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UAE telco du sees 20 pct revenue growth in 2011

Nationwide service rollout by end of the year-CEO; First quarter profit of 205.8 million dirhams; Royalty provisioning to continue at 50 percent; No disruption seen from new BlackBerry policy from May

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April 25, 2011 10:48 by



UAE telecom operator du expects revenue to grow 20 percent in 2011 as the company forecasts a nationwide rollout of its services before the end of the year, du’s chief executive said on Monday.

Osman Sultan said the company is already in advanced testing of its services outside of its traditional geographical footprint.

“It’s a complex operation but we see this before the end of the year, rolled out in a more or less nationwide rollout,” Sultan said during a conference call with reporters to discuss first-quarter results.

The telecoms carrier, which now has a 41 percent share of the UAE mobile market, reported a first-quarter net profit of 205.8 million dirhams ($56 million) after providing for royalties, up from 97.1 million dirhams in the year-earlier period and in line with an average forecast for 203.7 million dirhams by analysts polled by Reuters.

First-quarter revenue jumped 29 percent to 2.04 billion dirhams, compared with 1.58 billion dirhams a year earlier.

Du said it added 272,000 net active mobile subscribers during the quarter and invested 477 million dirhams in infrastructure.

“It was a very strong quarter in terms of subscribers, given that the market is near saturation,” said Irfan Ellam, vice president and telecoms analyst at Al Mal Capital. “That’s the function of more properties being completed in new Dubai where du operates.”

NEW BLACKBERRY POLICY

Sultan said the company’s growth momentum will continue this year in both fixed-line and mobile services, with no interruption seen in BlackBerry usage as a result of a change in security policies implemented by the Telecommunications and Regulatory Authority.

Under the new policy, only businesses with 20 or more subscriptions will be allowed to use high security accounts on the BlackBerry Enterprise Server, a service provided by Canada’s Research in Motion to encrypt email messages between Blackberry devices and a computer.

The move comes months after the UAE dropped a threat to suspend BlackBerry services after resolving a dispute over access with RIM.

Sultan said the new policy, which will go into effect on May 1 for the company, does not raise any concerns.

“In comparison of the situation of last summer, there is complete continuity,” he said. “I don’t see any real reason for frustration.”

CONSERVATIVE ROYALTY PROVISION

Sultan said du will also continue to provision for royalty payments to the government at 50 percent of its profits until it is advised by the government on the rate for the year.

“It is healthy to be conservative to not have any surprises” he said.

The operator paid a 15 percent royalty fee to the government in 2010, while its rival, Etisalat , paid 50 percent of its annual net profit as royalties.

Al Mal Capital’s Ellam said it is likely that the 50 percent royalty will be lowered again for du this year, boosting profit further.

Net profit for the quarter before royalties was 412 million dirhams, compared with 194 million dirhams a year earlier.

Sultan said the company is also in advanced discussions with banks to refinance part of a 3 billion dirham loan maturing in June as it weighs its refinancing needs for development going forward.

“We will not be going out seeking the totality of the 3 billion dirham loan,” he said. “Discussions are happening with banks to see how we can refinance these needs.”

Abu Dhabi-based Etisalat lost its monopoly in the UAE market to du in 2007 and former state company has been aggressively expanding outside its home market since then.

By Dinesh Nair and Shaheen Pasha

(Additional reporting by Nadia Saleem; Editing by Matt Driskill)



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