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29 March 2024

Etisalat and du's customer base to reach 235 per cent

Value-added-services is one of the most salient features in the Middle East mobile phone market. (EB FILE)

Published
By Nancy Sudheer

The UAE mobile phone market penetration is expected to reach 235 per cent by the end of 2009 and 251 per cent in 2010 despite talks of a decreased population, transient expatriate community and a strong multiple SIM ownership trend.

Research firm Business Monitor International's (BMI) study titled "UAE Telecom Report Q2 2009" said, with the help of data published by etisalat and du, that the UAE mobile market ended 2008 with 9.798 million mobile subscribers. This reflects full-year growth of 34.5 per cent based on the addition of 2.511 million new customers during the year.

Considering the penetration rate had already surpassed 162 per cent by the end of 2007, market growth in 2008 has shown good results. By the end of 2008, the UAE's mobile subscriber penetration rate had risen to 207.8 per cent.

Although Emirates Integrated Telecommunication Company (du) claims to report 90-day active customers, it is thought that etisalat's figures conceal a large number of inactive prepaid customers. The mobile market penetration figures in 2009 and 2010 could fall if etisalat started to discount inactive customers.



Etisalat and du fighting it out

The launch of services by du is considered as a main factor for boom in mobile growth as its growth is said to be based on active mobile users only.

In terms of market share in 2008, Emirates Telecommunications Corporation (etisalat) reported a market share of 74.5 per cent, down from 87.4 per cent a year earlier. This despite the fact that etisalat had 7.3 million mobile subscribers in the UAE at the end of 2008.

Etisalat continued to lose out to du in terms of market share throughout 2008. Du had 2.498 million active customers at the end of the year, giving a market share of 25.5 per cent, up from 12.6 per cent a year earlier. Du's mobile customer base grew by 173 per cent during 2008.

"It is common in developed markets to have penetration rates above 100 per cent, but in the UAE it is more than 200 per cent. The persistence of inactive subscribers accounts for part of this, but we also believe that there is high level of multiple SIM ownership in the UAE mobile market, with customers having different SIMs for personal and work use. It is also possible that official population statistics are underestimating the size of the population, particularly the expatriates," the study said.

The UAE has a very large expatriate population – more than 70 per cent. A large proportion of this are expatriate workers on low salaries while others settle in the UAE to take advantage of the economic opportunities.

Both etisalat and du have taken advantage of this fact by targeting expatriates with numerous promotions focused on international calls.



The competition

The calling plans of the two telecom service providers follow a decision by the UAE regulator Telecommunications Regulatory Authority (TRA) to ease regulations to allow the operatos to compete more effectively. However, the UAE has not really seen a trend of falling prices with increased competition as is often seen in other markets, partly because the competition is still fairly limited. It is not in etisalat or du's long-term interests to instigate a price war, so they have concentrated on promotions and new services to attract more customers.

Etisalat in particular has concentrated on value-added services, whereas du announced in October that it saw the UAE's mobile subscribers as still being interested in basic connectivity and services and said it would focus on going "back to basics". Not long after this statement came the announcement of a new tariff in association with the Permanent Committee of Labour Affairs that was specifically designed to target the expatriate workforce in the country.

It is a bargain branded offering, similar in some ways to the kind of offers often launched by MVNOs (mobile virtual network operators) in Europe that target immigrant and expatriate communities. Despite the various international calling promotions, this is a market segment that had been relatively under-served, and it could be a large growth area for du.

Both du and etisalat said they have nothing to fear from a third operator on the market. This is entirely accurate, at least as far as the next six to seven years are concerned, for while the TRA says it is preparing policies that will ease the introduction of a third operator, it claims that the issue is "premature" and cannot be discussed until 2015.

Key developments in the UAE telecoms market in recent months include the January announcement by the TRA that it had finalised the submissions from interested companies for acquiring a licence to broadcast mobile TV services in the country.

Once issued, the new licence will be valid for 10 years. Although 3G-based mobile TV services are available in the UAE, the new mobile TV service will be based on a different technology and will enable customers to access a wider selection of mobile TV channels.

The TRA plan to make mobile TV services available in the country in 2009.



Operators to cash on VAS

Value-added services (VAS) for mobile telephones are a major feature of the market in the Middle East.

In addition to a wide range of voice-based mobile VAS, including voicemail and friends and family services (which allow cheaper call rates to designated numbers), many of the region's mobile operators offer a wide suite of data-based services, including wireless broadband services.

Some analysts said mobile data services, including SMS, MMS, video telephony and mobile TV, generated more than $1 billion (Dh3.67bn) in revenues for Middle Eastern mobile operators in the third quarter of 2008.

Other analysts have predicted that revenues from mobile data services, as a proportion of total mobile service revenues, will rise from nine per cent in 2008 to 24 per cent in 2013.

Both etisalat and du offer a wide range of voice-based VAS such as call forwarding, call barring, caller line identification, multiparty calling and voice messaging.



Fixed-line growth rate

The report says fixed-line growth for the UAE remains unchanged in the current update. The number of fixed-line connections will see steady growth over the next five years, but it does not see this keeping pace with new estimates for population growth, and thus the penetration rate is expected to fall.

BMI believes that the general trend within the fixed-line market of the UAE will be one of continued decline.

However, the figures published by etisalat and the regulator, and now du, suggest that the UAE's fixed-line sector is not stagnating in the way that the analysts previously thought.

They also suggest that the arrival of competition from du has had a positive impact on the market.

The UAE Government has ruled out the possibility of opening up the fixed-line market to foreign operators, saying competition between incumbent etisalat and second operator du should be sufficient to bring down prices.

The fixed-line market has so far been spared the effects of VoIP usage, which has put downward pressure on subscriber numbers in other markets.

The TRA said in September that it was considering the possibility of allowing international VoIP services, initially for the two licensed operators, and then possibly opening the market to another UAE-owned VoIP provider. These developments are likely to be a long way off.



Broadband widens

Broadband subscriptions are expected to reach 1.164 million by 2013, having broken the one million barrier in 2012. This will give a penetration rate of 21.7 per cent. The report estimates that the UAE had 2.561 million internet users at the end of 2008, a 20 per cent rise on 2007.

Both dial-up and broadband internet connections are expected to grow over the next five years, but broadband's growth is expected to outpace the growth of dial-up connections and will likely cause the dial-up sector to enter a period of gradual decline.



Threats to the sector

As per the Business Environment rankings for the telecoms sector of the Middle East, the UAE retained its position in seventh place.

The country retained its position despite receiving a lower overall score.

The UAE has a telecoms market score that is just below the regional average of 54.9. The country also has the second-lowest telecoms market score out of the GCC countries, except Oman. Although mobile subscriber growth appears to remain strong, the mobile penetration rate has now surpassed 200 per cent, further strengthening the likelihood that saturation point is not far off.

Market saturation will inevitably limit the potential to win new customers, forcing the operators to compete for one another's existing subscribers.

The independent operation of the telecoms sector is another area of concern. The strong internet control policy, due to cultural sensitivities, might affect mobile internet usage.

Another area of concern is mobile penetration in all the UAE's telecom sub-sectors that offer few growth prospects. Lack of foreign investment could also slow the pace of technological innovation.

For expatriates another concern is the UAE's currency being pegged to the US dollar. The expatriates have to keep track of their respective countries' currencies as the US dollar moves up, down and sideways.

 

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