Du faces "some redundancies" in restructuring

"Name of the game is efficiency" says UAE telco CEO Osman Sultan
Osman Sultan confirmed that there would be some redundancies as a result of its restructuring programme.
Osman Sultan confirmed that there would be some redundancies as a result of its restructuring programme.


UAE telecommunications operator Du is likely to make “some redundancies” as part of a restructuring operation which will see some parts of the business outsourced, CEO Osman Sultan confirmed.

The head of Dubai-based Du, the Gulf state's second operator after Etisalat, refuted on-going market speculation of wide scale lay-offs, telling Arabian Business: “Restructuring is happening. We have not laid a quarter of our staff, that is for sure."

Sultan added: "From time to time in an outsourcing process there might be some redundancies, but this is not like we are restructuring the company and laying off people for cutting costs.”

Sultan also told Arabian Business that the company has no plans to move outside its domestic market this year.

The company, which started operating in 2007 and retains about half of the mobile market share, has been pursuing an outsourcing programme since the beginning of the year in a bid to become more efficient.

"The reason why we are outsourcing is to enable better growth and value creation," Sultan said. "Du has been one of the fastest growing telecoms in the entire Arab world for the past three years. It's pretty normal when you are in this phase of growth, that you enter a phase where the name of the game is efficiency."

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Last month the company said it was putting in place a new organisation structure that would see the consolidation of its operations. The company reported a 12.9 percent increase in its third quarter revenue to AED2.5bn (US$680m) from the same period in 2011, boosting its net income after royalty by 34 percent in the period to AED326.9m. The telecoms operator had 5.96m mobile subscribers on September 30, giving it a 46.5 percent share of the UAE's mobile subscribers, the same as in the second quarter.

"Moving in the traditional telco model outside the UAE is not on our agenda, we will be looking to MVNOs (mobile virtual network operators), but we don't see anything happening in this respect in 2013," Sultan said when asked if the operator would could consider expanding abroad like its rival Etisalat, which operates in 15 countries and is currently considering buying Vivendi's 53 percent stake in Morocco's Maroc Telecom.

"Given the existence of solid growth potential in its home market, as well as relative regulatory certainty in the UAE, focusing on its home market for the short to medium term makes sense," said Jawad Abbassi, founder and general manager of telecoms research firm Arab Advisors Group, adding "especially as regional and global opportunities are becoming more expensive to pursue with less certain prospects".

Growth in the industry is being driven by mobile, specifically in data. By the end of 2011, the total number of fixed-line subscriptions of 20 examined operators in 15 Arab countries reached 26.441m, according to Arab Advisors. Telecom Egypt had the largest fixed-line subscriptions base among the selected operators, followed by STC and Syrian Telecom. The UAE recorded the highest fixed-line penetration rate by end-2011, followed by Syria.

Mobile subscriptions in the Middle East were projected to reach more than 250m last year, as mobile penetration exceeds 100 percent, according to Informa Telecoms & Media. The introduction of new players to markets and the end of monopolies has been beneficial for consumers. With increased competition, product ranges have improved, prices have come down and companies have been forced to become more innovative as they vie for a larger share of the market.

Sultan said he is "quite bullish" about the operating environment in because of "better macroeconomic environment and the gains of efficiency that we will be doing", when asked about his outlook for the coming year.

The economy of the UAE, the second largest in the Arab world, was projected to grow about 4 percent last year, down from about 5.2 percent in 2011, according to International Monetary Fund estimates. The figure may change when the government releases its figures for the year in the first quarter.

Dubai's stock market has increased to a 34-month high on the back of the country's property market rebounding after a corporate debt crisis in 2008 and ensuing property market collapse.

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