Etisalat reports 12% jump in second quarter net income on lower impairments

UAE telecoms operator net income of Dh2.2bn beats analysts' estimates

Etisalat names Juan Villalonga as a board member to fill one of the seven seats assigned to EIA. Etisalat

Etisalat reported a 12.4 per cent increase in second-quarter net income, beating analysts' estimates, as the UAE's biggest telecoms operator lowered impairments.

Etisalat made a profit after federal royalty of Dh2.2 billion in the three months ending June 30, as it reduced capital spending and added customers, according to a statement on the Abu Dhabi bourse, where its shares are traded.

The quarterly earnings beat two analyst estimates of Dh2.1bn, according to Bloomberg data. The company, which operates in 16 countries, earned Dh13bn in revenues in the second quarter, up from Dh12.8bn in the corresponding period a year ago.

"Second quarter net profit is positively impacted by higher net finance and other income, lower impairment, share of losses from associates and losses from discontinued operations and lower royalty charges," Etisalat said.

Etisalat, which had a monopoly in the UAE until Du entered the market in 2007, made an exit from its Nigeria operations last year. The company, which owns and operates subsidiaries in the Middle East, Africa and Asia, said its share of income from its associates and joint ventures slumped 62 per cent. Last week, rival Du said its second quarter net profit rose 1.3 per cent as fixed-line revenues climbed. Both operators are set to introduce limited 5G services, the ultra-high speed mobile broadband, later this year.

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Impairments and losses booked in the second quarter dropped 70 per cent to Dh55 million compared to the same period in 2017, while consolidated capital spending fell 6 per cent to Dh2.1bn.

Royalty payments to the federal government for the quarter also dropped 7 per cent year-on-year and 4 per cent quarter-on-quarter to Dh1.5bn.

Etisalat's second-quarter global subscriber base of 144 million expanded by 4 per cent from the year-earlier period but remained unchanged from the first quarter.

The company, which is majority owned by the government, reported a 2 per cent year-on-year rise in operating expenses to Dh8.4bn in the second-quarter on the back of higher cost of sales, rising network costs and increasing depreciation charges.

The Abu Dhabi-based company's board approved an interim dividend payment of 40 fils per share for the first half of the year, it said.

Revenues from Etisalat’s international consolidated operations increased six per cent year-on-year to Dh5.1bn. Sales from global operations contribute 39 per cent of the group’s consolidated revenues.

“One element that stands out in the results is the improved financial performance of Etisalat Egypt and the continued good figures from Maroc Telecom, with both operations benefiting from the growing use of mobile data," Matthew Reed, practice leader for Ovum, Middle East and Africa, said.

Egyptian investment bank EFG-Hermes reiterated its Neutral rating on the Etisalat stock, it said in a note.

"We remain of the view that the main factors to watch out for are firstly emerging fund flows, as this is the more likely driver of stock performance for now, given Etisalat’s weight in EM indices and the size of passive flows invested in the stock," Omar Maher, head of the telecom sector at EFG-Hermes said. And secondly, any "potential dividend surprises and similarly the upcoming share buyback programme."