World view

The entry of competition in the UAE marked 2007 as a milestone for incumbent Etisalat. However, with its current international portfolio spanning 14 markets, the year has been an auspicious one for the telco both at home and abroad.

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By  Administrator Published  September 11, 2007

The previous nine months have been something of a revelation for the UAE's incumbent operator, culminating in the company reporting that its financial results in 1H07 exceeded expectations.

Adding an extra million subscribers on its UAE network year-on-year, with a total of 6 million active customers, Etisalat's footprint stretches from West Africa to the Chinese border.

Having taken the entrance of domestic rival du in its stride, the UAE's incumbent operator has been hitting the headlines with its aggressive international expansion.

Having launched under the Etisalat-Misr brand in the expansive Egyptian market in May 2007, Etisalat-Misr racked up 1 million subscribers in less than seven weeks of operations. An impressive feat, particularly in light of the two strong incumbents already present in the market.

With such rapid expansion rates in a country with a mobile penetration rate of approximately 25% (Egypt's population is estimated at 80 million) the company's US$3.1 billion fee for a 3.5G licence appears an erudite purchase.

Etisalat-Misr chief executive Saleh El Abdooli claims the company offers coverage in approximately 40 areas of Egypt at present but plans to roll out services further, eventually increasing market penetration to 50% by 2010. The operator also harbours ambitions of increasing its subscriber base to 10 million within the same time frame.

Etisalat chairman Mohammad Omran tells CommsMEA: "We must offer the best services if we are to achieve our goals. We must also be swift in bringing them to market.

"Egypt's mobile penetration of approximately 20% demonstrated to us that the market was far from its potential," he adds.

Comparing the country to other regional markets such as Morocco, Omran states that offering advanced services was a key point of difference for the company in Egypt.

"The basis of our strategy in Egypt has been to offer better services that were previously unavailable to mobile subscribers in the country," he says. "In fact, I am confident that we will surpass our stated aim of achieving 20% market share within three years."

As part of its wider expansion drive, Etisalat has identified a specific set of criteria for entering new markets, explains Omran. He states that the Etisalat's entry into the Egyptian market serves as a textbook example of this strategy.

"Primarily we look at certain aspects of a market before entering it; these include GDP, market penetration and the potential for technological development within a country," he says.

Despite Afghanistan's low GDP, Etisalat paid out US$40 million for a 15-year concession in the war-torn country, officially launching its network in late August after putting back its original July target.

"The ongoing security issues there, as well as the presence of three other mobile operators, makes this a difficult proposition," Omran concedes.

However, he contends that the business case for operating in Afghanistan lies in the fact that mobile penetration is below 20% and there is a higher ARPU there than in surrounding countries such as India or Pakistan.

Etisalat will utilise VSAT backhaul to tackle the difficult Afghan terrain, and Omran points out that the company plans to leverage its global presence, in markets such as Saudi Arabia, UAE and Pakistan, to offer complete solutions to the Afghani diaspora.

Etisalat's Afghan operations serve as a notable addition to its international presence, with Omran stating that its entry there demonstrates that the UAE operator is not pursuing a simple ‘cheque-book expansion' policy given the low market entry cost.

"If you look at the Iraqi market, new entrants [such as Korek Telecom] have had to negotiate the acquisition of existing network infrastructure from the previous operator on top of their US$1.25 billion licence fee," says Omran. "The business case for entering Afghanistan made more sense to us."

However, the UAE operator has also shown little reservation about paying high entry fees for markets with low penetration levels as evidenced by the US$3.25 billion entry fee paid in Saudi Arabia in 2005.

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