UAE UAE Telecom Industry

Ringing all the way……

www.mtiworldwide.com
 1

Middle East Telecom landscape

The Middle East telecom sector has experienced rapid
changes and tremendous growth since 2003. Market
liberalization, increased competition, and the
introduction of new network technologies are all
increasing consumer demand for broadband access. In
2006, most Middle East countries experienced double-
and even triple-digit growth in the number of broadband
subscribers. As a result, there are significant
opportunities for telecommunications operators to tap
into this potential and increase their revenues and bottom
line margins
Exhibit 1
World Internet users by World regions
3% 3% 1%
Asia
Europe
10%
North America
40%
Latin America/Caribbean
17% Africa
Middle East
Oceania/Austrlia
26%
The sector witnessed a phenomenal compound annual
growth rate (CAGR) of 44 % between 2003 and 2007, with
subscribers increasing from 24 million to 103 million. As
the wave of sector liberalization continues, telecom
operators are facing increasing competitive pressure. On
one hand, the market for traditional telephony, whether
fixed or mobile, is so saturated that it can no longer be a
viable exclusive source of growth. On the other
hand, convergence with other sectors has brought about
opportunities that could be considered.
However greater availability of and demand for digital
content, a growing youth market and the increase in
prosperity in the region are also significant drivers behind
the observed boost in demand for broadband. This
demand seems set for continued growth as more
countries in the region move toward a competitive
structure and as advancements in technology make it
more possible to provide high-speed broadband in an
economic manner. The success of regional
telecommunications operators in capturing this demand
largely depend on key marketing, technology, and
customer service strategies and decisions that they will
need to adopt.
Growth strategies for telecom operators fall largely under
two categories: Scale and Scope.
The potential growth paths for telecom operators rely on
growing revenue share and growing the customer
base, and most preferably a mix of the two. In order to
grow, operators must be able to preempt competition and
leverage the critical mass for competitive advantage.
In terms of scope and growing revenues, operators must
extend and diversify their business to include offerings
that go beyond basic telecom services. Seeking scope is
further enabled by convergence between telecom and
other industries such as media and the financial sector.

Exhibit 2
World Internet penetration rate by Geographical Regions

North America
Oceania/Austrlia 59.5%
73.6% “ Telecom sector
has grown with
Europe 48.1% CAGR of 44 %
Latin America/Caribbean 24.1% between 2003 and
World Avg. 21.9% 2007, with
Middle East 21.3%
subscribers
Asia 15.3%
increasing from 24
Africa 5.3%

0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0%

mn to 103 mn
”
Penetration rate
 2

UAE Telecom Industry

UAE has one of the most developed telecom market and
technologically advanced telecom infrastructure in the
Gulf with fixed, mobile and Internet penetration rates of
30.4%, 166.4% and 49.5% respectively at the end of
December 2006. The country is ranked first in the Arab
World and 29th overall in Networked Readiness Index
(NRI), according to the Global Information Technology
Report produced by the World Economic Forum.
Development of an independent regulator (TRA)
In 2004, the UAE government created an entity, the
Telecommunications Regulatory Authority (TRA), to
regulate, develop and oversee the telecommunications
industry in the UAE, effectively ending Etisalat's regulative
authority.

Until 2007, UAE‟s telecom sector had been provided
under monopoly conditions by the Emirates
Telecommunications Corporation (Etisalat), a company of
which the UAE government owns 60%. Etisalat however
lost its monopoly in 2007 to Emirates Integrated
Telecommunication Company (EITC), now re-branded as
“du”. The company paid a total price of AED124.5 million
for the license that granted du the right to Install, operate
and manage all range of telecom services across the UAE.
In February 2007, du launched its mobile service across
the Emirates in addition to Internet and pay TV services in
some of the free zones of Dubai. Call Select, the first of
du's nationwide fixed line services, was launched in July
2007. The introduction of the second telecom operator
will pave the way to a full liberalization of the market
The organizational objectives of the TRA are derived from
the Telecommunications Law. TRA is responsible for the
development of the required policies to maintain fair
competition, govern new entrants‟ ability to compete with
the incumbent operator and manage the regulations
related to the nature of the licensing regimes.
Fixed-network markets have begun to be
liberalized, albeit at a slower pace (see Exhibit 4).
However, the region is starting to see stagnation in the
value added to market development by competing
facilities-based operators.

