Du’s debut is unlikely to turn too many heads

The long-awaited release of du's tariff structure has thrown up few surprises, and confirms the sentiments the company's CEO Osman Sultan has long-since held - that du's competitive focus would be on product and service differentiation rather than on price.

Du is set to benefit most from the UAE public's exposure to an alternative offer for the first time in the country's 30-year telecoms history. Thus there is no material difference in the pricing structure between du's and Etisalat's core products - du charging 0.5 fils per second for calls to all national mobile and landlines from a prepaid account, for example, and Etisalat's current charge for the same service of 30 fils per minute.

Aside from a discount of up to 40% on national and international SMS, which only lasts for a limited period, the price differential between Etisalat and du is unlikely to be large enough to inspire a large proportion of mobile subscribers in the country to churn to the new entrant. Therefore it appears the most likely way in which to encourage this behaviour is through imaginative branding and marketing, together with the bundling of packages, and an active market segmentation process.

In this environment of managed competition, it is hoped innovations such as the introduction of per second billing by du, and Etisalat's competitive reaction to announce it would follow suit later this year, will define the new entrant's role in what is already a sophisticated and highly penetrated communications market.

For the main part, du does appear aware of what is required of it in order to have the desired effect on the market. The announcement of services aimed at corporate subscribers, including dedicated account managers and tailored business solutions is a strong indication of its intention to court big business and enterprises given the operator's Dubai-centric pedigree. Financial analysts have forecast that du could feasibly gain close to 30% market share by the end of 2009, and given the success of the 'booking number campaign', which saw more than 500,000 people reserve numbers prior to launch, may well be achievable.

In a market like the UAE, du was never likely to revolutionise the communications sector, and given the government's significant equity position in both service providers, as well as the two operators' contribution to the national treasury, du is likely to be encouraged to be successful, but not too successful.