost to its bottom line

The operator has responded to the impact of higher royalty payments by cutting costs.

Osman Sultan, the chief executive of du, said “We’re expecting at least Dh1bn to be saved on a cumulative basis”. Victor Besa for The National

Telecoms operator du intends to optimise costs to the tune of over Dh1 billion by the end of 2019, as it wrestles with static mobile revenues and uncertainty over the level of future royalties, according to its chief executive.

Speaking on a conference call yesterday, Osman Sultan said that the reductions in costs would incorporate cost of sales, operating expenses and capital expenses.

“We’ve been working on our cost structure significantly that allows us to ensure that we have the right value-creation pockets,” Mr Sultan told reporters. “We’re expecting at least Dh1bn to be saved on a cumulative basis.”

Mr Sultan once again highlighted the effect to du’s bottom line of increased royalty payments to the federal ­government.

Payments increased by 10 per cent to Dh2.1bn during last year and du has yet to receive any instruction on the royalties payable to the federal government for 2017, he said.

On Tuesday, du announced a 20 per cent fall in net profit for the fourth quarter, the eighth consecutive quarterly drop. The telco released expanded results for 2016 yesterday, revealing sluggish growth in its mobile business, the largest contributor to its revenue base.

Mobile revenue increased by just 1.5 per cent to Dh9.1bn over the year, even as the operator’s mobile subscriber base increased by 12 per cent to 8.6 million users. Nearly 90 per cent of du’s mobile subscriber base is prepaid users, who typically generate a lower average revenue per user than customers with monthly subscriptions.

“We need to simplify our proposition, [and] we need to work on ensuring that we address the right users,” said Mr Sultan.

“We’re working on a more precise segmentation looking at what are the needs of our customers and putting the right offers to regain this momentum in the market.”

Its parent, the Emirates Integrated Telecommunications Company, has announced it will soon offer services under the Virgin Mobile brand, targeting younger subscribers, using the same network infrastructure as that used by du.

The company said that its board was recommending a full-year dividend of 34 fils per share, compared with a 43 fils payment for 2015 that included a special dividend payment of 10 fils per share.

Its shares closed yesterday up 0.7 per cent at Dh5.94 in Dubai.

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