Exhibit 3
Mobile Market Liberalization Time Line * Highlights of telecommunications regulation and liberalization**

Separate Telecom Start of Data of Full

Country Regulator Liberalization Liberalization

Bahrain 2002 2002 2004

Saudi Arabia 2001 2003 2006

Jordan 1996 1996 2005

UAE 2004 2005 2015

*Sources: Booz Allen Hamilton

**Source: ITU

Liberalization Exhibit 4
Telecom Competitive Landscape in Middle East
Until 2004, the UAE‟s telecommunications market had a
single entity, Emirates Telecommunications Corporation
(Etisalat), operating in the capacity of both a telecom
regulative body and a fully-fledged telecom service
provider, at the same time. With the UAE‟s accession to
the World Trade Organization (WTO) agreement, the UAE
initiated the first steps towards becoming a fully
liberalized market by 2015 (see Exhibit 3)
 3

UAE Telecom Industry (cont..)

Mobile Market

Benchmarked against the other ME region, the UAE had Pricing

the highest penetration exceeding 166% at the end of According to the World Bank, the price basket for mobiles
2007, with total mobile subscribers reaching per month in 2006, showed that the UAE is relatively
approximately 7.6 million at the end of December cheap, compared to most of the region, in terms of
2007, compared to the region‟s average of 60%. affordability, with the UAE standing at US$4.10 per
According to government statistics in 2006, the UAE's month, compared to the region‟s average of US$6.30 per
population was 4.6 million, which means that there are month, giving an added advantage to the UAE in terms of
about 178 mobile numbers in circulation per 100 increasing mobile usage.
people, or about two sim cards per person

Exhibit 4
Mobile subscribers and Penetration rate Mobile affordability* (US$ per month, 2006)

166.4
8 180 24
7 160
127.6 20
140
6
per 100 inhabitants
Million Subscribers

110.5
US$ per month

120 16
5 94.7
80.6 100
7.59

4 69.4 12
6.94

57.6 80
3
5.52

45.4
4.96

60
4.53

8
4.01
3.68

2 40
2.97
2.43
1.43

1.91

1 4
20
0 0 0
2000 2001 2002 2003 2004 2005 2006 2007

Total Prepaid Penetration

* Price basket* (US$ per month, 2006) based on monthly subscription plus 50 mins peak and 50 mins off-peak use. Source: TRA

Experts believe that reported

Mobile subscription
subscriber numbers are „over
grew by 38% to
inflated‟, as there is no definition set
reach 7.6 million
by the country's Telecommunications
subscribers, with
Regulatory Authority (TRA) for
91% being prepaid.
subscriber measurement. Both
Telecom operators in the region report active and inactive
subscribers, creating an unrealistic high penetration rate.

Despite skepticism concerning sustained mobile

subscriber growth at a time when the penetration rate in
the UAE was already 130% at the end of 2006, with the
launch of du, the second mobile operator in February
2007, quarterly net mobile subscriber additions for the
total market almost doubled, reaching an approximate
570,000 per quarter during 2007, compared to an
average of 247,000 subscribers per quarter in 2006.
 4

UAE Telecom Industry (cont..)

Fixed line Market

The fixed line telephone system in the UAE was growing The introduction of CPS will increase competition in the
rapidly until the advent of cellular technology. A drastic UAE telecom sector, reduce prices, and enable consumers
decrease in prices for cellular technology in 1996 to freely choose their provider of national and
thwarted the growth of fixed line telephones. However, in international fixed line call services
terms of penetration rate, the UAE had the highest
penetration rate in the region, with rates exceeding 28% Pricing
at the end of 2006. Total fixed line subscribers in the UAE
According to the World Bank, the price basket for fixed
reached 1.38 million, with annual growth rates between
lines per month in 2006, showed that the UAE is among
4% and 5% per annum.
the most expensive in the region, in terms of

Exhibit 5
Fixed line subscribers and Penetration rate Fixed affordability* (US$ per month, 2006)

1600 34 20
32.4
1400 33
Subsribers in Thousands

31.7 16
per 100 inhabitants

1200 31.3 32
US$ per month

30.8
30.5 30.3 30.4
1000 30.1 31 12
800 30
1386
1310
1237

8
1188
1136
1094

600 29
1053
1020

400 28
4
200 27
0 26 0
2000 2001 2002 2003 2004 2005 2006 2007

Subcribers penetration
* Price basket* (US$ per month, 2006) based on monthly subscription Source: TRA

