Du and Etisalat could be heading into a price war as both companies promote their new post-paid plans and offer large data packages at reduced monthly prices.
Etisalat is offering a 12-month deal where customers receive 10GB of data and 300 flexible minutes or 1,000 local minutes for AED250 ($68) per month.
Meanwhile, Etisalat's Dubai-based rival, du, has launched a radio campaign that says: "...get 12GBs of data with the latest smartphone for just AED300". Customers must first buy a smartphone from du to qualify for this offer, tech website ITP.net reported.
Reuters reported this month that chief executive Osman Sultan said du would not fight a price war with Etisalat, quoting him as saying: "It's a spiral... you [should] offer great value to your customers, but not to the detriment of the value created for your shareholders."
Sultan said previously that the failure to conclude a network-sharing agreement with Etisalat to allow competition in fixed services was limiting du's ability to win a bigger slice of sector earnings. A deal has been under discussion for several years.
He also declined to predict when competition in fixed services would be introduced, but said, "I'm more optimistic than I was at the beginning of the year."
He also said that du would target getting more subscribers onto monthly contracts to help increase revenue share - these account for nearly a 10th of its mobile customers and use three times as many call minutes as pre-paid customers.
Stephanie Baghdassarian, research director, Gartner Inc, told ITP.net, said: "If you look at Etisalat and du and how they've been evolving, reported connections have grown 20 percent for Etisalat and 12 percent for du during 2013. At the end of 2013, Etisalat held 54 percent of the market (a rise of 2 percent) and in the same time, ARPUs [average revenue per user] went down 10 percent for Etisalat and 9 percent for du.
"This seems to confirm that Etisalat is getting aggressive from a price perspective and it's paying in terms of customer acquisition."
Both du and Etisalat last year completed rollout of mobile number portability services, which allow subscribers to freely transfer between carriers without the need to change phone number. The service, mandated by the UAE's telecoms regulator, was expected to generate competition between the two providers. Baghdassarian said it was too soon to tell if MNP would have a direct effect on their subscriber bases.
"In most mature markets, we haven't seen MNP having a clear impact on churn, but I have no information on the UAE, so this could be different; although my guess is that MNP is not a driver but rather it's one less barrier to change operator," she said.
"Price decline is very much to the benefit of end-users, although the risk is to end up in a situation where margins get tight and impact how much the operator can invest in its infrastructure. It can also mean the operator needs to reduce costs and to do so [will mean] cuts on commercial staff and after-sales service."
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