The United Arab Emirates has a pretty well-developed telecommunication infrastructure and it benefits a lot from high penetration rates in both the mobile as well as fixed-line networks. This telecommunication infrastructure is further enhanced by the Dubai City Smart Initiative. Even though UAE itself is considered to be one of the most advanced markets of the Middle East, it is also the least liberalized when it comes to its telecommunication sector which remains a duopoly with only two telecom operators with limited foreign investment.
The TRA is the main regulator and it was established in 2003 under the 2003 Telecom Law and has the responsibility to manage each and every aspect of the telecommunication and Information Technology industries in the UAE. Some of the responsibilities of the TRA include issuing licenses, enforcing regulations, promoting e-government, establishing access management policies, resolving conflicts and disputes, ensuring service quality and access equity.
During the late 1970s and the early 1980s, the federal government progressively nationalized the telecom sector and established the Emirates Telecommunication Corporation or Emirtel which was later renamed as Etisalat as the sole provider of telecommunication services in UAE. Etisalat is 60 percent owned by the government whereas 40 percent of its shares belong to a group of UAE nationals. Till 2006, Etisalat was the only provider of telephone and telecom services in UAE. However from February 2006, this monopoly enjoyed by Etisalat alone became a duopoly when Du entered the market as a new telephone company and internet service provider. This UAE telecom duopoly is made up of Etisalat and Du both of which are majorly owned by the government. Du was launched in 2006 and despite the various inter-connection difficulties and zero number portability it faced, it has continued to gain ground against Etisalat and now controls over 48.17 percent of the mobile market. The reason why it gained ground so quickly against Etisalat is the high percentage of the expatriate population in the UAE which provides the company with a constantly changing pool of subscribers.
Like other Middle Eastern countries, the Emirates also enjoys a youthful population where twenty-nine to thirty-two percent of its residents are between the ages of 25 to 34 and hence because of this demographic makeup, provides this telecom duopoly a useful barrier in terms of local revenue and net profit expansion. Apart from competing on service and speed, these two telecom giants are also competing against one another in terms of quality and variety which includes services such as delivery of new applications and packages to existing and potential customers so as to encourage new entrants to subscribe as well as to convince old ones to stay rather then switch.
To keep in lieu with the competition between these two telecom giants, Du has made increasing efforts to expand its customer services by increasing its customer representation and by improving employee training. Du has also introduced flexible packages for its existing customers, which from Du is a type of strategic play as both Du and Etisalat realize the disadvantages of a price war.
For a long time, both Etisalat and Du have enjoyed a duopoly in the sector however now to combat this market saturation, the TRA has issued licenses to many niche outfits such as the Al Yah Satellite Communications, Thuraya, Media Zone Intaj and FZ which have licenses to offer satellite services in the Emirates. According to the research conducted by the TRA, it was found out that there are over 2.13 million fixed-line subscribers, 17.13 million mobile users and 1.1 million internet subscribers in the UAE alone. However, even though many flexible packages are available to the users, international calls are still quite expensive in UAE and this is due to the traditional restrictions on the VoIP. Both Etisalat and Du benefit from high pricing here as the Emirates has a cosmopolitan population and a high concentration of multinational offices and hence an increased demand for international calls.
As far as the mobile segment of the telecommunication market is concerned; we can see both Etisalat and Du continue to focus their efforts on the provision of more flexible and attractive packages to their customers in attempt to gain market share. However, when we look at the potential capacity, the level of technical sophistication and the growing demand from the young and tech-savvy population, we see that there is still a lot of substantial development to take place in the future.
As far as Etisalat is concerned, we see that there is a saturation of the local market which will ensure a continued focus of the company on the development of international operations. Secondly, as market saturation goes, we have seen that there is a high demand for 4G LTE networks and fiber-optics fixed lines in terms of delivering new services and hence in UAE, we see a growth of e-commerce as well as other online services like icfliz which streams Bollywood, Hollywood and Jazzwood movies and seasons.
The drivers or the key factors for the growth in the UAE Telecom sector include robust economic growth, foreign investment and government initiatives whereas the restraints pertaining to market saturation in the telecom industry are the high costs of telecoms.
In 2018, we see both Etisalat and Du showing a deep interest in the development of 5G technology and this venture of theirs is fully supported by the TRA itself. The evolution of UAE telecommunication industry is inevitable as the telecom operators themselves are now seen facing the challenges pertaining to the mobile market maturity over the past year due to mobile and smartphone ownership rates reaching saturation points and hence operators are turning towards other services and strategies to boost profitability.
SpotServe LLC is a facilitator of Etisalat and Du services through the mobile app for multiple services- SpotServe is available for free on Google Play and Apple Store or get an invite to download the beta version at https://www.spotserve.ae/dl
Sources:
- Everington, John. (2017). Telecoms year in review: UAE operators test new brands and ICT strategy in search for growth. Retrieved fromhttps://www.thenational.ae/business/technology/telecoms-year-in-review-uae-operators-test-new-brands-and-ict-strategy-in-search-for-growth-1.691822
- (2008). The Great Duopoly of UAE Telecoms. Retrieved from https://www.arabianbusiness.com/the-great-duopoly-of-uae-telecoms-45222.html
Resource URL: https://spotserve.ae/2019/01/13/market-saturation-telecommunication-industry-in-the-uae/
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