Fixed line affordability, with the UAE standing at US$17.40 per

Since 2007, consumers in the UAE
subscription month, compared to the region‟s average of US$7.30 per
were able to choose their provider of
reached 1.38 mn month, which explains the increased disparity between
national and international fixed line
subscribers, with preference for mobile usage, as opposed to fixed line.
calls via carrier selection service (CS).
48% of the lines After the introduction of CS, retail
being residential prices for fixed network international
calls decreased between 35% and 80%. But the technical
limitations of CS prevented competition from reaching
100% of the population of the UAE.

The UAE Telecommunications Regulatory Authority (TRA)

has directed Etisalat and Du, the only two telecom
operators in the country, to make network adaptations in
order to provide CPS in the fixed line telephone by 2009.
CPS allows telephone users to have their calls
automatically routed through a network offering lower
call cost, without the need to dial a prefix or use special
equipment.
 5

UAE Telecom Industry (cont..)

Information and Communications Technology Sector (ICT)
Internet Market

In terms of technology, the UAE has led the Middle East According to a study conducted by OpenNetIniative (ONI)
region through the introduction of the latest in February 2005, the UAE government, through Etisalat‟s
developments, and in infrastructure and service rollout. In internet service provider (ISP), (which at the time was the
1982, the UAE was the first country in the Middle East to country‟ sole ISP) blocked 15.4% of URLs, which are
introduce mobile phones and launch GSM services in otherwise accessible in other countries.
1994. In addition, the UAE was also the first in the region
to install 3G technology and offer a variety of related Pricing
multimedia and mobile services in 2003, a technology
The increase in retail competition is likely to impact
that is not available in the entire Middle East as yet.
prices, as operators try to bring more attractive offerings

Exhibit 6
Internet subscribers and Penetration rate Annual Cost of a Broadband Connection, 2007

600 25 $1,200
$995
500 20 $1,000
Thousand Subscribers

per 100 inhabitants

$793
400 $800
15 $627 $659
300 $600 $514 $557
524

10
443

$324
399

$400
380

200
363

$255
317
290
256

241

5
209

100 $200
128
18

30

56
0

0 0 $0
2000 2001 2002 2003 2004 2005 2006 2007

Dial-up Broadband Penetration

No broadband service-based competition
*Qatar prices are for a 512Kbps connection, **Oman prices are for a 384Kbps connection Full broadband service-based competition Source: TRA

The UAE enjoys the highest

to consumers. A brief look at the cost of entry-level DSL
internet penetration in the region
Internet in the Middle East region provides some evidence: The
at a rate of 48.5% at the end of
subscription grew average annual cost of a basic broadband connection
December 2007, with total
by 32% to reach in a market with effective retail competition is US$150
subscribers reaching 0.9 million.
904 thousand lower than of a connection in a monopoly or duopoly
However, in terms of broadband
subscribers. market .
penetration rate, the UAE came in
Broadband
third, with a rate of 5.17%
subscription, which UAE Internet users spent over US$ 1.15 billion in
preceded by Qatar and Bahrain.
is dominated by B2C e-commerce in 2007 – Arab Advisors Group
residential, is
Huge internet censorship:
growing far faster A survey of Internet users in the UAE reveals
Despite the UAE government‟s
than dial-up. In substantial adoption of e-commerce in the affluent
efforts to establish itself as an
2006 broadband and booming economy. 51.2% of Internet users in
economic and technological leader
represented only the UAE reported purchasing products and services
in the Middle East by encouraging
35% of internet online and through their mobile handsets in 2007.
internet usage, there is a level of
subscription while Based on the survey findings, it is estimated e-
State censorship on the Internet
in 2007 it is 42% commerce users in the UAE to exceed 1.16 million
and sites which are banned. The
consumers who have spent over US$ 1.15 billion in
UAE government blocks extensive content it considers 2007.
objectionable for religious and cultural reasons.
 6

UAE Telecom Industry (cont..)

