du to spend on faster data networks

The telecommunications operator du plans to spend as much as Dh1.5 billion (US$408.3 million) building faster mobile networks to satisfy smartphone users' hunger for more data on the go. A surge in mobile subscriptions and revenue from data services boosted business at du last year, as its overall revenue climbed to Dh8.9bn, up more than 25 per cent since 2010. "We are not - any more - a start-up," said Osman Sultan, the chief executive of du. "Now we are in the phase where we need to optimise. We need to seek efficiency," he added. "Before we speak about growth, it has to be an efficient and profitable growth for the company and its shareholders." While overall revenuerose last year at du, a Dh531m increase in its royalty payment to the federal Government took a big bite of the telecoms company's annual profit - resulting in a Dh715m fee for operations last year. This figure was up from Dh184m for 2010, when the company was required to pay only 15 per cent of its net profit - and not 15 per cent of net profit plus 5 per cent of total revenue as is required for last year. Even after the royalty payment is accounted for, however, du's profit for last year increased to Dh1.1bn, up from Dh1bn in 2010. "These results didn't come from out of nothing," said Mr Sultan. "It has been fuelled by a better position in the market. We have continued to have the lion's share in terms of new subscribers, for sure." Now in its fifth year of operation, du added 278,100 active mobile subscriptions during the fourth quarter of last year, bringing its total base of mobile users to 5.2 million accounts. This took the company closer to matching its rival telecoms operator, Etisalat, and gave du more than 46 per cent market share by the end of last year, according to data from the Telecommunications Regulatory Authority. To entice more customers, du spent Dh1.29bn last year on expanding the coverage of its data network, which has "greatly improved, particularly in our 3G coverage, as we see this as a major stream of future revenue growth", said Mr Sultan. Revenue from mobile data services on du's network during the final quarter of last year surged to Dh237m, up 63.4 per cent from Dh145m in the same period a year earlier. Revenue for du's fixed-line telephone, TV and broadband business increased 20 per cent during the same period, to Dh380.2m. Compared with the previous quarter, revenue from these non-mobile data services inched up just 2.9 per cent. To keep pace with demand for mobile data services, du plans to roll out faster, so-called long-term evolution (LTE) infrastructure during the second or third quarter this year. "We have always said, from day one, we will go LTE - having broader broadband infrastructure," said Mr Sultan. He said du's strong financial performance last year led its board of directors to propose its first cash dividend to shareholders - 15 fils per share. If shareholders agree this month to the proposal, du says, it will make a one-time payment worth Dh685.7m spread across its shareholders. Mr Sultan insisted the move was not in response to any requests from shareholders. "There was no pressure at all," he said. "The cash situation is healthy. It's only healthy to return to shareholders." Shares in du, which trade on the Dubai Financial Market, closed at Dh3.12 yesterday, down 1.8 per cent from Monday's close. While du has expanded in the Emirates, it says it is not seeking to enter new markets but may consider that course in future. "When we believe that opportunities will be adding value to du, we will not hesitate to explore this," said Mr Sultan. "For the time being, regional opportunities are very challenging. At this stage, we think [there is] much more value creation for our shareholders to continue creating the value and leverage on our position we created in the UAE market."