3G mobile subscribers in the UAE likely to touch 2.4 million by 2012

The UAE remains a promising market for 3G, or third generation mobile services, according to a new report.

The country has an over-penetrated mobile market and an affluent population that tends to be technology-savvy, says the study by research firm Rncos E-Services.

The number of 3G subscribers is expected to increase at a compound annual growth rate (CAGR) of around 25 per cent between 2007 and 2012 to reach 2.4 million by the end of 2012.

"There has been a mass migration of users from traditional voice-only mobiles to more sophisticated third-generation mobile technology over the recent years," says the report. "Analysing the present scenario of mass migration, the report explains that the number of 3G mobile subscribers will reach 2.4 million by 2012.

"Moreover, with the better understanding of the technology, availability of more affordable 3G handsets in the market, the sales of 3G mobile phones increased by 22 per cent in 2008 over 2007."

The penetration of the mobile market in the UAE reached more than 190 per cent in 2008, leaving less room for operators to further take advantage of the market. Instead operators are now looking at value added services (VAS) to derive revenue from saturated mobile market.

With rapidly declining internet subscription rates and easy availability of high-speed broadband access, the number of internet subscribers is projected to grow at a CAGR of approximately 25 per cent from 2009 to 2012.

But this does not indicate the end of growth as the number of mobile subscribers is forecast to grow at a CAGR of more than seven per cent during 2009-2012. The demand for internet services has increased in recent years in line with the growth of the education and business sectors in the region.

"Although dial-up subscriptions currently dominate the internet market, broadband subscribers are projected to account for nearly 65 per cent of internet subscribers in coming few years," says the report.

"Broadband subscriptions in the UAE are growing continuously as the number of both domestic and business users of high-speed services continued to increase.

"The main factor fuelling the growth of broadband services is the strong growth in the number of small to medium-sized businesses. The number of broadband subscribers grew at a CAGR of around 60 per cent from 129,000 subscribers in 2005 to 529,000 in 2008. The penetration rate also increased from a mere 7.9 per cent in 2005 to 26.9 per cent in 2008."

The broadband segment, which is dominated by residential users, is growing far faster than dial-up.

In 2007, broadband represented only 42 per cent of internet subscriptions, while in 2008 it surged to more than 45 per cent.

The number of broadband subscribers is forecast to reach 1.8 million by 2012, growing at a CAGR of more than 35 per cent between 2009 and 2012. The increase in the number of businesses along with the entry of new players such as du will also fuel the growth in the broadband subscriber base, says the report.

As a result the penetration rate of broadband subscribers is forecast to increase from 31 per cent in 2009 to 66 per cent in 2012 – a CAGR of 29 per cent.

"However, the fixed-line infrastructure remains underdeveloped, with penetration rates pegged at 30 per cent in 2008," adds the report. "This is mainly due to a lack of competition in the telecom market coupled with high costs and the time required to set up network infrastructure."

The telecom market was worth Dh27.72 billion in 2008. With competition further intensifying and operators looking at various alternatives to boost revenues from mobile and internet services – such as the rollout of 3G, mobile TV or IPTV across the country – the telecom market in the UAE is set to grow at a CAGR of 10 per cent from 2008 to 2012 to Dh40bn.

UAE telecom subscribers can expect lower call rates over the forecast period. From the current rate of about 30 fils per minute the airtime rate, according to the report, will fall to as low as 20 fils per minute.

Etisalat has been preparing for competition for some time and has been dropping its prices and airtime rate for two years. As a result many more people are happier now than they were five years ago, says the report.

A mobile virtual network operator (MVNO) entrant in the UAE is unlikely to appear in the next couple of years, primarily because the regulatory framework for MVNOs is not in place.

Moreover, du is still expanding its mobile network infrastructure. The existing infrastructure is already at full capacity utilisation in some key urban areas. Until one, or both, operators have sufficient excess capacity to lease to a virtual operator, the added value of an MVNO in the UAE remains slim, at best, says the report.

"The UAE's telecommunication market remains a duopoly consisting of etisalat and du. It is characterised by high GDP per capita, an extremely high rate of mobile penetration and a rapidly growing internet broadband subscriber base. Etisalat commands about 78 per cent of the UAE's mobile market in terms of subscribers and du achieved a market share of 22 per cent by the end of 2008," the report adds.


Strengths of UAE market

- With its rapidly evolving ICT infrastructure, the UAE is considered a regional hub for ICT in the Middle East and North Africa 

- Immense support from the UAE Government, including tax holidays for software companies, the easing of export and import regulations and training programmes are an added advantage

- Extending infrastructure, attractive zones and technology parks such as Dubai internet City, Dubai Media City and Knowledge Village

- Higher level of mobile penetration than other Middle East countries 

- The UAE remains ahead among the Arab nations in embracing newer ICT technologies, such as 3G, WiMax and mobile TV


Weaknesses

- The UAE has been slow to reform its telecom industry – clear evidence of this is that etisalat still accounts for more than 80 per cent of the market 

- The high cost of PCs and internet access has hindered the potential growth of the internet market

- Piracy levels remain high

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