A tale of two telcos

Price cuts are one thing, but will a second UAE operator benefit business? Much of the debate around the entrance of Du into the UAE telecoms market has so far focused on its potential impact on pricing. But whether a duopoly of two government-owned firms will end up reducing phone and internet costs remains to be seen. Given that 50% of current monopoly Etisalat’s net profits are handed over to the government, it is unlikely to encourage a price war.

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By  Richard Agnew Published  March 12, 2006

|~||~||~|Price cuts are one thing, but will a second UAE operator benefit business? Much of the debate around the entrance of Du into the UAE telecoms market has so far focused on its potential impact on pricing. But whether a duopoly of two government-owned firms will end up reducing phone and internet costs remains to be seen. Given that 50% of current monopoly Etisalat’s net profits are handed over to the government, it is unlikely to encourage a price war. In fact, many customers might lose out from Du’s launch — if the subsidies Etisalat provides on local calls are taken away. More focus, instead, should be being placed on the potential benefits of the move to the UAE’s businesses. Regionally, telecoms companies have done little to diferentiate the enterprise sector from the market at large, and develop specific services and pricing packages that businesses need. Broadband remains prohibitively expensive compared to other parts of the world — increasing costs for small and medium size enterprises (SMEs). The vaunted Blackberry mobile email service, or its competitors’ solutions, remain unavailable in most countries, and internet connections across the region often go down. If the UAE, and other Gulf countries, are to offer the quality of service needed to attract outsourcing contracts, encourage investment and allow businesses to run effectively, then things need to be shaken up. So far, Du is making all the right noises. Chairman, Ahmed bin Byat, talks in this issue about segmenting the UAE telecoms market more effectively — essentially, developing services and packages that suit different parts of its customer base. He also plans to spend big on a nationwide fibre network that will be able to provide the reliability businesses’ require, and will shortly announce a deal with Flag Telecom to plug into the UK group’s high-capacity international network. This is sure to reduce the internet outages we have seen in the region over the past few years. But he is not the first person from a regional telco to promise better service. These are the kind of improvements the industry has been talking about for years, but talk is cheap. It might be too much to ask for Du to make an immediate impact on quality of service when it launches later this year, but that’s how the benefits of competition should be judged. ||**||Missing the boat|~||~||~|Another week has gone by and the controversy over Dubai’s P&O deal refuses to die down. There have been more protests over the move in the US, and an attempt by a former P&O partner to block the deal in UK courts. Most worryingly though, the governor of the UAE's central bank, Sultan bin Nasser Al Suwaidi, has warned that US opposition to the purchase may jeopardise free trade negotiations between the two nations. The UAE and US have already had a series of discussions, and are due to hold the next round this week, but the furore could mess things up. If an agreement is delayed, those opposing the deal, including many in the US government, will have shot themselves in the foot. Washington's foreign policy should be aimed at encouraging more trade with the Middle East, helping its economic and social development. A delay would also threaten the rapid growth in business between the UAE and US, which saw American exports reach almost US$8.5 billion last year. Al Suwaidi said that any block on the deal would not be “a wise economic decision”. He’s right.||**||A warning from the past|~||~||~|Last week, Lebanese politicians and leaders entered into the first national dialogue in years to seriously discuss a number of important issues. As well as UN resolution 1559, which calls for the disarmament of all militant groups in the country (including Hezbollah), on the agenda has been the possible impeachment of president Emile Lahoud, whose presidency was extended under Syria's coercion through an amendment to the constitution. Hezbollah has so far refused to lay down its arms and considers itself a resistance movement, more than anything else. But international pressure is increasing on the Shiite movement, as well as its backers Syria and Iran — and maybe to the extent that it is willing to reach compromises with its fellow Lebanese citizens, given the charged political atmosphere. Let's hope the very real prospect of civil conflict is deterred by the memory of the country's brutal, 15-year civil war. ||**||

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