United Arab Emirates Telecommunication Report Q3 2008

In this update on the telecoms sector of the UAE, we have made some alterations to both our fixed-line and broadband growth forecasts for the country. New data published by the regulator suggests that fixed-line growth in 2007 was stronger than we had predicted, with much of the new growth coming come from second national operator du. In contrast, broadband growth was weaker than we had anticipated with penetration having reached just 8.6% at the end of 2007, less than our estimate of 100%. Since our last update, the UAE's telecoms regulator has published figures showing that there were 904,000 internet subscribers in the country at the end of 2007; this is equal to a penetration of 20.5%. However, of this total, 380,000 (42% of the total) were broadband subscribers with the remainder being made up of dial-up.

In a development which has significant implications for the future of internet usage in the UAE, it was reported in April 2008 that unrestricted internet access for residents of Dubai's 'free economic zones' and beyond was about to come to an end. The UAE's second national operator du, which provides broadband to customers in these zones, issued a statement saying that it would begin blocking websites which did not adhere to the values of the United Arab Emirates.

Meanwhile, faced with increased competition in its domestic market, UAE incumbent Emirates Telecommunications Corporation (Etisalat) has continued to exhibit evidence of major future overseas expansion plans. In April 2008, the operator was reported to be in talks with Telekom Malaysia (TM)- backed Spice Communications and others regarding a possible foray into India's rapidly growing mobile sector. Etisalat's interest in India's telecoms market complements a wider international expansion drive, which has recently seen the operator acquire telecoms assets in Indonesia and Nigeria, and to express an interest in acquisitions in Algeria and Qatar. Despite these ongoing expansion plans, it was revealed in April 2008 that Etisalat had offloaded part of its stake in Saudi cellular operator Mobily. Etisalat saw its share of Mobily fall from 35% to 26.25% as part of a plan to sell a total 20% stake in the operator.

The UAE has moved one place up our latest set of revised Business Environment Rankings for the Middle East. Although we have awarded the UAE a higher country structure score, the UAE continues to suffer from a poor score in the regulatory independence category.