Information and Communications Technology Sector (ICT)
3G VoIP

Enabling Network Technologies
As the amount of data transfer increased the requirement
of bandwidth also increased. Because content requires so
much bandwidth, the limited availability of enabling
technologies has traditionally been the main obstacle for
the mass usage of content services. This is becoming less
of an obstacle in relatively advanced markets, such as
those of the GCC. Fixed and mobile broadband
The Voice over IP (VoIP) Services has many regulatory
aspects in UAE. Only the Licensees (Etisalat and DU) can
provide VoIP Services to the users in the UAE.
VoIP allowed only for local calls
The Telecommunications Regulatory Authority (TRA) said
in November 2006 that it would allow Voice over Internet

Exhibit 7
3G Penetration evaluation Broadband Penetration evaluation

3.5% 10.0%
3.0%
3.0% 7.9%
2.6% 8.0%
2.5%
% of Population

% of Population

2.0% 5.8%
2.0% 6.0% 4.9%
1.7% 1.6% 4.6%
1.5% 4.5%
1.4%
1.5% 4.0%
1.1% 1.0%
0.8% 2.6%
1.0% 1.9%
2.0% 1.0% 0.9%
0.5% 0.6%

0.0% 0.0%
Bahrain Kuwait Oman Saudi Arabia UAE Bahrain Kuwait Oman Saudi Arabia UAE
2006-07 2006-07
81% 95% 94% 66% 101% 26% 87% 80% 120% 71%
Growth Growth

Sources: Analysys Ltd.; Booz Allen Hamilton

technologies are becoming increasingly accessible with
the phenomenal growth levels witnessed in the adoption
of 3G and DSL services in the region.
UAE was also the first in the region to install 3G
technology and offer a variety of related multimedia and
mobile services in 2003, a technology that is not available
in the entire Middle East region as yet.
Telecom-media convergence
Mobile handsets are increasingly converging with other
multimedia devices, such as digital cameras, music and
video players, and personal digital assistants (PDAs).
Similarly, customer premises equipment (CPE) for fixed
telephony is converging with personal computers and
television set-top boxes. A number of set-top box vendors
are becoming increasingly active in this space and
manufacturers are driving rapid product development and
increased innovation. Among the advanced features
integrated into this new generation of equipment are high
storage capacity, video-on-demand capabilities, digital
video recording support, multiple format
decoding, security support and digital rights
management.
Protocol (VoIP) technology, but only for local calls within
the UAE. Long-distance calls using VoIP will continue to
be prohibited, for the time being, to protect the
revenue, which telecom operators receive from
international calls.
The following VoIP communications are considered
illegal:
• Any call initiated from a PC and terminated at a
Landline (in the UAE or everywhere) and/or Mobile
such as MSN Credit, Skype-Out, etc.
• The use of IP Handsets through Internet Access to
make national and international calls such as
Net2Phone, etc.
• The use of websites that act as a trigger in initiating
calls such as jajah, etc.
• The use of VoIP Gateways and use of VoIP Services in
connecting the Office in the UAE to an office outside
the UAE boundaries.
 7

UAE Telecom Industry (cont..)

Information and Communications Technology Sector (ICT)
Trends and Drivers ICT Sector

Given the dynamics of technological innovation and
development in the communications industry, multimedia
convergence, mobile broadband and internet usage are
set to be the next battleground for operators. Although
voice communication will remain the major revenue
generator for mobile operations in the medium term, data
and value-added services will play an important role in
differentiating operators and increasing the loyalty of
subscribers.
Mobile telecom operators are moving towards
convergence of services offering either trip-play or quad-
play for a number of reasons:
The opportunities available in the UAE`s Information and
Communications Technology (ICT) industry are growing
quickly. The value of the local market is expected to
reach $2.4 billion by 2011 from $1.5 billion in 2006. The
country is expected to become the region`s premier ICT
hub due to its heavy investments, which are aimed at
boosting the technological potential of the country and
the benefits of Dubai Internet City, Dubai Media City and
Exhibit 8
ICT market by 2010
$3.80
$4.00

