BMI View: Telecoms operators du and Etisalat are expected to implement fixed network sharing by the end of 2015 , which will eliminate their respective monopolies in Dubai's new developments and most of the rest of the country. With new subscriptions growth in the mobile market beginning to taper off in 2014, it is increasingly clear that growth opportunities lie in the mobile and wireline data markets, where there remain strong opportunities across the consumer and enterprise segments. BMI believes competition at a national level will be a crucial component in capturing these growth opportunities.
The mobile market grew 4.4% year-on-year (y-o-y) in 2014 and by 2.9% quarter-on-quarter (q-o-q) to 16.383mn subscribers according to operator data.
Operator data suggest that the wireline sector grew slightly q-o-q from 1.609mn to 1.611mn lines in operations in Q1 2015, following a contraction of the market form 1.639mn in Q4 2013 over 2014.
The fixed broadband sector grew by 2.1% q-o-q in Q4 2014 and 9.0% y-o-y in 2014.
Market average mobile ARPU fell by about 2% in Q1 2015, while having increased very slightly y-o-y.
The UAE moved up one place to second position in this quarter's update to BMI's Risk/Reward Index (RRI) table with an aggregate score of 60.2. This score was nevertheless down slightly by 61.6 last quarter, suggesting that the UAE is faring better than other regional peers in the face of the biggest new macroeconomic challenge - lower oil prices. Despite the mixed operational performance recorded in 2014, the market continues to present strong subscriptions and revenue growth opportunities across multiple services. A stable political environment and strong private consumption growth help boost the UAE's Country Risk index, although the country continues to score poorly in the Industry Risk category owing to strong state influence on the telecoms sector.
In March 2015, du announced being ready to invest in its fixed networks if network sharing does not occur. UAE-based telecoms operator Etisalat and du were supposed to implement fixed network sharing in October 2014, but it has been postponed. The two operators initially planned for fixed network sharing at end-2011. The company has declared that network sharing has to happen, but if it does not, then it will surely invest to boost its coverage areas across the UAE, though that will take longer.
In March 2015, UAE's Telecommunications Regulatory Authority (TRA) has blocked WhatsApp voice calls in the country, following the launch of WhatsApp's free VoIP call service for its users. The TRA has stated that licensed providers retain the prerogative to provide VoIP services through their networks. Etisalat blocked the new feature on its network a few hours after it became available.
The launch of du's LTE-A network and offer of OSN Play video-on-demand services will help maintain growth momentum in the mobile data segment, while also offering a boost to the smaller wireline market. Although du is a strong rival to incumbent Etisalat in the UAE's mobile market, accounting for 44.8% of subscriptions at the end of 2014, its weaker position in the wireline arena means it has struggled to increase its share of total market revenues. According to BMI calculations, du's share of total telecoms revenue in the UAE rose only marginally from 30.4% to 31.1% over the 12 months to December 2014.
The launch of du's LTE-A (LTE-Advanced) services in March 2015, coupled with the announcement of free access to video-on-demand service OSN Play to all OSN pay-TV subscribers on du's network, will contribute to du's continued growth in the consumer segment. Through OSN Play, subscribers can access a wide range of entertainment, sports, news and children's programming at any time and on multiple devices, including PCs, smartphones, tablets and smart TVs. This will encourage greater data usage on du's upgraded mobile data network, enabling it to maintain the outperformance of the mobile data segment. du's mobile data revenues increased by 18% y-o-y, outpacing total revenue growth of 13.3% y-o-y. Meanwhile, the partnership will be equally beneficial for OSN, expanding its potential customer base to include du's 7.3mn mobile subscribers as of December 2014.