16/02/2011 00:00 AST
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), Reuters said.
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.
The Dubai index rose 0.5 percent to 1,616 points, Reuters said.
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.
The Abu Dhabi index climbed 0.2 percent to 2,716 points.
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.
The Kuwait index dropped 0.1 percent to 6,651 points.
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.
The Qatari index rose 0.5 percent to 8,981 points.
Saudi Arabia’s Tadawul All-Share Index (TASI) fell 0.27 percent to 6,606.05 on Tuesday. The sector activity for the day was mostly negative with 10 out of 15 closing with lose ranging from 0.04 percent by the Insurance sector to 0.68 percent by the Industrial Investment sector. On the other hand the gaining sectors ranged from 0.16 percent by the Cement sector to 0.76 percent by the Media and Publishing sector. The overall market breadth for the day was negative with 53 advancers against 64 decliners giving it an AD ratio of 0.82, the Financial Transaction House (FTH) — licensed by the Capital Market Authority (CMA) — said in its daily market commentary.
The liquidity for the day reached SR3.12 billion.
Al-Rajhi Bank dropped 0.6 percent. Samba Financial Group and Riyad Bank each lost 0.4 percent.
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 Co.(STC) for violating regulatory and anti-monopoly laws. STC dropped 0.5 percent.
The Omani index slipped 0.09 percent to 6,995 points.
Arab News
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