Etisalat feels the heat as profit falls for second quarter in succession

Increased competition from its rival du and a rise in operating costs were the cause of a second consecutive quarterly decline in profit for Etisalat, the UAE's biggest telecommunications company.

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Etisalat revealed yesterday net income for the second quarter of the year was Dh1.59 billion (US$432.8 million), down from Dh1.87bn in the same period last year, a decline of nearly 15 per cent.

The results are gloomier than those in the first quarter, when Etisalat reported an 8.5 per cent fall in profit.

The result fell short of analysts' expectations, with a poll by Reuters having forecast a profit of Dh1.87bn.

Matthew Reed, an analyst at Informa Telecoms & Media, said the results were "disappointing".

"It's clear that Etisalat continues to have problems in its home market of the UAE," he said. "This is the result of strong competition from du."

However, not all the news was bad. In the UAE, Etisalat reported a slight increase in the number of mobile customers, to 7.5 million subscribers compared with 7.43 million in the first quarter of the year.

"It looks like they've stemmed the losses in mobile subscription," Mr Reed said. However, he added Etisalat's UAE mobile customer base was "still below where it was about 18 months ago".

Etisalat has been pursuing growth opportunities outside the UAE, and its international operations now account for 24.4 per cent of revenue, up from 21 per cent a year earlier.

But the company's failed $12bn bid for a controlling stake in the Kuwaiti operator Zain had been a setback in these ambitions, Mr Reed said.

"In the international market it has seen quite modest growth in the last year because … it was unable to complete the Zain acquisition, which would have been a transformational deal," he added.

Shares in Etisalat, which are listed on the Abu Dhabi Securities Exchange, fell by 1.36 per cent to Dh10.90 yesterday.

The company reported that operating costs in the second quarter rose to Dh4.99bn from Dh4.64bn in the same period last year.

For the first six months of this year, Etisalat's group revenues increased by 0.3 per cent to Dh15.97bn. Its profit in the first half fell by Dh455m to Dh3.41bn.

The company, which operates in 18 countries, pays half of its net profit to the federal Government as a royalty fee.

In a statement to the Abu Dhabi bourse, Etisalat said it had set its interim shareholder dividend at 25 fils per share, payable from August 11.

bflanagan@thenational.ae