• Warding off competition, through the provision of

$3.00
diverse services $2.40
• Reducing subscriber churn rates
Billion

$2.00
• Increasing revenue sources
$0.88
$1.00
$0.40 $0.40 $0.38
Consumer attitudes and behavior, particularly those of
teenagers and young adults, regarding communication $0.00
services has significantly changed over the past decade.
Saudi UAE Kuwait Qatar Oman Bahrain
Evidence of this transformation can be seen in the
Arabia
growing popularity of online chatting, online social
networking applications (e.g. Facebook, Hi Five), peer-to- its free trade zones. Several major initiatives coupled with
peer file sharing and even online trading, all of which will regional trade and economic liberalization are expected
drive up the adoption of next-generation network to boost IT growth in the UAE. IT in particular has become
services. a driving sector for growth in the UAE. The regional hub
is leading the adoption and development of new
technologies. Worldwide interoperability for microwave
Growth drivers for broadband access technology will give rise to more powerful and
efficient notebooks, media internet devices and ultra-
• Greater demand for digital content applications (e.g. mobile personal computers due to the reduced power of
online stock trading, Facebook, Youtube, Itunes, etc…) consumption by 95 per cent
• Growing young population
• Increasing regional wealth
• Low broadband penetration
• Decreasing monthly access costs
• Network technology advancements
 8

UAE Telecom Industry (cont..)

Forecast
Mobile and broadband to drive growth
The shift from fixed line to mobile will continue as the
level of services offered to mobile subscribers grows in
diversity and sophistication. With growing broadband
subscriber base it is anticipated that the provision of data
and multimedia services will be an important revenue
growth driver. The increased level of business start-ups
and strength of economy in UAE is making high speed
data provision a necessity for further sustained economic
growth.
Broadband and internet poised for further growth
Internet and broadband will be the next revenue growth
driver , with broadband subscribers capturing the bulk of
the growth, since 52% of the UAE population is under the
age of 29. This demographic age group tends to be
sophisticated in terms of technology use and could
become the engine for increased broadband penetration.
The hurdles for broadband growth include content

Exhibit 9
Total Telecom market projection Mobile versus fixed line penetration
184 182 184
12.0 200 32
166.4
9.6 180 31.5
10.0 160
7.8 127.6 30.4 30.4 31
8.0
7.4 140 110.5 30.3 30.2
30.1 30.1 30.5
5.9 120
USD bn

6.0 100 30
80 29.5
4.0 60
29
40
2.0 20 28.5
0.0 0 28

2007 2008e 2009e 2012e 2005a 2006a 2007a 2008e 2009e 2010e
Mobile penetration (LH) Fixed penetration (RH)
Source : Al Mal Capital

Continued room for mobile subscriber growth
Strong mobile subscriber growth will be triggered by the
UAE‟s rapidly growing population and increased inflow of
expatriates, which, in turn, means high demand for
international telecommunication services.
Given „inflated‟ subscriber numbers, it is believed that
there is room for increases in the level of active
subscribers.
Fixed line revenue lagging behind
Revenues from the fixed line operations to continue
dropping. Telecommunications Regulatory Authority
(TRA) has directed Etisalat and Du, the only two telecom
operators in the country, to make network adaptations in
order to provide CPS in the fixed line telephone by 2009.
CPS allows telephone users to have their calls
automatically routed through a network offering lower
call cost, without the need to dial a prefix or use special
equipment.
restriction and the usage of Voice over Internet Protocol
(VoIP). According to a study conducted by OpenNet
Initiative, almost 15.4% of the total number of websites it
tested were blocked in the UAE, leading to a conclusion
that the UAE suffers from over-blocking, thus preventing its
citizens from accessing a considerable amount of material unrelated
to the UAE's expressed goals.
The TRA has maintained its position to ban VoIP services
in the UAE, allowing it only through the licensed telecom
operators. The endorsement of VoIP will promote
broadband penetration, especially given that a significant
78% of the total population in the UAE are
expatriates, who could use the inexpensive voice over
internet applications to make international calls.
However, the flipside to the endorsement of VoIP would
be the decrease of international call revenues for telecom
operators.

The introduction of CPS will increase competition in the

UAE telecom sector, reduce prices, and enable consumers
to freely choose their provider of national and
international fixed line call services
 9

UAE Telecom Industry (cont..)

