Phoney wars

Will Etisalat suffer if the telecoms market opens up in the UAE? CEO Mohammed Omran talks to Richard Agnew about the firm’s strategy to take on competition.

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By  Richard Agnew Published  July 10, 2005

Phoney wars|~|30-FEATURE-UPLOAD-PIC-200.jpg|~||~|COMPETITION IN THE UAE TELECOMS MARKET HAS BEEN EAGERLY ANTICIPATED FOR A LONG TIME – and with it, consumers are expecting reduced prices and improved sevices. But is it actually going to cost businesses more? Not only will the days when they had one option for telephone services be over; the discounts state-owned operator Etisalat provides on local calls maybe on their way too. “This is an issue which we are evaluating now,” Mohammed Omran, Etisalat’s chief executive officer, tells Arabian Business. “Now, for the fixed network we charge AED15 [US$4] per month for unlimited phone calls and… this is not the right way. However… we have to look [for] ways where we do not affect low-income people who are using it as kind of a security. We are looking at different kinds of solutions, but it is a major issue,” he adds. Etisalat’s discounted calls are a relic of a soon-to-be-gone era when, as a state-controlled service provider, its wide-ranging social obligations came first. They have been subsidised through more profitable areas of its business, such as mobile and international calls, so alternative sources of funding would have to be found if they are to be kept going when competition is brought in. For Omran, though, the prospect of a new entrant has neither signalled the death of Etisalat’s fixed-line operation, nor meant that it must continue propping it up. Millions of dollars have already been ploughed into a revamp of the network, to deliver a range of services such as TV and internet access to UAE households. A tender will also be launched next month, which will pave the way for the next generation fixed network’s (NGN) expansion, after which it will gradually replace the operator’s existing infrastructure and serve all new properties Etisalat connects. “I always talk about the revival of fixed lines,” says Omran. “Fixed lines have reached saturation in many countries, not only in the UAE. But now [we are aiming to generate] more usage on the fixed lines [and] are deploying an NGN which can offer voice, data as well as video. We intend to introduce it in a larger scale in the UAE, especially in the new areas of developments where we are going with new networks,” he adds. With the UAE opting to have two state-owned telcos operating side by side in the market, Omran expects competition between them to focus primarily on advanced services like high-speed internet access, rather than price. Etisalat, he says, has therefore laid out a target for this year to double its broadband subscriber base, which stood at 45,000 at the end of 2004. “We have around 50,000 residential digital subscriber lines (DSL),” says Omran. “Our target is to move to more than 100,000 by the end of the year. By 2008, we aim to be among the top countries in the world in broadband,” he adds. The vast majority of Etisalat’s internet customers currently have narrowband connections, so the expansion of the fixed network should encourage more people to hook up to its high-speed packages and reducing ‘churn’ to the new entrant. But the upgrade will also be the foundation for Etisalat’s play to make its mark in the UAE’s media and broadcasting sector. It already delivers television to certain subscribers that are within reach of the network of its cable operator, E-Vision. But by sending programming over its landline network using DSL, it will be able to target a wider range of consumers. It will also be able to take on the region’s satellite broadcasters, by offering customers the convenience of a single bill for a ‘triple-play’ of TV, phone calls and internet access. “Our aim is to expand E-Vision using DSL because it is cheaper than fibre,” says Omran. “We are experimenting using DSL [for television]. This is the way we have to develop the market. It will not only be for internet. With broadband connectivity at home — you should be able to use it for online gaming, home shopping and many other services,” he adds. Globally, many telcos have been thinking about delivering TV programmes to customers along with phone and internet connections for years now, but few are already running triple play networks. British Telecom, Telecom Italia, France Telecom, Deutsche Telekom, Telekom Austria, Swisscom and Belgacom have all run trials, but none in the Middle East have yet made the heavy investments in their network that would allow them to follow suit. Guaranteeing levels of service is also an issue that Etisalat would have to overcome. Analysts point out that consumers are less likely to accept glitches that occur while they are watching a movie than when they are surfing the web. As high definition television is introduced, the job of telcos to deliver better quality pictures over broadband networks will also become much more difficult. Another challenge for Etisalat is that the UAE’s Telecommunications Regulatory Authority (TRA) has yet to make a decision on whether to legalise voice over internet protocol (VoIP) technology, which it would have to use to deliver phone calls over its DSL infrastructure. “Internet telephony is not allowed and we have already instructed Etisalat to go ahead and block websites that provide internet telephony,” says Mohammed Al Ghanim, director general of the TRA. “VoIP as a technology is emerging and is a good technology. We are studying it right now ... [and] we are seriously thinking about it. Etisalat is interested in VoIP. As soon as we tackle [the rules] which will allow the second operator to come in and to operate, then we will announce something about VoIP. But my technical and regulatory team are studying it,” he adds. Etisalat’s fixed-line business now generates just over a quarter of its revenue, and has long since been overtaken by its mobile operations in terms of subscribers. At the end of last year, it had 3.7 million GSM users, while only 1.2 million were using its landlines. But the next step, Omran says, could be for Etisalat to introduce a ‘quadruple play’ which would bring the two businesses together. Part of this process, Omran says, will see the operator making serious attempts to upgrade its mobile network, so that broadband subscribers can also access video and internet services while they are on the move. It is planning to accelerate its deployment of Wi-Fi in shopping malls and commercial centres, as well as expand the coverage of its 3G network, which is currently limited to parts of the UAE’s urban centres. It also plans to put the 3.5G technology, high speed downlink packet access (HSDPA), on trial later this year, which could theoretically allow consumers to download video and internet content to their mobiles at speeds of up to 10 Mbps. A service delivery platform (SDP) implemented earlier this year will also make it easier for movie and video providers to add their content to its network. “3G is now running in areas in Dubai and Abu Dhabi and some other cities,” says Omran. “We haven’t expanded it fast because there are two elements which are needed to roll out 3G — terminals and content. We see more terminals coming with better functionality and lower cost, as well as more content.” He adds that, due to the shortage of 3G handsets in the market, Etisalat will shortly launch plug-in cards which consumers can use to access the web at high-speeds from their laptops. Eventually, Omran says this process will not just see users accessing web and television content over any device they please — but also using phones which connect to their landline at home and the mobile network when they are on the move. Already launched in the UK by British Telecom, Etisalat plans to offer the service first in new residential developments, allowing customers to save on their mobile bills and encouraging them to stick with the operator once its competitor comes in. “We are evaluating the next wave of wireless technologies like HSDPA and we aim to experiment with it sometime later this year and introduce it soon after that,” says Omran. “[With] broadband coming to the mobile, it becomes like a complement for the fixed line. People will watch videos at home and then on their mobile. BT has also introduced the merger of mobile and fixed where when you go home you can use the home network with your mobile… so we are looking at that also. In new developments in Abu Dhabi and Dubai we have started talking to them and our aim is to introduce it,” he adds. ||**||

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