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Home > Communications > Telecommunications > General Telecom
UAE Telecommunications Report Q3 2007
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The launch of the UAE’s second national operator du continues to be felt in the mobile market, which isheading for a bumper performance in 2007. After 528,000 net additions in the first quarter of the year, duand incumbent Etisalat collectively added 513,000 new subscribers during Q2, taking the total mobilesubscriber base to 6.5mn at the end of June 2007. That represents growth of 18.2% during the first half ofthe year, an impressive performance considering that the market grew by 21.7% during the 2006 as awhole. It is all the more striking given that at the end of 2006, the UAE already had a penetration rate ofaround 115%. BMI suspects that net additions may slow slightly during the second half of the year asexcitement over du’s launch dies down. However, we nonetheless expect the market as a whole to reacharound 7.4mn by the end of the year, taking penetration to a massive 142%. Moving forward, thedevelopment of the market will depend largely on how stringent operators are in discounting inactiveaccounts from their networks. We believe that many Etisalat customers will have taken a du SIM card inorder to compare services and while some may carry multiple SIM cards to take advantage of differentpromotions and interconnection rates, a significant number are likely to let one or more accounts liedormant. We are currently forecasting that penetration could rise as high as 170% by the end of ourforecast period, but we will revise these figures significantly if operators begin clearing inactive numbersfrom their reported figures.
Recent months have also seen competition in the fixed-line and internet sectors intensify, which can onlycontinue now that du’s services are no longer confined to the UAE’s economic free zones. Following awarning from the national regulator, the TRA, for delays in rollout, du began offering fixed subscriptionsin Etisalat’s traditional concession areas in late July 2007. Data from the TRA suggest strong demand forbroadband services in particular, with the number of high-speed subscriptions rising by 86.8% during2006 to 241,000. At that time, broadband accounted for 35% of all internet subscriptions, compared withless than 25% in 2005.
Despite this positive growth outlook, the UAE has slipped down our business environment rankings forthe Middle East and now lies in fifth place. However, this mainly reflects an improvement in scores forother states, namely Saudi Arabia, whose competitive environment has altered significantly following thelicensing of new operators in all sectors. Despite its small population, the UAE remains an attractivemarket thanks to its high ARPU rates and large corporate sector. The introduction of a second nationaloperator is having a positive effect on growth, but we believe that Etisalat still has too much control overthe market, while the government retains controlling stakes in both Etisalat and du.
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