What will Virgin Mobile’s entry mean for the UAE telecom market?

UAE-based telecom operator Emirates Integrated Telecom Company (EITC) – the parent company of du, recently announced that it was launching Virgin Mobile as a new telecom brand within the country.

Virgin Mobile will use EITC’s network, IT and other infrastructure – just like du. All customer contracts and regulatory obligations will also be on EITC.

Read more: Du holding company to launch Virgin Mobile brand in UAE

With only two two telecom operators licensed in the UAE at present – Etisalat and du – the introduction of Virgin Mobile has led to uncertainty on how the market will now operate.

“EITC first launched mobile services under the du brand name in 2007 to break the stranglehold Etisalat had on the UAE telecom space,” said Paul Black, director of telecommunications, media, and IoT at International Data Corporation (IDC) Middle East, Africa, and Turkey.

“The company’s unexpected announcement that it will introduce Virgin Mobile as an additional brand to run alongside du has therefore caused intense speculation about the possible ramifications – not only for du, but also for the wider market.”

While EITC CEO Osman Sultan clarified that Virgin Mobile will operate only as a brand alongside du, Virgin Mobile operates as an mobile virtual network operator (MVNO) in all other countries in which it has a presence.

“Within the UAE, frequent discussions have taken place about the need for the Telecoms Regulatory Authority (TRA) to either license a third mobile operator or outline regulations that would allow for the establishment of an MVNO,” said Black.

“In fact, Virgin Mobile, which already has offices in the UAE, had previously made it clear that it would be interested in operating in the local market if the existing telecom framework was changed to accommodate MVNOs. However, no such changes have been forthcoming.”

Speaking to reporters, Sultan asserted that the launch of Virgin Mobile is “fully compliant with the current regulatory framework” in the UAE.

“Nothing prevents us from launching another brand within our business,” he said.

According to IDC, “the unexpected launch of a new brand can be successfully challenged by other telecom players, as happened in Qatar in 2010 when Vodafone objected to the introduction of the Virgin Mobile brand under Qtel (now Ooredoo) and successful lobbied for the new service to be shut down.”

However, the company said it believes that EITC must have sought guidance from the TRA prior to launching Virgin Mobile services.

Black added: “In the absence of any objections from a licensing standpoint, IDC believes this added layer of competition will have a positive impact on the provision of services to the UAE’s brand-conscious young population.”

With Virgin Mobile clearly targeted at the youth – a segment where it has a strong brand following – it could see success in the local market.

“Given the country’s large youth population and Virgin Mobile’s international experience in actively targeting this segment, the potential for the company’s success is high,” explained Black.

The launch of Virgin Mobile can also help EITC address the issue of declining profits caused by intensifying competition and growing customer expectations.

“However, EITC must ensure that the du brand does not become diluted as a result of direct competition from within its own stable,” cautioned Black.

At present, du frequently sponsors sporting and music events that reach out to the country’s tech-savvy young population.

“One option would be for du to leave the youth segment to Virgin Mobile, allowing it to focus more intently on attracting customers with a higher average spend,” opined Black.

Etisalat is also likely to react by improving its own digital services offerings for the youth segment.

Overall, IDC expects Virgin Mobile’s addition to be a positive development for consumers in the UAE.

The move is expected to help open up the country’s telecommunications market and stimulate some much-needed competition.

“The entrance of a new player in the UAE telecom market is long overdue,” said Black.

“And as long as the growing digital service needs of this population are met, the telecom consumers of the UAE stand to benefit greatly going forward.”