Shares of Etisalat and du rose on news that royalty fees to the Federal Government will remain unchanged for the next five years.
Etisalat announced on Tuesday that it would pay 15 per cent of its annual revenues and 30 per cent of its net income to the Federal Government as a royalty payment each year to the end of 2021, in line with royalties paid by both operators in 2016.
The new royalty scheme was outlined by the UAE’s Ministry of Finance on Monday.
The fees will be payable on the revenue and profit of Etisalat’s domestic operations, which accounted for 56 per cent of the operator’s revenues during the third quarter of 2016.
Revenues from Etisalat’s international operations will be unaffected, while royalties on international profits will only be considered “if similar fees paid in the country of origin are less than the fees that could have been imposed in the UAE”, the operator said.
Etisalat said it was assessing the implications of the new royalty scheme but did not anticipate “a significant impact” on net profit for 2017.
Du will be subject to the same royalty regime over the same period, a representative for the operator told The National on Tuesday, declining to speculate on the impact on profitability.
Shares in Etisalat and du closed up 2.2 per cent and 0.2 per cent, respectively, on Tuesday.
The announcement of the new royalty regime comes following the expiry of a five-year payment schedule that led to the two operators’ royalty payments hitting the same level in 2016, du’s 10th year of operations.
Du’s royalty payment regime was originally set lower than that of Etisalat, enabling the second entrant to compete more effectively against the incumbent operator.
But du’s revenue growth has failed to keep pace with the rise in royalty payments in the past two years.
The operator last week reported a 10 per cent fall in annual profits in 2016 due to rising royalty payments, its second consecutive annual profit drop.
Etisalat by contrast reported a 1.9 per cent rise in net profits for 2016 but it did not comment on the effect of royalty payments.
jeverington@thenational.ae
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