Rights issue raises Dh1 billion giving du cause for celebration

Money raised will go towards improving the company's infrastructure

The UAE's second telecommunications operator, du, has concluded its rights issue and raised Dh1 billion (US$272.2 million) in funds that will go towards improving the company's infrastructure. More than 571.4 million shares were offered at Dh1.75 each on May 13 and it was fully subscribed by its major shareholders, Dubai Holding, the investment company of Sheikh Mohammed bin Rashid, Vice President of the UAE and Ruler of Dubai, and by Mubadala Development, a strategic investment company owned by the Abu Dhabi Government.

The remaining 20 per cent of the rights offering available to investors trading on the Dubai Financial Market (DFM) was oversubscribed, the company said. "We are very pleased with the take-up of the rights issue and the extent of the support we have received from our shareholders," said Osman Sultan, the chief executive of du. "This is a clear demonstration of their belief in our performance and growth strategy."

The telecoms operator's share price on the DFM General Index closed yesterday's session up 0.9 per cent at Dh2.25, but has fallen 44.9 per cent since reaching a 52-week high of Dh4.09 on October 27. Analysts viewed the conclusion of du's rights issue as a positive move for the company, which began offering mobile and internet services in 2007. "The stock is cheap and it's a more stable business compared to other sectors," said Simon Simonian, a telecoms analyst with Shuaa Capital, whose recommendation for du is under review. "With the rights issue now behind them, the outlook for du is positive."

Mr Simonian said the additional capital would help to improve the quality of du's mobile and broadband network as well as with investments in other ventures. The operator is set to tap into Etisalat's broadband network in the coming weeks to offer its internet and television services nationwide. "The mobile network is pretty much complete but it strengthens the balance sheet and gives du some more options," Mr Simonian said.

Trading of the new shares is expected to begin from Sunday after investors receive a letter from du notifying them how much of the company's stock has been allocated to them. [e-mail]