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Can du now afford to cut Broadband prices?

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The UAE’s second telecommunications company du has just declared a net profit of $72 million for 2009 after provisions for a 50 per cent royalty for the government compared with just over a million dollars in 2008. Revenues rose 35 per cent to AED5.3 billion.

Does this higher than expected profitability mean that du can now afford to cut Broadband prices in the UAE that are among the more expensive in the world?

Price falls?

There have been some indications recently that Broadband prices are to come down, but nothing has actually happened yet.

Last year du added 1.01 million mobile customers and 337,900 in the final quarter, more than double its rival Etisalat. This tends to contradict reports that the population of the UAE might be shrinking but it is also a credit to du’s marketing strategy.

Although stock market listed, du is partly owned by Dubai Holding, the investment company of Sheikh Mohammed bin Rashid, Vice President of the UAE and Ruler of Dubai, and by the Abu Dhabi investment vehicle Mubadala Development. Despite that pedigree fighting to gain market share from a powerful incumbent player like Etisalat since du’s start-up in 2007 has not been an easy task.

It is also an expensive business. Du invested some AED2.4bn in building its mobile, Broadband and fixed line networks in 2009 and has an investment programme of more than AED2.2bn for 2010.

This year there is excitement about a new Arabic sports channel on the Internet and a long-awaited Broadband infrastructure sharing deal between du and Etisalat to start within five to six months.

Pricing levels

Yet what most consumers would like to see most are lower prices. Perhaps with the infrastructure investment programme in progress that might be expecting too much, but it may also become necessary if du wants to grow its subscriber base further into less affluent segments.

There are also some niggles about customer service and billing of services but a rapidly expanding telecoms company is bound to have some teething troubles. Clients would be more forgiving perhaps if prices came down to levels found in European countries.

Besides Broadband is the backbone of the Internet economy with its information, shopping and banking experiences, and should be considered as basic as roads in making the national economy more efficient.

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Written by Peter Cooper

February 25, 2010 at 5:53 pm

Posted in Media, UAE Stocks

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