Mobile penetration will slow next year
Increase in the number of mobile phone subscribers in the UAE will slow to 10.2 per cent next year compared to the blazing growth of 29.5 per cent achieved in 2007, analysts said. This will be accomplished on the back of continuing population growth, investment bank EFG-Hermes said in the UAE Research Yearbook 2008 released last week.
“With mobile and fixed-line penetration rates of 151 and 30 per cent, respectively, both the highest in the Middle East and North Africa (Mena), we believe that population will be the main driver of telecommunications growth. We forecast the UAE’s population will grow at a 2007-2012 CAGR [compounded annual growth rate] of 7.3 per cent,” the bank’s analysts wrote in a report in the 2008 yearbook.
The mobile penetration rate will continue to exceed the size of the addressable market over the next two years, then decline to a level equal to it. “We project that mobile phone subscriber additions will begin to slow, with the expanding population driving most of the growth. For 2008, we expect subscribers to grow by 10.2 per cent, up from the 6.7 per cent we had previously forecast. This is less than the 29.5 per cent growth that we expect for 2007.”
The concept of mobile number portability is expected to be introduced in the UAE next year, through which users of one service provider can switch to another without changing their telephone numbers, including the prefix. The country’s second operator, Emirates Integrated Telecommunications Company, or du, is expected to be the largest beneficiary of number portability for the next five years.
“We expect du to continue capturing a higher share of net additions over the next two years, increasing its market share to 25 per cent in 2009. Afterwards, we expect the share of new additions to stabilise at 50:50 between du and etisalat [Emirates Telecommunications Corporation]. Over the long term, we expect etisalat’s market share to stabilise at 64 per cent and du’s at 36 per cent,” EFG said in its report.
THE PHONE MARKET
The mobile market witnessed an unexpected surge in the first nine months of 2007, adding 1.6 million subscribers versus fewer than a million for the whole of 2006. Du had the highest share of additions, gaining 882,000 subscribers, while etisalat added 670,000.
“We estimate 80 per cent of du’s reported additions are active. The entrance of du drove the penetration rate to 151 per cent as of end-September. As we had expected, this exceeded the size of the addressable market, which we estimate at 140 to 145 per cent of the population. If we use our estimate of active subscribers, the UAE’s mobile penetration rate as of end-September drops to 147 per cent,” the report said.
Du CEO Osman Sultan told Emirates Business earlier this month that the operator is on track to achieve market share targets. “We had said that we will attain 30 per cent market share at the end of 2009. As we stand today, we will achieve this objective ahead of schedule,” he said in an interview.
The entrance of competition was a major driver of this strong market growth, but EFG believes the rapid expansion of the country’s population was also important. “Rather than slash headline tariffs and start a price war with etisalat, du focused more on market segmentation and promotional offers to gain market share,” EFG’s analysts said.
The penetration rate for fixed-line phones has been stable at 30 per cent since 2002. EFG expects it to start increasing over the next five years. “The introduction of triple-play services, expected in late 2008 or early 2009, will boost fixed-line penetration, especially if it results in a reduction in broadband prices. Du has awarded a contract to Alcatel-Lucent to provide internet protocol television, or IPTV, including video-on-demand services. We believe that both operators will focus on value-added services and other interesting value proposals to customers that will increase spending on services based on fixed lines,” the EFG report said.
Triple play, a concept that du has also said it will introduce, likely next year, offers subscribers voice video and data over a single source. Etisalat’s cable TV subsidiary, Emirates Cable TV and Multimedia, or E-Vision, last year ordered a new range of enhanced set-top boxes. The new user interface extends the reach of etisalat’s TV services, beyond its cable network, to customers with ADSL broadband connections. Hybrid set-top boxes support both Digital Video Broadcasting (DVB) and Internet Protocol (IP) standards allowing broadcasters and network operators to leverage both traditional one-way broadcast as well as two-way interactive IP delivery.
“We project fixed-line subscribers will grow at a five-year (2007-12) CAGR of 7.9 per cent, slightly higher than the growth in population for the same period,” EFG said. “We forecast the fixed-line penetration rate will climb to 34 per cent in 2015 then stabilise. Throughout our forecast horizon, we expect etisalat’s market share to decline gradually, then stabilise at 75 per cent.”
The fixed-line market added 70,700 new lines in the first nine months of this year, implying year-on-year growth of 64 per cent. Etisalat, at 67 per cent, had the highest share of additions. Du added the remaining 33 per cent, increasing its market to three per cent at the end of the third quarter.
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