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HC Securities Resumes
du Coverage With 
‘Hold’ Rating

DUBAI - Al Futtaim HC Securities has resumed coverage of Emirates Integrated Telecommunications Company or du with a “hold” recommendation, as subscriber base growth is likely to slow down due to easing population in the UAE.

“It is widely believed that one of the key drivers behind the growth in mobile and fixed line subscribers in the UAE was the fast growing population, mainly expats who represented 81 per cent of the 2008 population. As businesses cut their labour force leading to population outflows, we estimate this year’s population to decrease by 1.2 per cent, negatively affecting net adds,” HC Securities said
 in a note to clients.

A fiercer-than-expected competition by Emirates Telecommunications Corp., UAE’s biggest telecommunications network, may lead to lower subscriber acquisition and market share for du, and may “negatively impact on its topline,” said HC Securities.

It said du is facing fundamental challenges, operating as a second player in a saturated mobile market, and in a highly penetrated fixed line market.

“There is limited room for future growth in the mobile market, especially with the expected slower population growth. We forecast the total mobile market subscribers to grow at 4.4 per cent in 2009 and 2010.”

Opportunities in the fixed line market is also being curtailed by the decline in population, and the delay or cancellation of 50 per cent of the new residential areas in Dubai.

The broadband market still offers opportunities, with internet usage in the country at nearly 50 per cent.

“At an estimated internet penetration rate of 20.1 per cent, there is still room for growth. Bearing in mind that broadband uptake is more popular than dial-up, a low broadband penetration of 11.6 per cent in 2008, and the fact that fixed line broadband remains cheaper than mobile broadband, there is growth potential in the broadband market.”

HC Securities’ target price for du is Dh3.29. du’s shares which are listed at the Dubai Financial Market, ended 3.8 per cent lower at Dh2.76.


rocel@khaleejtimes.com