Forecast
Exhibit 10
UAE Mobile Market
UAE Internet Market
14,000 200 3000 50
180 45
12,000 2500
160 40
Subscribers ('000)

Subscribers ('000)
10,000

Penetration
140 35
2000

Penetration
120

1,953
8,000 30

1,503
11,902
11,384 100 1500 25
10,784
10,024

1,130
6,000 80
9,231

20

819
7,694

60 1000

569
4,000 15
5,519

524 380
4,534
3,683

40

442 243
10

398129
2,000 500

694
36355

673
648
617
576
20 5
0 0 0 0
2004a 2005a 2006a 2007a 2008e 2009e 2010e 2011e 2012e 2004a 2005a 2006a 2007a 2008e 2009e 2010e 2011e 2012e

Subscribers ('000) Penetration Dial-up Broadband Penetration

UAE Fixed-line Market

2,000 31
1,800
30
1,600
Fixed Subs ('000)

1,400 29
1,200
Penetration

28
1,899
1,826

1,000
1,739
1,626
1,505

27
1,386

800
1,310
1,237
1,188

600 26
400
25
200
0 24
2004a 2005a 2006a 2007a 2008e 2009e 2010e 2011e 2012e

Fixed-line Subs Penetration Source: UAE TRA, Al Mal Capital Research

MVNOs: Market Segment or Market Figment?

A Mobile Virtual Network Operator (MVNO) does not have infrastructure. Furthermore, the existing infrastructure is
network infrastructure of its own but instead leases already at full capacity utilization in some of the key urban
network capacity at a discounted rate from a license areas. Until one, or both, operators have sufficient excess
holding operator and resells it to customers with additional capacity to lease to a virtual operator, the added value of
services. MVNOs arguably enable the much larger license- an MVNO in the UAE remains slim, at best.
holding operator to capture previously untapped segments
of the operator‟s market at reduced risk and cost, thereby Potential for Third Operator?
increasing and sustaining market share. There are now While there has been no official comment on the
more than 300 such operators across the world and, in potential for a third license being issued in the future, it
some countries, they outnumber licensed operators. is believed that, once du has profitably established
itself, additional competition will be introduced either in
As for the UAE, MVNO entrant is unlikely during the next couple of the form of a third universal license or as separate
years, primarily because the regulatory framework for MVNOs is not in individual licenses for fixed, broadband and ISP.
place. Additionally, du is still expanding its mobile network However, no new licenses are issued prior to 2010, by
which time du should be well established and profitable.
 10

UAE Telecom Industry (cont..)

Competitors profile
Etisalat
Established in 1976 to consolidate the independent
telecoms networks of the UAE‟s seven emirates, Etisalat
was the region‟s first telecom operator to introduce
mobile phone service (in 1982) and GSM technology (in
1994). The company remained the sole provider of
telecoms services in the UAE until competitor du was
created in late 2005 in accordance with the regional
liberalization of the telecoms sector
Mobile broadband: a double-edged sword?
Etisalat‟s 3.5G service covers more than 97% of the UAE‟s
populated areas. According to management, as of year-
end 2007, roughly 400,000 UAE residents had a monthly
mobile broadband subscription, and 900,000 utilized the
pay-as-you-go mobile broadband offerings. In
2007, Etisalat UAE‟s Network and Data services generated
AED 2.04bn in revenues, a 44% increase from 2006, constituting 10%
of Etisalat UAE’s total revenues.

Exhibit 9
Etisalat’s UAE mobile Etisalat’s UAE fixed-line

10 86% 100% 2 104%

78%
72%
8 66% 80% 1.6 100%
6 60% 1.2

1.79
96%

1.56
7.9

1.45
7.22

4 40% 0.8 1.33

7.2
6.4

0.86
0.85
0.84
0.83
4.02

92%
3.82

3.80
3.69

2 20% 0.4
0 0% 0 88%
2007 2008 2009 2012 2007 2008 2009 2012

Subscribers (mn) Revenue ($ bn) Market Share Subscribers (mn) Revenue ($ bn) Market Share

Etisalat’s UAE Internet

3.00 120%
Etisalat is currently majority-owned by the
2.50 100% UAE Ministry of Finance (60%); the 40% free-
float is publicly traded on the Abu Dhabi
2.00 80%
Exchange (ADX) and can only be held by
1.50 60% UAE nationals
2.57

