Profits, revenue and customers all up for du - but royalty payment bites

Markets Update: A Dh531 million hike in its payment to the UAE Federal Government for 2011 bit into du's annual profit, with a slight rise after a year of growth in revenues and customers for the telecoms company.

Du’s overall revenues climbed to Dh8.9 billion, up 25.2 per cent from 2010. Sarah Dea / The National

Du's business benefited from a surge of customers paying for mobile data plans last year, but a Dh531 million hike in its payment to the UAE Government bit into the telecommunications company's annual profit for 2011.

While du's overall revenues climbed to Dh8.9 billion, up 25.2 per cent from 2010, its royalty payment to the government also increased - to 15 per cent of its profit and 5 per cent of total company revenues. This resulted in a Dh715 million royalty fee for operations last year, up from just Dh184 million for 2010 when the company was required to pay only 15 per cent of its profit and none of its revenues.

"The Federal Government estimated this is a fair and reasonable thing for du in its phase of its life, to pay this level of royalty - and we respect this decision and obey by it," said Osman Sultan, du's chief executive.

Du's profit last year, once royalty payments had been accounted for, increased to Dh1.1 billion, up from Dh1 billion in 2010. "These results didn't come from out of nothing," said Mr Sultan.

"It has been fuelled by a better position in the market," he added. "We have continued to have the lion's share in terms of new subscribers, for sure."

The company's strong financial performance overall has led its board of directors to propose its first cash dividend to shareholders, of 15 fils per share. If shareholders agree to the proposal later this month, it would equate to a one-off payment worth Dh685.7 million spread across more than 4.5 billion of du's shares.

Mr Sultan insisted the move was not in response to any requests from shareholders. "There was no pressure at all," he said.

"The cash situation is healthy. It's only healthy to return to shareholders."

Du, which is now in its fifth year of operation, added 278,100 active mobile customers during the fourth quarter last year, bringing its total base of mobile users to 5.2 million people. This took the company closer to matching its rival telecom operator, Etisalat, and gave du more than 46 per cent market share by the end of last year, according to data from the Telecommunications Regulatory Authority.