Why did Etisalat not publish its Q4 results?

UAE telecom giant Etisalat yesterday published an estimate of its full year financial result for 2009 but delayed providing a final profit figure for the year because of accounting changes in the fourth quarter.

Gulf News reported: ‘Accurate figures for the fourth quarter could not be calculated as the company changed its accounting methods to comply with international standards for the first time in 2009′.

Modest growth

The estimated annual result showed profits rising by 3.6 per cent to $2.4 billion, lower than most analysts had expected, according to The National. Revenues rose five per cent to $8.4 billion.

Detailed annual results are expected on February 25th. Only then will the market learn whether the application of new international standards has resulted in some new write-offs in the fourth quarter, which would impact on the final profit for 2009.

However, the company was not slow to publish figures showing an expansion of its subscriber base in the fourth quarter. It added 464,000 customers in the year and 300,000 in Q4 alone.

This appears to contradict predictions of a population decline in the UAE in 2009, although many subscribers now have more than one phone and an element of double-counting may have crept into these figures.

For 2010 then the outlook for Etisalat may also be one of robust performance, depending again on whether any provisions against possible bad investments are forthcoming. Certainly it will be interesting to watch how these new accounting standards impact profits both in 2009 and what they might mean for 2010.

Competition from du

And looking ahead analysts think earnings could be squeezed next year by a loosening of price controls to allow more aggressive price competition from duopoly rival du. For a 28 per cent gross margin does invite accusations of over-pricing.

Indeed, whether UAE companies can protect their historically large profit margins in a tougher and more competitive market is something that is troubling local analysts. For without their high profit margins then UAE share prices will fall.

It will be for the government regulator to balance the benefit of competitively priced telecoms to the development of the UAE economy against the maintenance of high profit margins for re-investment in infrastructure and to reward shareholders.