Feb 06 2012 |
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UPDATE:Dubai Du: Royalty Fee For 2011 At 15% Of Net Pft, 5% Of Revs
Monday, Feb 06, 2012
(Adds analyst comment, details throughout.)
-- Du royalty fee in 2011 lower than what it provisioned for
--Telco paid 15% of net profit as royalty in 2010
--Rival Etisalat usually pays 50% of net profit as royalty
Of ZAWYA DOW JONES
DUBAI (Zawya Dow Jones)--Dubai-based Emirates Integrated Telecommunications Co . (DU.DFM), or Du , has to pay 15% of its 2011 net profit and 5% of its revenues as royalty fees to the U.A.E. government, the country's no. 2 telco said Monday.
Du added that "ongoing Royalty for 2012 onwards will be advised to the Company in due course."
The company paid a royalty fee of 15% of its net profit in 2010, and had provisioned for 50% of its bottom line as fees in 2011. Du 's rival in the U.A.E. Emirates Telecommunications Co., or Etisalat, usually pays 50% of its net profit as royalty fees.
"We estimate this royalty rate change to result in a one time benefit of AED215 million; a combination of lower provisioning for fourth quarter 2011 and write back of excess provisioning done in the previous quarters of financial year 2011," said Nishit Lakhotia, a senior analyst at Bahrain-based investment bank SICO.
"For Etisalat, in 2011, we expect the royalty rate to be same as earlier, i.e., at 50%, unless they also get a similar treatment, which they deserve in our view," Lakhotia added.
Etisalat operates in 18 countries across the Middle East and Africa, as opposed to Du that only operates in the U.A.E. market.
"This news is likely to encourage Etisalat to re-double its efforts to negotiate a new rate with the government," said Matthew Reed, a senior analyst at Informa Telecoms and Media.
Du 's shares last traded Monday down 2% at AED3.01 on the Dubai market.
-By Shereen El Gazzar, Dow Jones Newswires; +971 444 61684; Shereen.elgazzar@dowjones.com
Copyright (c) 2012 Dow Jones & Co.
(END) Dow Jones Newswires
06-02-12 0834GMT
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