UAE telco Etisalat's third-quarter net profit misses forecasts
DUBAI (Reuters) - Etisalat ETEL.AD, the Gulf's No.1 telecom operator, reported an 18 percent drop in third-quarter profit on Monday, missing analysts' estimates as capital spending and operating expenses each rose by about a third.
The UAE former monopoly, which operates in about 15 countries across the Middle East, Africa and Asia and is in exclusive talks to buy a controlling stake in Maroc Telecom (IAM.CS), made a net profit of 1.83 billion dirhams ($498.23 million) in the three months to September 30, according to a statement to Abu Dhabi's bourse. <ID: nL6N0HP02B>
This compares with a profit of 2.21 billion dirhams a year earlier.
Analysts polled by Reuters on average forecast Etisalat would make a quarterly profit of 1.96 billion dirhams.
Third-quarter revenue was 9.59 billion dirhams, up from 8.01 billion dirhams year earlier.
Etisalat said the revenue rise "was primarily due to customer acquisition, an increase in the revenues of data and handset sales".
Unlike markets in Europe and North America, Middle East consumers typically buy unlocked handsets and separately choose a mobile operator.
But slowing subscriber growth has led regional operators to increasingly sell handsets directly to persuade customers to sign up to monthly contracts. These so-called post-paid customers usually spend more on telecom services and are less likely to switch provider.
Handset sales offer little profit for operators and may help explain how Etisalat's third-quarter net profit margin fell to 19 percent, from 28 percent a year ago.
Quarterly operating expenses rose 32 percent to 6.09 billion dirhams. This was largely due to a 47 percent jump in sales costs to 2.15 billion dirhams, while staff costs and depreciation also increased.
The UAE accounted for 6.17 billion dirhams, or 64 percent, of Etisalat's third-quarter revenue.
The remaining revenue came from its international units, which rose 41 percent to 3.4 billion riyals, partly due to the consolidation of its affiliate Pakistan Telecommunication Co (PTCA.KA) (PTCL).
Revenue from Egyptian unit Etisalat Misr fell 14 percent to 1.12 billion dirhams, a drop Etisalat blamed on foreign exchange losses.
Consolidated capital expenditure rose 39 percent in the third quarter to 1.3 billion dirhams, compared with the year-earlier period, Etisalat said.
In Africa, Etisalat's earnings before interest, tax, depreciation and amortization (EBITDA), a key industry metric, fell 38 percent due to what Etisalat described as new call taxes and increased marketing spending.
Etisalat had a net cash balance of 5.83 billion dirhams as of September 30, down from 8.13 billion dirhams at 2012-end. ($1 = 3.6730 UAE dirhams)
(Reporting by Matt Smith; Editing by Dinesh Nair)