Dubai Shares Rise to 3-Week High as Du's Royalty Payment Reduced

15/02/2011 00:00 AST

Dubai shares rose to the highest in almost three weeks led by Emirates Integrated Telecommunications Co. after the phone company said it will pay lower than expected royalties to the government.

Emirates Integrated, the United Arab Emirates’ second- biggest phone company known as Du, increased to the highest since November 2009. Emirates Telecommunications Corp. climbed for a second time this week in Abu Dhabi. Dubai Islamic Bank PJSC, the U.A.E.’s biggest Shariah-compliant lender, advanced 3.1 percent. The Dubai Financial Market General Index rose 0.5 percent to 1,615.82, the highest since Jan. 26, at the 2 p.m. close in the emirate. The ADX General Index gained 0.2 percent,

“Telecoms are buoying the U.A.E. markets,” said Shehzad Janab, asset management head at Dubai-based Daman Investments PSC, which manages more than 5.5 billion dirhams ($1.5 billion). The government cutting of the Du royalty fee implies a release of anywhere between 400 million and 500 dirhams and is leading positive momentum as sell-side analysts factor in the earnings impact, he said.

The 15 percent of profit royalty payable to the federal government is effective on Jan. 1, 2010, Du said. “We note that management had been provisioning for a 50 percent royalty rate since 2008,” Shuaa Capital PSC analysts Simon Simonian and Rawan Oueidat wrote in a note yesterday. “The announcement implies the company’s profits prior to 2010 will not be taxed.”

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