UAE telco Du will pay 5% of its revenue as a royalty to the UAE government, in a addition to 15% of its net profit, for the year ended December 31 2011, the company said in a statement today.
The modified royalty payment was less than the market had anticipated. Du had prepared to pay 50% of its net profit as a royalty payment, the same sum as that usually paid by its rival Etisalat.
Du said that the ongoing royalty payment for 2012 would be “advised to the company in due course”.
"The 15% royalty on Du’s net profit is the same rate as last year – it was introduced in Feb 2011 and applied retrospectively to Du’s 2010 results," said Matthew Reed, senior analyst, Informa Telecoms & Media. "The new element is that Du will also pay a 5% royalty on its revenues. Presumably this has been introduced to reflect Du’s growing size and financial success. But Etisalat will probably take the view that it - Etisalat - is paying substantially more in royalty and will continue to lobby behind the scenes for its own rate to be cut."