The New Operator

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As the New Year begins, the new UAE telecoms operator Emirates Integrated Telecommunications Company, branded as du, is securing its customer base ahead of its expected launch of operations in February.

du, which launched a campaign allowing customers to book their phone number with the company in November, has received approximately 500,000 subscribers booking 750,000 numbers. Under the campaign, customers are allowed to keep their old phone number but must change the prefix from '050' to '055'. The ease of switching operators and the option for customers to retain their mobile number seems to have had a positive impact on du's efforts to build a substantial customer base.

However, the imminent launch of du's operations has led to the existing operator, Etisalat, and the newcomer to adopt an aggressive marketing strategy to showcase their new products, services and pricing. The mobile penetration rate in the country is extremely high, with estimates placing it at 125%, marking the UAE out as having the highest mobile penetration rates in the Arab world. It also has internet penetration levels of 60%. Against such a backdrop, competition between du and Etisalat is set to be fierce.

Some analysts fear that this will not dramatically impact prices. Osman Sultan, CEO of du, said that the company will be looking to grab a 30% market share within three years of launching operations. However, this will not be achieved through a price war. According to Sultan, "We have a great deal of respect for Etisalat as a strong regional player with a very deep pocket. We will not be getting into a price war with them as such cut-throat competition would not be in the interest of either company." However, Wisam Francis, BIS Shrapnel's project manager for Middle East telecom sector believes that du will struggle to achieve its ambitious targets, suggesting that it will only achieve between 10-20% market share up to 2009.

du has been investing heavily in its infrastructure and human resources in preparation for the commencement of its operations. The company has also been keen to make its mark ahead of its launch, highlighting its next generation network and pricing structure. Particular areas of emphasis for both Etisalat and du are broadband and mobile television, both of which are expected to gain prominence in 2007. du has also stressed its per second pricing strategy that distinguishes it from its competitor Etisalat. All customers will have the option to be charged on a second by second basis on all mobile voice calls. Sultan said that this was a particularly important development because, "It is only fair that our customers pay for precisely what they use."

Etisalat is also preparing for the arrival of the new operator du by readjusting its pricing structure. One key area that Etisalat is looking to address is international calls. The company is going to offer off-peak rates to business customers on their international calls, constituting a 35% discount on current rates. Ahmad Abdul Karim Julfar, the chief operating officer at Etisalat, seemed to concede that this decision was driven by the changing nature of the market in the UAE and recent developments. He argued, "In light of the current market environment we have reviewed our services and rates to ensure that the true cost of the service is more accurately reflected in the charges."

However, it would appear that the rationale behind cutting prices on international calls is not simply driven by the imminent arrival of a new operator in the UAE. Etisalat is also taking into account the potential changes to regulation on Voice over Internet Protocol (VoIP) in the UAE. This issue continues to dominate the telecommunications sector in the country. As it stands, the technology is still illegal with products such as Skype blocked within the country.

It has been rumoured that the national regulatory body, the Telecommunications Regulatory Authority (TRA) is set to legalise VoIP. However, it has issued a rebuttal this week saying that the technology is still under review. The TRA's manager for administration and public relations, Adnan al-Bahar told the local press, "Until the regulatory framework is in place VoIP is illegal."

Nevertheless, it would appear that it is only a matter of time until the regulatory framework is put in place issuing in the legalisation of VoIP. This is seen as a particularly important growth area in the telecommunications sector in the Middle East and North Africa (MENA) region. According to Luke Kabamba, the Dubai-based ESM business unit head for IT software management company CA's Europe Middle East and Africa (EMEA) eastern markets, "The Middle East market has witnessed a huge surge in the last couple of years and many companies today have plans of investing in VoIP which not only helps increase customer satisfaction and staff efficiency but also simplifies and reduces the cost of managing voice communication systems."

For both retail and business customers, VoIP holds many clear-cut advantages, besides cost reduction. It would appear that any legalisation of VoIP would not allow for full competition in this service. The TRA has suggested that only the two national operators, Etisalat and du, will be allowed to offer the service.

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