Du cannot afford to rest on its laurels

▶ Telco’s stagnant core revenues mean that diversification is vital

A0.9 per cent rise in profits isn’t usually something one touts. However, for du, the UAE’s second largest telecoms operator, the announcement of a flat quarterly second quarter profit was a genuine milestone, after posting year-on-year declines in earnings for 10 consecutive quarters.

The stabilisation in profit, which comfortably beat all analyst predictions, came on the back of a 6 per cent rise in revenue.

That uptick notably included a 5 per cent rise in mobile revenues, a segment that accounts for over 70 per cent of total revenues, which showed flat growth in the previous quarter.

The results are indeed worthy of celebration for the company given its past performance. But the operator cannot afford to be complacent.

A closer look at the figures reveals much of the increase in revenues comes from handset sales rather than actual telecom services, a reminder once again that traditional telecoms services, like voice and data, remain under pressure for operators worldwide.

Such pressures explain the reluctance by local and regional operators to fully embrace Skype and other VoIP services, for fear of further losing out on

The results are indeed worthy of celebration for the company given its past performance

precious international calling revenues. Although du’s chief commercial officer Fahad Al Hassawi insisted this week in an interview with The National that the operator is open to VoIP services, the conditions required by both du and Etisalat are likely to be beyond the pale for providers like Skype and WhatsApp.

Both du and Etisalat, which releases its own results today, are instead getting creative to try and shore up their profitability.

Du’s parent EITC is gradually rolling out services under the Virgin Mobile brand in an attempt to drive more revenue from its prepaid mobile users.

Both UAE operators are also attempting to get into the managed and digital services game, helping businesses with not only their communications but entire IT set-ups.

Such services are still in their infancy though, accounting for just 2.5 per cent of du’s revenues in the past quarter, with no guarantee they can offset a fall in core revenues.

Du has just cause to toast its latest results, but no one should be under any illusion about the challenge both it and Etisalat will face in the coming years.