Where will UAE's Etisalat face competition in 2005?

July 6, 2004

With the current impressive penetration rates (especially for GSM) and the quality of services offered by Etisalat, aspiring market entrants are bound for a tough ride. The Arab Advisors Group foresees interest in the GSM, data and International Gateway licenses. We expect the operators to work on differentiating themselves with their services, concentrating on content rather than in-the-bag measures of connectivity and subscription flexibility. Identifying niche segments will also prove effective in establishing market presence.

A new report, "UAE Communications Projections Report" was released to the Arab Advisors Group's Strategic Research Service subscribers on July 5, 2004. This report can be purchased from Arab Advisors Group for only US$ 850. The 52-pages report, which has 27 detailed exhibits, fully analyses the UAE telecommunications (fixed and wireless) market and provides five-year forecasts of more than 40 Demographic, service, revenue and Infrastructure indicators. It also fully analyses the monopoly operator, Etisalat, and its strategy. The report also fully analyses the equipment vendors' competitive landscape.

Any investment in this report will count towards a Strategic Research Service subscription should the service be acquired within three months from purchasing the report.

"A single recent development in the UAE market changed the communications landscape in the country. On April 12, 2004, the governing Supreme Council of Rulers, headed by H.H. Sheikh Zayed Al-Nhayan issued a decree ending the monopoly status of Etisalat. This is discussed in full detail in this report's Section III. Although the outcomes of the decree have not yet been executed, its impact has been profound. But until the decree is put into effect, the country's market remains closed for potential investors. This new competitive environment translates into an increasing demand for complex infrastructure by a technologically savvy marketplace, which is good news for vendors." Faisal Hakki, Arab Advisors Research Analyst, wrote in the report.

Arab Advisors Group's analysis shows that UAE's datacomm, Internet and GSM revenues grew by more than 20% in 2003, while fixed telephony grew by less than 5% in the same year. UAE Cellular lines surpassed fixed lines as far back as the year 2000. The Arab Advisors Group foresees strong interest in the GSM, data and International Gateway licenses in the UAE, which will of course depend on the final liberalization blue print to be set in the country.

With the anticipated entry of a second cellular operator in 2005, the Arab Advisors Group projects the UAE's cellular market to grow at a CAGR of 8.5% during the period 2003-2008, reaching 4.472 million subscribers (a cellular penetration rate of 83.4%). A third cellular operator is highly improbable owing to the preliminary information regarding the liberalization decree, which has given clues to the future cellular market that there will be substantial governmental intervention, executed indirectly through the regulatory committees.

With the current impressive penetration rates (especially for GSM) and the quality of services offered by Etisalat, aspiring market entrants are bound for a tough ride. The Arab Advisors Group foresees interest in the GSM and International Gateway licenses. We expect the operators to work on differentiating themselves with their services, concentrating on content rather than in-the-bag measures of connectivity and subscription flexibility. Identifying niche segments will also prove effective in establishing market presence.

"Naturally, the government law will need to take a position on all major areas of policy and to lay down in a clear and undisputable manner the liberalization agendas and timetables. It is imperative for investors to have legal security, transparency, and clarity." Mr. Hakki concluded.

The Arab Advisors Group's team of analysts in the region has already produced more than 260 reports on the Arab World's communications and media markets. The reports can be purchased individually or received through an annual subscription to Arab Advisors Group's (www.arabadvisors.com) Strategic Research Services (Media and Telecom). To date, Arab Advisors Group has served more than 150 global and regional companies by providing reliable research analysis and forecasts of Arab communications markets to these clients.