du Telecom Reaches Out to Consumers

Emirates Integrated Telecommunications Company, also known as du, is a company that offers mobile and fixed telephone systems, broadband connectivity, and IPTV services to individuals, homes, and businesses in the UAE. After a strong first quarter, it can boast excellent results. The total revenue for the company amounted to AED 2,447 in the first quarter, up 20% year-on-year and 1% quarter-on-quarter, despite the fourth quarter being high season. The increased revenue is mostly from the mobile segment of the company, which counts 78% of total revenue.

It recorded its highest quarterly mobile adds since its inception, of 320,000, beating the 160,000 consensus and increasing 15% quarter-on-quarter and 18% year-on-year. This is particularly impressive when compared to Etisalat’s 870,000 net subscriber loss during the same period.

Overall, the quarter closed with du counting 5.5 million mobile subscribers, a 20% increase year on year and 6% rise quarter on quarter, and giving it nearly 46.7% of the market share. As du’s network quality increases, it ceases to be a barrier for customers switching from du’s primary competitor, Etisalat.

As for du’s fixed-line segment, adds reached 14,000 and subscribers 545,000. Revenue from the segment, which includes TV, telephones, and broadband, reached AED 409 million this quarter, a 21% rise year-on-year and 4% quarter-on-quarter.

Margins also improved this quarter, with the gross margin reaching 69.2%, compared the last quarter’s 68.9% and first quarter 2011’s 64.6%. EBITDA rose 48% year-on-year and 7% quarter-on-quarter, attributed to reducing overheads as a percentage of revenue and management controlling cost by implementing sustainable policies. The EBITDA margin reached 37.7%, and company officials believe a 40% EBITDA margin is within sights.

du’s strong first quarter results have led it on a path towards increased branding and attempts to reach out to the consumers in the UAE in new and original ways. The first step on this journey was the announcement of a four-year deal with Flash Entertainment, the UAE’s primary concert organizer. When Madonna arrives in the UAE in June, she will be singing at the newly-christened “du Arena”, where over 50,000 concert goers will be experiencing du’s new advertising opportunities. The company will finance the re-structuring of the arena with multiple entry points, better food and beverage services, smoother parking procedures and improvements in transportation.

According to anonymous reports, the Du branding will be at the arena and on advertisements for concerts, but will not extend to t-shirts or other similar mass-produced paraphernalia.

With its strong financials and presence in the consumer sector, du is a company that is likely to continue posting good results throughout the next several quarters.

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