Broad appeal

As mobile growth slows, the UAE's second operator has its sights on the growing market of fixed and mobile data. Osman Sultan talks to George Bevir

Tags: Emirates Integrated Telecommunications Company United Arab Emirates
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Broad appeal
By  George Bevir Published  May 4, 2009 Communications Middle East & Africa Logo
The UAE's second operator, Du, has grown rapidly since it launched at the start of 2007, thanks in part to tariffs and promotions that have targeted the country's large migrant population.

Cheap international calls have helped the government-backed operator to turn a profit ahead of schedule and propelled its subscriber base from naught to 2.4 million active subscribers in two years. But with many construction projects in the UAE on hold, workers being laid off and expatriates heading home, Du's target market could be a casualty of the global economic downturn.

Analysts at Dubai-based investment bank Al Mal capital last month predicted the telecom sector would be hit by an estimated 4.2% fall in the UAE's population, with an anticipated further decline of 1.2% in 2010 adding to the problem of a shrinking market.

Du CEO Osman Sultan acknowledges that the perpetually soaring mobile penetration rate of the UAE may finally be leveling out. "We expect to see growth, but maybe in line with the more challenging context," he says, adding that he does not expect Du's overall subscriber base to be eroded by any demographic shifts.

"In the first year we were growing by 150-160%, and then we grew by 100%. So maybe instead of growing by 60-70% we will grow by 25%. It's very difficult to tell, but we are looking very carefully at daily, weekly and monthly indicators and trying to assess."

Last month, Du launched a tariff that it hopes will attract a new set of customers to the network. The "Elite" plan, which combines a postpaid account with a prepaid "wallet" also allows customers to choose their own number, with the most desirable digits costing a pricey AED1000 (US$272) per month.

Sultan says that he hopes to win customers with a "higher purchasing power" to the network, with customers from rival Etisalat firmly in his sights. "I wouldn't be doing my job if I wasn't launching a product to try to attract the competitors' customers as well. That's the name of the game," he says.

Home fixture

As well as churning customers from Etisalat, Sultan says he expects some new arrivals to the UAE to sign up to the plan, and some existing Du customers to upgrade to it. But he does not think that venturing abroad is the right tactic for Du to expand its overall subscriber base. He says there are "no plans" to take the Du brand outside of the UAE, and he says he doesn't expect that to change any time soon.

One of the reasons that Sultan gives for sticking to the UAE market is the fierce competition between regional powerhouses such as Etisalat, Zain, STC, Qtel and Orascom. It is a market he describes as "crowded...with big players".

"We still have a lot on our plate in the UAE," he says. "Ok, we reached profitability earlier than expected, which is great news. But we still have a lot of challenges. We have to take our broadband story beyond our market today; have to take it nationwide, and we have to focus our efforts on this."

Despite being tasked with talking up Du's latest mobile tariff, Sultan is most animated when he talks about the potential of fixed and mobile broadband services, which he says needs to undergo a "profound transformation" in the UAE.

As of the end of last year only 10% of residents in the UAE had a broadband internet subscription, according to figures released by the Telecommunications Regulatory Authority (TRA). Broadband connectivity across the UAE is mainly provided by Etisalat, with Du connecting homes and businesses in some areas of Dubai, with only a few served by both Etisalat and du.

"Broadband for us means fibre optic, and fibre optic is not like the mobile network where you build the network. It is about digging, putting ducts, and this is not something we believe in doing," Sultan says.

"There is already an infrastructure in the country. If you consider that the major shareholder for Du and Etisalat is the same, I think there is rationale behind that, to use the same infrastructure."

At the end of last month, Du signed a deal with Abu Dhabi for "uninterrupted access to all installed and planned fibre optics networks across the emirate of Abu Dhabi."

Talks between both operators and the TRA about Du sharing Etisalat's broadband infrastructure are underway, but so far no agreement has been reached and Sultan says it is too early to say when any announcement about a deal is likely to be announced.

"Unbundling is one of the routes, and sharing current infrastructure is another. But local loop unbundling is usually a long process, and we want to accelerate things."

Future broadband

"Mobile broadband is the story for tomorrow," says Du CEO Osman Sultan. "We believe in LTE, and we believe that it really will enable the mobile broadband story to become larger."

Du is in talks with its current vendors and suppliers that it is not doing business with at the moment about fourth generation mobile broadband technology LTE. But discussions about rival standard WiMAX are on hold, he says.

"We have had a pilot...but we have held our decision in order to see what's becoming of WiMAX as a technology, specifically in the current economic context. Our discussions on WiMAX are on hold at the moment," he says.

"We want to ensure that this is really a technology that has its economic ground stable before we move on it. Sultan says Du might use WiMAX for specific, targeted projects, which it is doing by providing backhaul for the Dubai metro's WiFi capability.

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