United Arab Emirates Telecommunications Report Q1 2008

The UAE's Telecommunications Regulatory Authority (TRA) has ruled out the possibility of allowing a foreign-owned operator to enter the country's mobile market. It will instead remain in the hands of Etisalat and du, and therefore the state. However, the regulator appears to be in two minds as to whether it will invite bids for a third mobile network operator. While saying on the one hand that it has not looked into the matter, it admits that it is inevitable that there will be a third mobile network operator in time. In the meanwhile, it hopes that the introduction of mobile number portability will soften the clamour for more competition.

While there is a strong case for there being no need for further competition in the UAE's saturated mobile market - it is currently around the 140% level and BMI expects this to increase to over 170% by the end of our forecast period in 2012 - mobile services remain expensive. There is a good argument for competition to be intensified to force tariffs down, and perhaps promote wireless value-added services.

Incumbent operator Etisalat insists it is not concerned at the prospect of a third operator, even welcoming the fact that such an arrival would place pressure on du.

There is no doubt that alternative operator du has had a good first year. Only launching commercial services in February 2007, already it has one million mobile subscribers as the country's overall market breaks the seven million mark. Already du controls a 12.4% share of the local market. It is little surprise therefore that Etisalat is preparing to extend its international footprint both through further investments in Africa, where it sees huge potential, and in Gulf states such as Qatar, where it is bidding for a third mobile licence, and Oman, where it hopes to acquire a stake in incumbent operator Omantel.

While the government has extended its restrictions over internet usage to UAE's free economic zones, blocking any sites featuring 'adult content and the promotion of vice, drug and alcohol use and violence', the regulator has put a stop to du's monopoly of fixed-line and internet services in Dubai's economic zones, which house more than 2,000 multinational companies.

Meanwhile, BMI's Business Environment Rankings, the UAE does not score well in. The government remains very much in control of the market, which does threaten the independence of the regulator.

Inward investment opportunities remain unavailable, and even if there were any, it is hard to find much potential for growth due to the saturation of the local market.