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By Alexander Cornwell
DUBAI, Feb 16 (Reuters) - Emirates Integrated Telecommunications Co is targeting 1 billion dirhams ($272 million) in savings by 2019 as government taxes erode profit at the United Arab Emirates’ second-largest telecoms company, its chief executive said on Thursday.
Results have been under pressure since late 2014, with the pace of growth in the mobile market unable to match the rise in the rate of royalties paid to the government, which have increased steadily since 2012.
The telecoms firm, commonly known as du, expects “at least” 1 billion dirhams in savings over three years from changes to its costs of sales, operational expenses and capital expenditure, CEO Osman Sultan told reporters on a conference call. He later said the figure could be higher.
The firm, which ended rival Etisalat’s domestic monopoly in 2007, started restructuring in the second quarter last year which has included “tens” of job cuts, Sultan said on Jan. 31.
The company this week reported a 20 percent fall in fourth-quarter profit.
Du’s royalty payment in 2016 increased to 2.111 billion dirhams compared to 1.921 billion dirhams in the previous year, according to Reuters calculations. It is yet to be given guidance by government for the 2017 royalty rate, Sultan said.
Du will also increase focus on non-traditional revenue streams including hosting data centres, managed services and services related to smart cities, Sultan said.
Dubai is embarking on a major smart city strategy to integrate the emirate’s infrastructure with online technology .
“This is where the highest growth will come from,” Sultan said.
The telecom announced on Jan. 31 it had acquired a licence to operate Virgin Mobile-branded services in the country.
Earlier on Thursday du said its board was recommending a full-year dividend of 0.34 dirhams per share compared to a dividend payout of 0.43 dirhams per share in 2015 which included a special dividend payment of 0.10 dirhams per share. ($1 = 3.6726 UAE dirham) (Reporting by Alexander Cornwell; editing by Jason Neely)