Global Arab Network | UAE Telecoms Competition - Etisalat & Du Going Head to Head

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UAE Telecoms Competition - Etisalat & Du Going Head to Head

Wednesday, 05 May 2010 14:35

Dubai_UAE_Emirates_Integrated_Telecommunications_Company_Du

Dubai's homegrown telecommunications operator, Emirates Integrated Telecommunications Company (Du), is looking to step up competition with the long-established market leader, Emirates Telecommunications Corporation (Etisalat) . Du is seeking to expand the range of services it offers in an effort to woo new customers and retain the loyalty of its existing client base.

Du announced on April 19 that it intended to increase its capital through a $272m issue of shares to its present stockholders, a move the firm said would allow it to bolster its existing networks.

According to Du chairman Ahmad bin Byat, the issue was part of the long-term process of developing the company into a major player in the telecommunications sector.

"One of our goals is to transform Du from a high-growth, early-stage venture to a more mature company with efficient management of future funding requirements," bin Byat told local media when unveiling the planned issue. "The capital raised through this rights issue will provide the necessary first step."

Though Du still has to get approval from its shareholders, with an extraordinary general assembly meeting planned for May 11, this is expected to be a formality. Dubai Holding and Mubadala Development of Abu Dhabi hold the majority of the firm's shares between them, with just 20% of its stocks being traded on the Dubai Finance Market. As the majority stakeholders both back the issue plan, it is expected that the subscription period will run from May 27 to June 8, with JPMorgan Chase & Co set to serve as coordinator for the rights issue.

The company intends to use most of the capital it raised to improve its internet and social networking platforms rather than seek to expand beyond its home market, the chief executive officer, Osman Sultan, said in an interview with local media.

"We will focus on growing within the UAE, and for the time being have no plans to speed up growth through overseas forays or acquisitions," Sultan said. "We have no plans to move outside the UAE in our core businesses of telecoms. The timing and existing scene wouldn't allow us to create the right value for our shareholders."

As news of the rights issue came out, Du's share price dipped on the Dubai stock exchange, though Simon Simonian, a telecoms analyst with investment bank Shuaa Capital, said the reaction was a normal one when a company moved to increase its share base.

"The idea is for investors to buy into the rights issue on a pro rata basis so they continue to own the same proportion of the company. Some investors are short term and can't necessarily afford to put more money in, so there is some selling pressure," he told international media April 19.

Pressure is something Du is quite used to, though it is more experienced in applying it, fast becoming a challenger to rival Etisalat since commencing operations four years ago. The company has built up a 32% share of the market in the UAE and such solid growth may in part have contributed to Etisalat's fall off in performance, with the telco posting an 8.5% drop in net profits for the first quarter of the year.

However, unlike Du, Abu Dhabi-based Etisalat is active in a number of overseas markets, with a presence in 18 countries. Its expansion programme was in part prompted by the ending of its monopoly in the UAE in 2006 with the launch of its Dubai-based competitor.

Du is also aiming to reinforce its position by rolling out new services, the latest of which is voice over internet protocol (VoIP), allowing residential subscribers to make phone calls over the internet.

The move should prove popular, and could also sway more of Etisalat's customers to switch service providers. Though Etisalat does offer VoIP, its service only extends to business clients. With Du offering lower-cost, internet-based overseas calls to residential customers, demand for private VoIP could quickly swell the company's subscriber lists.

Farid Faraidooni, Du's chief commercial officer, said that while there would still be the option of using land line or mobile phone links, VoIP could be an attractive alternative.

Alternatives are what the telecommunications sector in Dubai and across the UAE is all about, with Etisalat and Du going head to head in their domestic market, both offering similar but distinct services. While this competition means the two companies have to work harder to keep existing subscribers and attract new ones, the principles of cost and efficiency are maintained, with consumers reaping the benefits.

Global Arab Network

This article is published in partnership with Oxford Business Group

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