Du or die

When the UAE's second integrated operator was licensed in February this year, it was aiming to enter the mobile services market with a splash during the second half of 2006. With the year drawing to a close Christopher Reynolds talks to CEO Osman Sultan about du's current position and future plans.

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By  Christopher Reynolds Published  November 30, 2006

Following a flurry of activity prior and during GULFCOMMS 2006 last month, the show ended without du, the UAE's second licensed operator, confirming an official launch date for its mobile services. When CommsMEA spoke with CEO Osman Sultan back in March the former head of Egyptian mobile operator MobiNil was clear on outlining an end-of-2006 timeframe for the launch of mobile services, and expressed an expectation that fixed line, voice, data and pay TV services were set to follow in 2007.

Despite the announcement of a per-second billing scheme and a number registration service, the uncertainty surrounding when du will in fact commence operations has not abated. Predictably, Sultan takes issue with the criticisms, firmly believing that he has been as transparent as he possibly can be throughout the build out of the licensee's network.

“Firstly, I don't think it is fair to have these criticisms over when we are launching. Sometimes operators will start by just covering one part of an area and then later on they say that their coverage will expand,” Sultan told CommsMEA. “We started by saying we will have our own mobile infrastructure, nationwide coverage and we said that we are targeting more than 30% of market share within three years after launch. So I think we have been one of the most transparent operators,” he added.

While du's transparency is commendable, its inability to pin down a launch date hardly inspires confidence. However, Sultan claims that du's products and services are primed for implementation and the current uncertainty over the launch is due to problems concerning the operator's shared network infrastructure with Etisalat. Sultan says that his technical team has encountered obstacles, which, if not overcome, would prevent the nascent operator from commencing mobile services with nationwide coverage.

“On the network, if we are asked today if we are completely ready then the answer is no. We do not have the coverage that we want. So we are working on these technical obstacles. The result of site sharing with our competitor is not what we expected. Not because of any games that are being played, but because of real technical problems,” comments Sultan.

Two network agreements have to be reached between Etisalat and du. The interconnection agreement, which links both networks together - allowing an Etisalat customer to call a du subscriber - is in the process of being finalised with the UAE's Telecommunications Regulatory Authority (TRA), and Sultan is confident this process will soon be completed. The second agreement is over sharing the physical infrastructure - the pylons, mobile antennae and equipment - and it is in this area where specific technical difficulties have manifested. Du is also waiting for the TRA to propose a framework for the use of existing infrastructure, in order for the operator to roll out internet, fixed line and triple play services.

“We are in discussion with the authorities to see what is the framework for us to be able to use the existing infrastructure. Because I think it makes sense from a business point of view to optimise this network, which is a national asset. I hope it will be early 2007 but this is not something we can decide,” Sultan says.

Sultan also expected mobile number portability (MNP) to be ready in time for the launch of mobile services. MNP would allow users to switch their current number from one operator to another. However, notification from the TRA that customers would not be able to relocate their current number until the end of 2007 has proved highly problematic for du, as, according to its own market surveys, this is a critical concern for customers looking to switch from Etisalat.

This news from the TRA has therefore spurred Sultan into launching du's '055 my number' booking campaign, whereby customers can register their current Etisalat number with the new operator for a fee of AED100 (US$27) prior to the initiation of du's mobile services. The primary drawback to this system, as opposed to true number portability, is that users will have to change their 050 prefix to 055, though Sultan argues that this is the best compromise available.

“When asked, customers said clearly that retaining their number is fundamental for their convenience. I think what we are offering is really as close as possible to the best solution that customers can have. They have the opportunity to keep any number they currently possess, one number or multiple numbers, but yes we have to change the prefix,” says Sultan.

Another potential stumbling block in du's approach to resolving the MNP issue stems from the licensee's insistence on not revealing any details concerning price schemes or services before asking customers to register their number. The AED100 subscription fee will only be applicable once customers confirm their bookings, by which time, according to Sultan, they will be aware of what kinds of services and prices are on offer. However he argues that he cannot divulge details concerning pricing schemes at present, as these, once again, have to be approved by the TRA.

Despite the lack of specific pricing and tariff details Sultan was careful in articulating his intent to provide competition while not wanting to get drawn into a price war with Etisalat. For du, undercutting Etisalat is not an option. Therefore Sultan intends to launch with tailored packages to meet the needs of specific segments of the market, competing on services rather than lowering prices in its bid to gain 30% penetration within three years.

