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Thu 4 Mar 2010 12:00 AM

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Is it time to open the UAE telco shop?

The reliance on publicly-owned providers seems almost anachronistic these days, says Damian Reilly.

Is it time to open the UAE telco shop?
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So a new (government-owned) telecom operator has been granted a licence to scrap it out with (majority government-owned) Etisalat and (majority government-owned) du for customers in the UAE.

Yahsat, which is a wholly owned-subsidiary of Abu Dhabi government investment vehicle Mubadala, will be up and running in the first six months of next year.

It is of course good news for consumers in the UAE: a new operator is another option for people looking for the best deal in terms of mobile phone provider. However, there are still people who will moan that things have little changed since Etisalat - which turned a profit of $2bn in 2008 - had the monopoly in the UAE.

Like Etisalat and du, Yahsat will provide much more than just mobile phone reception - it will provide high speed internet connections and television packages. However, unless it is allowed to compete for business directly with its rivals, then the notion of effective competition is not one that can be fully justified.

As things stand, Etisalat and du have carved up Dubai into domains in which one or the other operates. For example, people living in Old Town have no choice over which company they go to for their broadband and their Premiership football. du is the only choice, and customers won't see much change out of $140 a month.

Likewise people living in the Marina or the Tecom areas will only be able to use du. In the non-du areas - which comprise most of the rest of the UAE - Etisalat is the only choice.

Until the market is opened to a non-local operator, such as Vodafone - which recently entered Qatar  - and that market is properly opened to competitive norms such as competing for customers across the board, regardless of geography, the UAE's telecoms sector will struggle to be as dynamic as are its private sector-led industry industries.

In fact, the reliance on publicly-owned providers seems almost anachronistic these days. After all, the UAE places great stock in letting the private sector lead the way - doing so when it comes to telecoms would surely benefit almost everyone.

Vodafone has been welcomed warmly by the public in Qatar - in less than a year it has taken 22 percent of the market share, and is far exceeding its own targets.

Perhaps it is time, then, if only to see the sector improved in the UAE, to allow a foreign player into the market.

Etisalat has recently changed its roaming fees on the pretext of simplifying its service to customers.

The new charges are testament to Etisalat's "staunch dedication to ensuring high quality, simple and more favourable roaming services to its users," senior vice president of consumer marketing Khalifa Al Shamsi said.

Which is nice. Because Arabian Business has just noticed, with the dull thud of my latest bill onto the doormat, that some of the fees have increased by over one hundred percent. Calling the UAE from the UK, which used to cost about $1.20 a minute, now costs $3 a minute.

A local phone call in Australia using Etisalat roaming last year cost $0.75 a minute, now it costs $1.5 a minute on a prepaid phone, and $1.36 on contract phone.

If, like me, you find it extremely hard to keep your eyes open when people start talking about roaming charges, then you too might find your bill for February something of a rude awakening, especially if you have been away during the month.

Etisalat is rumoured to be soon to sanction phone number "portability," which means people can leave its network to register instead with rival du, and at the same time keep their phone number.

The network then will need then to ensure, now more than ever, that the improved service on the back of these price hikes is keenly felt by customers.

Damian Reilly is the editor of Arabian Business.

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Moadh Bukhash 10 years ago

Lots of very good points, and its true that the telco market lacks 'true' competition. However, its important to point to the fact that the government's ownership in these companies means that the profit generated is sucked back into government budgets in the form of salaries, etc. This, in my opinion, is a major reason as to why it would be hard to allow a foreign player into the market.

Gleb Larionov 10 years ago

YahSat will never ever provide mobile services in UAE. Mr. Reilly needed to visit Yahsat's website to check what Yahsat will offer (correct, broadband Internet (via satellite dish) and TV (again, satellite). Is the article written just to lobby Vodafone? du teams up with Vodafone, so, they are here. Fee hikes from operators just a prove of stiff competition between du and etisalat (operators are increasing roaming to compensate losses on local calls). You can use du or etisalat (fixed services) on areas du- or et0salat- only (via call select). I just trying to say that a lot happening in telco and columnists need to make not a brief but a comprehensive background study. Cheers.

The Pundit 10 years ago

TRA regulations preclude the telcos from competing on pricing, meaning that that there is no free market and that there is no competition, there is only a duopoly that competes on name and ringtones only.

His Excellency Dr Paul 10 years ago

The crazy telecoms prices are just a tax, everyone understands this. The problem is that tax, as well as raising money, also changes behaviour - it increases the price of something and therefore reduces demand. It is no surprise therefore that the UAE is very backward in terms of web use - and this impacts business. When was the last time you bought anything online in the UAE? Or even saw a business selling online? People still use fax machines here. It's all very quaint, but really, the UAE needs to get with the 21st century which is 10 years old already. And while they're at it, maybe build a Salik web site that actually works.

Yousef 10 years ago

Just like Eitisalat is entering foreign markets throughout the world, foreign operators should be allowed access to the UAE market, that's only fair.

Salim 10 years ago

http://www.vodafone.com.qa/go/en/aboutus/aboutvodafone

Essa 10 years ago

I am honestly shocked at the restricted level of competition going on at Dubai. 2 government players, now added with a 3rd government company (which consequently UAE will be cut up into single-operator areas) is not good news at all. In fact, I would be worried as a business company or home resident that I would get a letter from the new operator introducing its services to me and forcing me to subscribe to their services. Prices have increased in Dubai?!?! That's just lunacy at its best! When telecom prices have been falling drastically globally, UAE goes the other way? the GCC is a bit of a sad untapped case overall, but look at Bahrain, where a major number of international destination rates are actually CHEAPER than using skype! Prepaid card boom actually made a call to the UK/US cheaper than a local. There are 5 to 8 ISP's active in the market, 2 WiMax operators, 3 Mobile companies fighting for supremacy.. In the end, a business can 'shop' and choose which operator to take for anything, fixed-line, mobile, internet.. and soon TV. The problem here is regulators need to be more abrupt and rationale in their mentality of deciding to 'liberalize' or not. What's the point of painting a picture of deregulation when your own users are restricted? If prices in telecoms increased in Bahrain, all hell will break lose, that's for sure! Utilities should be left for the private sector to compete. The problem I have is not that i hate government intervention with full control, I have a problem with being subjected to 'their views' of what services I should have! by the way, about Vodafone, you know it's fully controlled (not independent) by the Qatari Amir. I don't get that.. why do I know a royal to safe guard my entry into the market?! Anyway, the majoriy of the GCC is run like this fashion unfortunately.. Essa

Dan 10 years ago

I the era of information technology the GCC countries are left behind. When western countries use IT to improve their advantage the GCC countries are still in the protection and monopoly mode from the 1960’s and 70’s. World class infrastructure is not just 6 lane roads and big airports. It’s also high-speed, cheap communications which are provided to companies and private customers in very short time with adequate service. Communication services which were deregulated some 30 years ago in most progressing countries have created a great tool for companies and individuals to progress. How many great IT companies or business ideas that could be developed were not started in the homes and garages by individuals or some friends because they had access to cheap high speed communications? The few billions of profit from Etisalat or DU may sound good but it is stopping the over all progress of the country and the many more billions it could generate if the communication monopoly would be removed.

Sam 10 years ago

I have been on hold for 20+ minutes now trying to reconnect my home plus package from Du. Competition would reduce prices and improve services. For now I would settle on improved services. especially from a company that declared hundreds of millions in profits for last financial year. you think they can afford to hire some of that cheap labor they take advantage of. Long way to go yet... a very long way. 24+ minutes now

Sam 10 years ago

35 minutes now and still holding :(