Etisalat, Du negotiate royalty fee payments

1 Mar 2013

The United Arab Emirates’ two telecoms operators, Emirates Telecommunications Corporation (Etisalat) and Du, are reportedly in talks with the Ministry of Finance over royalty fee payments. Zawya Dow Jones cites analysts as saying that the two companies are discussing the types of revenues that would come under the new royalty scheme introduced on both net profits and revenues in December last year. According to analysts, the telcos have already saved about 12% in fees payable to the government on 2012 revenues after negotiating that some low-margin businesses, such as interconnection, are not included in the revenue element of the royalty payment, but the pair are also said to be looking to exclude revenues on handset devices sold as bundle packages from the royalty plan. Devices sold separately are not subject to the revenue royalty, the sources added.

Late last year, the government set the new royalty fee that Etisalat and Du must pay for the period 2012-2016, CommsUpdate reported. Under the new scheme, Etisalat is required to pay an annual rate of 35% of its net profit plus an amount equal to 15% of its revenue for 2012-15, followed by royalty of 30% of its net profit and 15% of revenue in 2016. Du, meanwhile, is required to pay a 17.5% royalty on profits and 5% on revenues in 2012, although the rates will steadily rise to 20% (profit) and 7.5% (revenue) the year after that, 25% and 10% in 2014, and 30% and 12.5% in 2015. Finally, in 2016 the profit royalty rate for Du will remain level at 30%, although the revenue fee will increase to 15%, the same rates as Etisalat.

United Arab Emirates, Du (Emirates Integrated Telecommunication Company, EITC), Etisalat UAE