However, Marc Hammoud, assistant vice president of research at Shuaa Capital, believes du is primarily counting on the UAE's 8% to 10% population growth in order to expand in such a highly saturated market. Hammoud also sees the issue of 'on-net' and 'off-net' call pricing as playing an important role in determining how du can attract subscribers and how customers will react to market deregulation.

“One point that will be interesting to look at is the 'on-net' and 'off-net' call pricing. Will the price be different when you call a du subscriber or an Etisalat subscriber? Could that create what we call a network effect, whereby you keep your Etisalat number to call Etisalat subscribers and you take a second number to call du subscribers? That would avoid paying a large amount to call both networks with a single number. This is a factor that could boost the number of subscribers for du,” Hammoud predicts.

The growing emphasis on services in the UAE market reflects the position of the TRA, Etisalat and du, which have all made it clear they will not be competing on prices. While recent second operators in other countries, such as Mobily in Saudi Arabia and Nawras in Oman have captured 27% and 28% of the market respectively in 18 months, they implemented aggressive pricing strategies. Hammoud believes the agreement between the UAE's regulator and its operators to compete chiefly on services will prove problematic for du's growth.

“In terms of just competing on services, capturing 30% of the market sounds bullish, I would say du's market penetration will be closer to 25% and their timeline also sounds tight. In a saturated market of 106%, it will have to rely more on new subscribers and the growth of population. This could perhaps happen, but closer to three years than two years,” Hammoud says.

The incumbent's response to the competition's talk of services and packages is apparent, with Etisalat looking to push dedicated services such its Wayek portal, which offers access to content on the move, as well as showcase enterprise solutions such as Blackberry and its IP VPN connectivity partnerships. Such is Etisalat's enthusiasm to offer tailored services to all segments in the market the operator recently announced the launch of solutions for individuals with hearing difficulties. It is clear its 'one size fits all' approach is slowly being abandoned, in order to pre-empt du's segmentation strategy.

“What we are trying to say is that in the last 30 years we have been building our technology, now that technology building is complete and we are focusing on offering services to the customer,” Essa Al Haddad, Etisalat's chief marketing officer told CommsMEA. “We want to show that we care for the UAE market as much as we do for the international strategy we are undertaking,” he added.

Part of this emphasis on the UAE market is a segmentation programme that Haddad believes will give different subscribers different services, as they require them.

With this in mind the establishment of du's own branded distribution points could be an important factor in distinguishing it from Etisalat. Sultan places a great deal of importance on retail presence, intending to launch with over a thousand indirect distribution channels nationwide, along with establishing around ten dedicated du stores.

Etisalat has a limited number of dedicated outlets, making it harder for customers to apply for services or to access certain information on their accounts. Du's approach to distribution therefore seems to be a part of its wider branding strategy; differentiating itself from Etisalat through personalising its services and connecting with the customer on a number of levels.

“What I think is that a brand is not only a logo, a brand is something that you have to feel when you are in any point of contact with a company. When you pick up a phone and call them, or enter into their store, how do they answer? You have to live it and breathe it across the entire value chain,” says Sultan.
November 15 saw the unveiling of du's latest branding campaign, which focuses on water as an analogy for the company's attitude toward communication. According to Sultan this is a calculated positioning strategy, intended to capture the attention of the young, modern, crowd while simultaneously convincing businesses and enterprises that du can offer integrated and full solutions.

“We are the national telecoms operator in the country, our promise to the market has to be at this dimension. We are not only going to talk to youngsters or teenagers. We are going to have products, services and advertising campaigns that will be completely different; this is just the first positioning,” Sultan proclaims.

It is clear that du sees branding as a vital conduit, through which it can tempt customers away from Etisalat, though Hammoud argues, it is likely that most people in the UAE will be attracted to du, not through segmentation or branding exercises, but out of simple curiosity, in the wake of a 30-year monopoly.

“What I believe is that if people are interested in going for du they will probably keep their Etisalat number and at the same time they will book a number with the du network, just to see how the service is and to compare the pricing and network coverage,” Hammoud suggests. “People like to change just for the sake of changing. When you have a monopoly for almost 30 years you want to try something else.”

“On the network, if we are asked today if we are completely ready then the answer is no”

“In terms of just competing on services, capturing 30% of the market sounds bullish”

“A brand is not only a logo, a brand is something that you have to feel when you are in any point of contact with a company”

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