1.00 40%
1.39
1.11
0.88
0.40

0.48

0.58

0.78

0.50 20%

0.00
2007 2008 2009
Subscribers (mn) Revenue ($ bn)
Etisalat‟s integrated service license from the UAE
Telecommunications Regulatory Authority (TRA) remains
valid until 2025, with the option to renew thereafter. In
February 2006, the TRA ended Etisalat‟s domestic
telecom monopoly when it granted the UAE‟s second
integrated service telecom license to the newly formed
Emirates Integrated Telecommunications Company
(EITC), operating under the brand name du.
0%
2012
Market Share
Source: UAE TRA, Al Mal Capital Research
Operations
In 2006, Etisalat restructured its operations into three
independent units:
Etisalat UAE provides full mobile and fixed-line
telecom, internet cable TV services (through e-Vision) and
network data services within the UAE.
Etisalat Services handles all operations, customer service
and educationalpromotions of Etisalat‟s ancillary units
like Emirates Data Clearing House, Ebtikar,e-Facilities
Management, e-Real Estate, e-Academy, and e-Marine.
 11

UAE Telecom Industry (cont..)

Competitors profile
DU du to retain income from the highest revenue generating
Emirates Integrated Telecommunications Company (EITC) cities, income that it would otherwise have to partially pay
became the UAE‟s second integrated telecom provider in to Etisalat as interconnect fees.
December 2005, capitalized at AED 4bn by the UAE
Federal Government (50%), Mubadala Development Co.
(25%), and Emirates Communications and Technology Co. DU targets higher value international calls by offering all
(25%). EITC then acquired from TECOM Investments the day international tariffs that match Etisalat‟s off-peak
assets, capital and businesses of a number of its rates.
subsidiaries, including an initial fixed-line subscriber base
of 19,100 business and consumer customers.

Exhibit 9
DU’s UAE mobile DU’s UAE fixed-line

5 34% 0.4 0.5 6% 0.07

28% 0.35 0.06
4 0.3 0.4 4%
22% 4% 0.05
3 0.25 0.3 0.04

0.47
0.2
4.05

2 0.2 0.03

0.32
0.15

0.28
2.81

0.046

0.057

0.114
0.02
2.03

1.93

0.1
1.46

0.69

1.18

0.07
1 0.1 0.01
0.05
0 0 0 0
2007 2008 2009 2012 2007 2008 2009 2012
Subscribers (mn) Revenue ($ bn) Market Share
Subscribers (mn) Revenue ($ bn) Market Share
Source: UAE TRA, Al Mal Capital Research

The UAE Telecom Regulatory Authority awarded EITC the Operations

nation‟s second universaltelecom license (20-year validity) du‟s broadcast business generates steady income but
in February 2006, at which point EITC unveiled its forms a relatively small portion of overall revenue (2.3% of
operating brand name, du.
total revenues in 2007). We forecast this to grow steadily
In April 2006, 20% of du‟s shares were listed on the at 3% per year.
Dubai Financial Market in an IPO oversubscribed by 166
times. The company launched domestic mobile services
in February 2007, and by the end of 2007 claimed 1.5mn
mobile customers and 46,000 fixed-line
subscribers, yielding a market share of 19% by
management‟s estimate.

Broadband services currently rely on copper and coaxial

cabling for last-mile delivery, though management stated
sizeable investment in Next Generation Network (NGN)
infrastructure that will deliver converged services at
higher speeds.

DU‟S initial acquisition of a number of TECOM

subsidiaries gave du the ability to offer fixed-line internet
services over limited areas. But, delivering wire-line
service to every development in the UAE would not be
financially prudent, so alternatives to cabling must be
pursued, WiMAX being one possible alternative. Building a
duplicate fixed line network across the entire UAE would
also not make sense, so we would expect du to
concentrate on those areas with the highest population
densities, namely Dubai and Abu Dhabi. This would allow
 12

About MTI

MTI Consulting is a fast growing strategy consultancy

worldwide, offering strategy consulting and advisory
services. Our services focus on Strategic Planning, Re-
Structuring, Business Strategy, Marketing Strategy and
Market Entry as well as Specialist Services in
Finance, Legal, HRM, Technology and Supply Chain.

Over the past 11 years, MTI has lent its strategic

management expertise to over 275+ Client-specific
projects in over 33 countries. MTI has operations in
Bahrain, Dubai, Malaysia, UK, India, Pakistan, Banglade
sh, Sri Lanka and strategic alliances forming our
global network.

MTI Consulting was a strategic partner at the World

Islamic Banking Conference (WIBC) for the last several
years.

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