The telecommunications operator du more than doubled first-quarter profit as it increased market share by drawing mobile phone customers away from its bigger UAE rival Etisalat.
The Emirates' second operator added 272,000 active mobile subscribers in the first three months of the year, bringing the total to 4,604,800, and claims its total market share now exceeds 40 per cent.
The company's net profit grew by 112 per cent to Dh205.8 million (US$56m), which was above analysts' expectations.
"We have the highest growth rate in the region of any telco," said Osman Sultan, the chief executive of du.
Analysts agree du has attracted mobile customers from Etisalat, which has lost subscribers over the past year.
Etisalat reported it had 7.43 million mobile subscribers in the UAE for the first quarter of this year, compared with 7.71 million in the same period last year.
"Since 2009 du has been consistently delivering good numbers," said Simon Simonian, a telecoms analyst at Shuaa Capital. "We're seeing every quarter that they're gaining market share … Etisalat has been in retention mode, rather than chasing new subscribers."
Mr Simonian had forecast a Dh181 million net profit for the first quarter, significantly below du's reported earnings of Dh205.8m.
He added du was attracting higher-spending customers, with a higher average revenue per user (Arpu).
"Up until 2009, they were attracting the low Arpu subscribers. Now we're seeing them being more active - getting iPhone, BlackBerry and data subscribers," he said. "They were coming from a very low base."
Other commentators agreed that du is winning market share. "Absolutely they are taking customers from Etisalat," said Philip Brazeau, who heads the telecoms practice at the Middle East law firm Al Tamimi. "There's a big proportion of the population that is going to du."
Irfan Ellam, a telecommunications analyst with Al Mal Capital, said while du was winning some customers there could be other factors at play.
"Subscribers appear to be voting with their feet, and seem to prefer du's offering, which is cheaper," said Mr Ellam. "On the surface, it looks as if du has captured those subscribers from Etisalat. But Etisalat's losses are bigger than du's gains."
He added possible changes in the way Etisalat accounts for mobile subscribers could be another reason behind the sharp drop in its reported mobile subscribers. Etisalat did not respond to a request for comment.
A royalty fee is paid by du to the Government, which the company has provisioned at a "conservative" 50 per cent of net profits. Before this provision, du's net profit for the first quarter stood at Dh412m.
First-quarter revenues of Dh2 billion marked a 29 per cent increase on the same period last year, but were flat compared with the end of last year. "Revenue was about 3.7 per cent below our estimates for the quarter," said Mr Ellam.
Last year du paid a 15 per cent royalty fee, much lower than expected given that the incumbent operator Etisalat pays half of its profits to the government.
The figures from du come amid mixed first-quarter results for the telecoms industry.
Etisalat reported an 8.5 per cent decline this month in first-quarter profits to Dh1.82bn. The decline was attributed to high capital expenditure, outlay and greater competition in the domestic market.
Mr Ellam said newcomers to the market, such as du, were performing better than more established rivals. "The new players seem to be faring better than the old incumbents," he said.
Imminent liberalisation within the UAE telecoms sector will this year bring increased competition between the rival operators.
The planned infrastructure-sharing between Etisalat and du, through which the operators will be allowed to compete on landline and broadband services across the country, is expected before the end of the year, Mr Sultan said.
"Testing is already happening," du's chief executive added. "Some customers will be called within weeks on an invitation basis."
The delayed launch of mobile number portability, through which customers will be able to switch between providers but keep their number, will not have a "massive impact" on customer numbers, Mr Sultan said.