By: Amr Adel
Dubai – Mubasher: The CEO of Emirates Integrated Telecommunications Company (du), Osman Sultan, expects to maintain the same level of infrastructure investments in 2017.
Investments in upgrading the company’s networks and infrastructure are expected to reach AED 1.8 billion by the end of 2016, and it will either maintain the same level or increase next year, Sultan told Mubasher on Tuesday.
The CEO also expects the company’s profits to decline in the fourth quarter of the year, due to the continuing pressure from the increase in the amount of royalty paid to the government.
Earlier today, du reported a decline in profits for the 8th consecutive quarter, as profits decreased by 6.7% in Q3-16 to AED 457.2 million from AED 489.84 million in Q3-15.
In December 2011, the government imposed progressive royalties on the telecom companies, to be paid at 15% of revenues and 30% of total profits, from 2012 until 2016.
du as well as its main competitor Etisalat pay these royalties or taxes to the UAE federal government, which is also the biggest shareholder in both companies.
The royalty effect will continue on the company’s revenues and earnings, Sultan noted, adding that the company’s profits before deducting depreciation, interest, and taxes will not grow by more than 11.6%, which is the royalty increase rate in 2016, which means that the change in the company’s net profits will be negative, the CEO explained.
However, the decline in profits will not affect the distribution of cash dividends nor the company’s cash flows, which remains a strong position, he added.
The royalties’ effect was gradual, and didn’t have that much effect in the first three years, but its effect was amplified in the last two years with the telecom market saturation, the CEO indicated.
The major challenge currently facing du is to increase the company’s revenues through innovative ways.
The investments in smart cities and its applications as well as the internet of things (IoT) is the main pillar of growth in the upcoming years, especially since the returns from the conventional telecom services will not retrieve its previous levels, Sultan believes.
The Emirati telecom company was established in 2006, and it has a market share of 47% in the UAE local market.
Translated by: Moslem Ali
