DUBAI: Dubai’s du hit a 15-month high on Tuesday after the telecoms operator said it would pay lower-than-expected royalty fees, potentially doubling its 2010 post-tax profits.
Du will pay a 15 percent royalty fee on its 2010 profit and none for 2008 and 2009. The firm had made provisions to pay 50 percent of its profits in royalties to the UAE federal government, the same as rival Emirates Telecommunications Corp (Etisalat).
The ruling means du will now save 550 million dirhams ($149.7 million) in fees from 2008 to 2010, which will likely be added to its fourth-quarter earnings, said Irfan Ellam, vice president and telecoms analyst at Al Mal Capital.
"This means that du’s fourth-quarter profit will be ahead of expectations," he added. "We don’t know what royalties du must pay for 2011 and beyond, but this increases the probability that royalty fees could come down for both du and Etisalat."
Shuaa Capital raised its full-year profit forecast for du to 1.16 billion dirhams from 527 million dirhams.
Du’s shares rose 3.1 percent to their highest close since Nov. 18, 2009. Etisalat added 0.9 percent.
Abu Dhabi Islamic Bank climbed 2.3 percent after swinging to a fourth-quarter profit of $68.23 million as customer deposits and fee income rose, the latest of the UAE capital’s banks to best estimates.
"The sector is consolidating and banks are signaling that lending will increase from the second quarter, with this starting to show up in financial statements in the second half of 2010," said Samer Al-Jaouni, general manager of Middle East Financial Brokerage Co.
Kuwait’s Zain, subject to a $12 billion takeover bid by Etisalat, fell 2.8 percent to an 11-week low after Iraq fined the telecoms operator $262 million for licensing agreement violations. Zain’s Iraq unit will appeal.
Qatar Electricity & Water (QEWC) slipped 0.6 percent despite posting a 23 percent rise in full-year profit.
"QEWC is one of Nomura’s key picks for 2011 and the company’s fourth-quarter results reiterate our positive view," said Scott Darling, Nomura analyst.
QEWC is up 7.7 percent since a Dec. 2 FIFA vote chose Qatar to host the 2022 soccer World Cup, with the firm seen likely to benefit from a state spending bonanza.
Saudi Arabis index fell for a third day, as unrest in Bahrain and Yemen made investors hesitant.
Al-Rajhi Bank dropped 0.6 percent. Samba Financial Group and Riyad Bank each lost 0.4 percent.
One person was killed when police in Bahrain clashed with mourners at the funeral of a Shia protester shot dead during an anti-government "Day of Rage", while in Yemen hundreds of anti-government demonstrators and government loyalists fought with rocks in Sanaa.
Hesham Tuffaha, Bakheet Investment Group head of research, said regional unrest was unlikely to spread to other Gulf Arab countries, but investors were wary.
"There is a very different picture in the Gulf, with higher income, lower unemployment and higher living standards, but we don’t know investors’ mentality exactly," added Tuffaha. "It’s a confidence issue affecting the whole MENA region. Investors are hesitating, but the market remains stable, which is positive."
Atheeb Telecom, an affiliate of Bahrain Telecommunications Co (Batelco), rose 0.4 percent after the fixed line provider said it filed a lawsuit against Saudi Telecom (STC) for violating regulatory and anti-monopoly laws. STC dropped 0.5 percent.
