Du Prepares for Competition as Net Jumps at Dubai Phone Operator

Du, the phone company that posted a 46 percent jump in quarterly profit, is firming up plans to face competition from a possible third operator in the United Arab Emirates as it expands its network and restructures operations.

Du expects the telecommunications regulator to allow a new company to start operations in the second-biggest Arab economy in 2015, Chief Executive Officer Osman Sultan said in a conference call with reporters today. “I wouldn’t be doing my job if I don’t plug this assumption in the business plan,” he said. “We should be ready today because my job is to make this company ready for competition at every moment.”

Du has secured 47 percent of the mobile-phone market share since it broke the monopoly of Etisalat and started operations in 2007. The U.A.E., with a population of more than 8 million, had almost 2 million fixed-line phones and 13.8 million active mobile subscriptions at the end of 2012, according to the Telecommunications Regulatory Authority. The regulator said last year Etisalat and Du were meeting the needs of the U.A.E. market and it didn’t have immediate plans to license a third operator.

Second-quarter profit rose to 474 million dirhams ($129 million) from 325.5 million dirhams a year ago, the company said in a statement today. Mobile-phone customers increased 16 percent to 6.65 million.

The shares rose 0.5 percent to 6.73 dirhams after the company said it proposed a one-time payment of 10 fils a share and an interim dividend of 12 fils. The stock has surged 93 percent this year, compared with a 32 percent gain for Etisalat.

Growth Opportunity

Du’s profit compares with a 6 percent increase in second-quarter net income at Etisalat, which is seeking to expand away from its home base to boost revenue. Etisalat said earlier this week it entered exclusive talks to purchase Vivendi SA’s stake in Moroccan mobile operator Maroc Telecom SA for 4.2 billion euros ($5.5 billion).

In contrast, Du, which is in talks with Etisalat on network sharing, started a reorganization this year and plans to outsource some roles at call centers and in information technology, Sultan said in January. Du raised three loans valued at $700 million since mid-December to help finance its network expansion, according to data compiled by Bloomberg.

“There is incredible economic momentum in the U.A.E., we all can see the growth,” Sultan said. “There is a lot of opportunity for the sector to grow.”

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