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Capex of UAE telcos increases 49% in second-quarter amid weak revenues

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Telecom operators in the UAE – Etisalat and du – have increased their capital spending in the second quarter despite reporting weaker revenues in a bid to sustain the increase in data traffic due to remote learning and work from home initiatives.

Both the telcos have reported an increase in fixed-line data traffic and to make its networks robust, the Capex has increased by 49% year on year in the second quarter to AED1,408m compared to AED945m a year ago.

Compared to the first quarter of the year, capital expenditure has increased by 78% from AED791m.

 “Telecom operators have an excellent job to boost their network infrastructure in a bid to absorb the rise in traffic as voice and data traffic shifted from businesses to residential lines and from outdoor to indoor usage due to Covid-19,” a telecom expert said.

He said that the opening of communications tools such as Zoom and Microsoft Teams to work for the first time in the UAE from residential lines is dealing a blow to its voice and data revenues as people are using it over WiFi.

“The rapid take-up of ToTok from 2019 is shifting a large number of calls to the application and operators could see a significant drop in voice revenue for the rest of the year. It is undeniable that it will have an impact on mobile revenues with no clear compensation from the fixed business,” he said.

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New challenges

The country’s largest telco Etisalat, which operates in 16 markets across the Middle East, Africa and Asia, suffered a 3.1% decline in second-quarter revenues to AED12.5b compared to AED12.9b a year ago while du’s revenues fell more than 15% to AED2.68b compared to AED3.19b a year ago.

Etisalat has invested 12% of its revenues and du by 19.1% of its revenues as Capex in the second quarter.

In addition to investments in capacity upgrades and network maintenance, du also allocated to 5G network rollout and the implementation of digital transformation initiatives, in line with the company’s plans to drive long-term value creation while Etisalat has invested in two new Tier 3 data centres in Jebel Ali and Dubai.

In the first quarter, du has invested AED310m or 10.4% of revenues and Etisalat has invested AED481m or 6% of revenues as Capex.

Krishna Chinta, Program Manager for Telecommunications and IoT at International Data Corporation (IDC), said that the pandemic situation has posed new challenges for the telecom operators as the mobile and fixed traffic consumption patterns have altered in unprecedented ways and this will certainly influence telecom operators to bring about certain changes to their operations as well as their cost structures as long as the impact lasts for.