Experts denounce UAE telco scheme

REGIONAL analysts have criticised the UAE authorities for the manner in which they have awarded the country’s second telecoms licence.

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By  Rhys Jones Published  May 15, 2005

REGIONAL analysts have criticised the UAE authorities for the manner in which they have awarded the country’s second telecoms licence. The UAE’s Telecommunications Regulatory Authority (TRA) announced that it had given the go-ahead for the new operator last week, to create competition with incumbent telco, Etisalat. But the lack of a public bidding process before the announcement prompted questions over the move’s transparency. “This was not a competitive tender and the new operator was selected without the benefit of the regulator having received competitive bids,” Kamal Shehadi, managing director of Beirut-based Connexus Consulting told Arabian Business. “The consumer is definitely not getting the best deal,” he added. The UAE’s state pension and social security fund will hold a 40% stake in the new operator, dashing expectations that the opening of the sector would allow a non-state-controlled player to compete with Etisalat, which is 60% owned by the government. A spokesperson for the TRA also told Arabian Business that no licences would be offered to other firms until 2015. “I am disappointed that the UAE has chosen to disregard international best practices as well as the interests of the consumer,” said Shehadi. “The world is moving towards privatisation and competition and the government of the UAE has ignored this and is just carving out a stake for itself,” he added. The UAE held the second round of its Free Trade Agreement (FTA) talks with the US in Washington DC last week, and is keen to promote its liberalisation efforts. But a leading Dubai-based telecoms lawyer told Arabian Business that the UAE has timed the announcement to appease the Americans, who are keen to see the telecoms market open up. “I think the timing of the announcement was very purposeful to make it look like there is activity in the sector and that they are taking the necessary steps to liberalise the market,” said Justin Connor, telecommunications attorney, Al Tamimi & Co. “The USA is pressuring heavily on the UAE in the context of FTA negotiations in order to open up and to liberalise the sector, but the UAE is also under pressure to retain the value of Etisalat,” he added. An FTA between the UAE and the US would grant the UAE access to the largest consumer market in the world as well as having a positive impact on its production and exports. However, any deal would hinge on at least partly the liberalisation of the telecoms sector, “This is one sector where they have effectively had a pass up until now and it looks like that is no longer going to be the case because the USA is seeking commitments greater than the World Trade Organisation (WTO) does,” said Connor. “The USA is pushing for much greater liberalisation. If the UAE is actually going to adhere to the FTA and sign it they need to think very carefully about how they implement that,” he added. The new telco is expected to be operational early next year. Further details regarding the ownership of the remaining 60% of its capital and the timing of its commercialisation are expected in the coming months. TECOM, Dubai’s free zone operator, declined to comment on ongoing speculation that it will become the UAE’s second telecoms player. It had also been speculated that Saudi Telecom is in a good position to be awarded a second mobile licence in the UAE, in reciprocation for the licence an Etisalat-led consortium won in Saudi last year, to operate the kingdom’s second mobile network. According to Mohammad Al Ghanim, director-general of the TRA, the new company will comprise local investment. “The new company will be based exactly on the model of Etisalat and it will be a purely local investment venture,” said Al Ghanim. “At this stage there will be no foreign company involved.” Etisalat is expected to be in a strong position, whatever the make-up of the new entrant. “We know that the second operator will eventually enter the UAE market. That’s why we have continuously improved our efficiencies to maintain our customer base,” said Mohammed Omran, CEO, Etisalat.

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