UAE Customers to Benefit From Fixed Network Sharing Deal Between Telcos- Analyst

A fixed network sharing deal, if and when it comes to fruition, will lead to better service and price points in the UAE’s telecom industry, an industry expert has said.

“When fixed network sharing becomes a reality it will give customers a choice of operators to choose from, differentiating mostly on the level of service experience,” said Sony John, program manager for Telecoms & Media at IDC.

“All in all, the customers will be the ultimate beneficiary having choice, could eventually lead to better price points.”

UAE telcos Etisalat and du have been at odds for nearly four years over the deal that would allow them to compete on fixed line services. The arrangement has been delayed due to the inability of both operators to agree on the extent of the bitstream access, which might permit one another to use the other’s fixed network.

But a recent bond prospectus issued by Etisalat showed that it expected the fixed network sharing deal to be finalised by the end of 2014, putting an end to the long drawn out negotiations.

Analysts say that the impact of this deal on the earnings of both the telcos will differ with du gaining the most.

“Du could see a significant increase in its addressable market as it allows it to access a much wider customer base across the UAE, as compared to its existing infrastructure in just new areas of Dubai,” said John.

“However, over time, earnings will be impacted by the service levels and price competition that operators will employ to garner market share.

“At the same time, infrastructure sharing will also allow for some level of savings in terms of capital expenditure, improved utilisation and drive changes in business model.”

The fixed network sharing deal might lead to greater competition between the telcos but the market is still far away from opening up to other external players.

“The TRA has repeatedly clarified many times in the past that it does not plan to license a third operator in the market as it does not see a need,” said John.

“This revelation of potential fixed network sharing in Etisalat’s financial filings is not enough to suggest the potential for a third operator.”

But he added that when the market eventually opens up to more players, it will lead to better price levels.

Moreover, the popularity of services such as internet-based phone calls or Voice over IP (VoIP) has also begun to dent the fixed line revenues of operators.

Etisalat’s fixed line average revenue per user (ARPU) was Dhs115 in 2013, which was the same as a year earlier, but was down from Dhs130 in 2011. The former monopoly attributed the decline to people opting to use VoIP services.

But John asserts that services such as VoIP will not have a huge impact on local telco earnings.

“Fixed line networks are still relevant more so due to fixed data than fixed voice,” he said.

“VoIP is legal only if consumed from the two licensed operators in the country and is yet to have a significant impact on telco earnings. However, OTT players such as Skype are continually gaining traction and will continue to do so.”

Abu Dhabi-based Etisalat made a net profit of Dhs2 billion in the first quarter of 2014 on the back of increase revenue and subscriber base and a declining capital expenditure and taxes.

The UAE remained Etisalat’s core market, providing Dhs6.5 billion of quarterly revenue, up eight per cent from a year earlier.

Meanwhile, rival du reported a 4.8 per cent rise in first quarter net profit to reach Dhs490.3 million following a rise in revenues and a reduction in capital expenditure.