Etisalat, the UAE's largest telecom operator, posted a 23.4 per cent slump in full-year net profit yesterday after writing off the value of its Indian operations.
The company, formally known as Emirates Telecommunications Corporation, made a net profit of Dh5.8 billion in 2011, down from 7.6 billion in 2010, after booking an impairment of Dh1.02 billion because of cancelled licenses in India.
Group revenues stood at Dh32.2 billion against 31.9 billion in the year-before period, the company said in a statement to Abu Dhabi's bourse yesterday.
India's Supreme Court last week ordered the government to revoke all 122 second generation (2G) licenses issued in a 2008 sale at the centre of a major corruption scandal. Swan Telecom, which was later renamed etisalat DB after etisalat bought a stake in the firm, was one of eight companies that acquired the licences at cut-price rates.
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"Etisalat's consolidated revenues are stable — actually they are up very slightly by one per cent between 2010 and 2011. But clearly the most striking development is that there has been a fairly substantial decline in net profit," said Matthew Reed, a senior analyst at Informa Telecoms and Media.
"Part of that can be attributed to the impairment charge that etisalat announced relating to the loss of its operating licences in India. But the stated impact on net profit of losing those licences does not account for all of the reported fall in net profits. Therefore, it seems profitability is under pressure elsewhere in the etisalat group," he added.
Reed says etisalat continued to face strong competition from du in its UAE home market last year, adding that political instability elsewhere in the region also had an impact on the company's bottom line.
"Etisalat Misr (Egypt) is the most substantial of etisalat's non-UAE operations that is included within the consolidated results, and that may have been affected by the political upheaval and economic difficulties there over the past year," he said.
Etisalat made a fourth quarter net profit of Dh710 million, according to Reuters, compared with a profit of Dh2.02 billion in the same period a year ago. Its shares ended flat on the Abu Dhabi bourse prior to the announcement although they are up 3.5 per cent for the year. "In the wake of the current economic slowdown, it is commendable to see an international operator posting revenue growth, although it is just marginal," said telecom analyst Hasan Sandila.