Revenue – AED3,090 mn, +1% Y-o-Y, -2% Q-o-Q, -2% vs. EFGe EBITDA margin – 45.0%, +2.4pp Y-o-Y, +0.4pp Q-o-Q, +0.0pp vs. EFGe Net income – AED480 mn, -1% Y-o-Y, +4% Q-o-Q, 0% vs. EFGe   du’s 1Q2016 results came in exactly line with our estimates on all fronts. Earnings stood at AED480 million, almost unchanged Y-o-Y despite earnings before royalty having increased 10% Y-o-Y; this was due to a 24% Y-o-Y increase in royalty fees on the back of a hike in royalty charges on the revenue component starting 2016 to 15% from 12.5%. This is the last increase in royalty rates for du as per the schedule that was announced by the Ministry of Finance, and going forward we expect royalty rates to remain unchanged. Overall we think this was a good set of results, but we see no positive surprise that would justify the stock’s performance lately. We believe the recent strong performance in the stock was rather owing to ongoing speculation about du allowing foreign ownership of its shares, and we remain of the view that du will eventually allow foreign ownership, encouraged by Etisalat Group’s decision last year.   The company booked a strong EBITDA margin of 45% for the quarter, in line with our estimate. The healthy margins will have been largely boosted by an improving revenue mix that is increasingly skewing towards higher-margin segments, with mobile data revenue contribution climbing to 34% of mobile revenue from 30.7% in 1Q2015. Moreover, EBITDA was supported by a one-off change of estimate of bad debt provision and a favourable settlement of prior year expenses. On the subscribers front, du showed positive net subscriber additions for the second quarter in a row as the negative impact of the subscriber registration campaign (My Number, My Identity) has subsided. (Omar Maher, Company Disclosure)