August 18, 2010
The UAE is putting its faith in fiber, with one of its major operators already using an all-FTTH (fiber-to-the-home) network and the other following suit by 2011.
That is one of the findings of a new report from Pyramid Research , “UAE: Fiber Deployments Will Boost Uptake of Pay-TV and VOIP,” which forms part of the Africa & Middle East Country Intelligence series.
According to the report’s author, Hussam Barhoush, the lack of true competition -- Etisalat and Emirates Integrated Telecommunications Co. (du) are the only operators in the UAE, and both are predominantly state-owned -- means that wireless access technologies such as WiMax and CDMA are unlikely to feature in the UAE telecom ecosystem.
“The upcoming boom is expected to be in broadband, as the country has plans to be fully connected to the fiber network,” says Barhoush. (See Etisalat Does FTTx With Zhone.)
Broadband penetration in the UAE, at 18.3 percent, is already the highest in the region, and the report predicts that broadband’s continued growth will see it generate $1.01 billion in revenues in 2015, up from $695 million in 2010. This contrasts sharply with other countries in the AME region. (See Pyramid: The Struggle for Broadband in AME.)
And the fact that Etisalat’s share of the FTTH network remains larger than du’s means that it will remain the dominant operator, with a predicted revenue share of 74.1 percent in 2015, albeit down from 77 percent in 2010. This despite du’s recent record profits. (See du Reports Q2 and Etisalat Reports H1.)
On the mobile side of things, du is more of an equal rival to Etisalat. The report predicts that its share of mobile subscribers will increase from 32.6 percent at year's end 2009 to 47.6 percent in 2015. However, as Barhoush points out, its lower ARPU (average revenue per user) means that its revenue share will not grow in proportion.
In 2010 du began upgrading its network to HSPA+, following in Etisalat’s footsteps. Both operators have expressed their intention to launch Long Term Evolution (LTE) at some stage in the not-too-distant future, but neither has specified an exact date.
Mobile is the dominant force in the UAE, not least because of the country’s highly transient population -- 80 percent of it comprising expatriates working on short-term contracts. [Ed. note: Our favorite ex-Pat is Irving Fryar.] One might think that this would make the telecom market particularly susceptible to changes in the UAE’s economic fortunes -- such as last year’s near-popping of Dubai’s property bubble -- but Barhoush says it has proved surprisingly resilient.
“Other markets, such as real estate, have not significantly affected the telco market," he says. "Telecom operators reported positive results on the financials front, and we expect the market to continue to grow.”
With little likelihood of other operators being able to challenge Etisalat and du, and foreign investment in the UAE’s telcos banned, the report says that the main opportunities for vendors will center on content and applications for both fixed and mobile, as well as high-end handsets.
After all, this is a country with a GDP per capita of $42,020. When the locals -- or some of them, at least -- have that kind of money, they have no need to make do with last year’s model.
Newcomers, but no rivals
Since the Pyramid report was first published, Al Yah Advanced Satellite Communications Services and Star Satellite Communications have won licenses from the UAE’s Telecommunications Regulatory Authority. However, according to Barhoush, these newcomers won’t be competing directly with the state-owned operators but will “mainly providing VSAT [very small aperture terminal] broadband services in areas that lack telecom infrastructure."
— Paul Rainford, freelance editor, special to Light Reading
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