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Emergence of a New TelecomOperator In A Monopoly marketOf UAE: DU
In February 2006, du received its integrated provider license ata cost of AED 124.5mn, thereby ending Etisalat‟s near 30-yearmonopoly on the provision of telecom services in the UAE.DU offers mobile and fixed telephony, broadband connectivity andIPTV services to individuals, homes and businesses. It alsoprovides carrier services for businesses and satellite up/downlinkservices for TV broadcasters. Above all it also offers value, while itcontinues to deploy state-of-the art technology to keep enhancingits services.
By October 2011 over 5 million people and over40,000 businesses have chosen to use its services and become itscustomers.
As a rapidly-growing enterprise it has over 2,000staff working to enhance and expand its bouquet of serviceofferings. The UAE (United Arab Emirates) is one such countrywhere the 30-year monopoly of Etisalat was ended with the entry ofa new player, du.Company OverviewEmirates Integrated Telecommunications Company (EITC) becamethe UAE‟s second integrated telecom provider in December 2005,owned by:the UAE Federal Government (50%),Mubadala Development Co. (25%),Emirates Communications and Technology Co. (25%).EITC then acquired from TECOM Investments the assets, capitaland businesses of a number of its subsidiaries, including an initialfixed-line subscriber base of 19,100 business and consumercustomers.The UAE Telecom Regulatory Authority awarded EITC the nation‟ssecond universal telecom license (20-year validity) in February2006, at which point EITC unveiled its operating brand name, du.In April 2006, 20% of du‟s shares were listed on the Dubai FinancialMarket in an IPO oversubscribed by 166 times. The companylaunched domestic mobile services in February 2007, and by the
end of 2007 claimed 1.5mn mobile customers and 46,000 fixed-linesubscribers, yielding a market share of 19% by management‟sestimate.Vision
of duTo enhance your life, anytime, anywhere.
of duIt wants to delight its customers, be the employer of choice for thebest talent, create optimal value for its shareholders throughbusiness excellence and innovation, and proudly contribute to thetransformation of itscommunity.It works to deliver its vision byusing its talent, skills and energies to connect, inspire and rewardall it touches, every day.
Values of du
We are Confident, Friendly, Honest, and Surprising, and ourvalues guide our actions.The du team:
Board of Directors/Management team du’s diverse and experienced management team is dedicated to creating a better experience for all du customers. Ahmad Bin Byat Osman Sultan Chairman Chief Executive Officer Andrew Grenville David Holliday Yatinder Mahajan Farid Faraidooni Executive Vice President Executive Vice President Executive Vice President Executive Vice President (Enterprise Division) (Consumer Division) (Carrier Services Division) (Corporate Affairs) Mark Shuttleworth Fahad Al Hassawi Sameer Sadeh Clint Goad Chief Financial Officer Executive Vice President Chief Innovation Officer Executive Vice President (Human Resources) (Technology Innovation) (Technology) Raghu Venkataraman Hamid Husain Rashid El Sheikh Anneliese Reinhold Executive Vice President Vice President Vice President Vice President (Corporate Strategy and (Information Technology) (Procurement and (Legal) Strategic Marketing) General Service) Hala Badri Ananda Bose Vice President (Corporate Vice President (Corporate Communications) Programme Management)Telecom Sector worldwide
Over the last two decades, the telecom industry world over hasgrown and evolved at an incredible pace and has considerablychanged the way people interact. Although, fixed line is still themost penetrated telecom segment; wireless or mobile segment hasbeen the key contributor over the last decade, offering a widerange of opportunities to provider and services to customers.Today, there are more than 4 billion mobile phone users worldwideand this number is expected to reach 5 billion in coming years. Theshift of revenue from fixed to mobile and from voice to data isaccelerating. Apart from its social and cultural impact on modernsociety, telecom industry is one of the significant contributors ofworld economy with an estimated 3% of the global GDP. Driven bystrong mobile and broadband penetration in emerging markets andsubstantial economic recovery in developed markets, globaltelecom industry is expected to see double digit growth over thenext four to five years.UAE Telecoms Sector: A “Du-opoly”?The United Arab Emirates telecommunication sector is now worthAED 977 million or about $266 million based on Q1 estimates bymarket research firm GfK (GesellschaftfürKonsumforschung(Society for Consumer Research Germany)The figure represents a 30% increase over the same quarter lastyear, with the value of the UAE telecommunication sector remainingin the AED 700 million ($190 million) range for most of 2009 beforerecording the jump earlier this year.The rise is credited toburgeoning demand for smartphones in the country.GfKs research also shows that the smartphone market hasovertaken the traditional mobile phone segment in terms of valuefor the first time, growing 47% quarter-on-quarter.In thesmartphone sector, the touchscreen segment grew by 58% invalue, followed by QWERTY phones with a 26% value rise
The table below sets out a range of main indicators specific to theUAE telecommunications sector for 2010: UAE Fixed Telephony Indicator Service Mobile Service Internet Service Subscribers 1,460,985 10,926,019 1,374,903 Revenues(Billions, AED) 3.2 18.4 2.7 Voice Minutes (Billions) 4.3 21.6 Not applicable(n/a) ARPU (3) (Monthly, AED) 184 140 166 AMPU (4) (Monthly, Minutes) 248 165 n/a Source: 2010 Industry data, (3)ARPU : Calculated by dividing the total revenues for a given period by the average number of subscribers during such period 6 (4)AMPU : Calculated by dividing the total minutes for a given period by the average number of subscribers during such period
Du business mobile services provides a host of business andentertainment features with single structured billing, mobileroaming , closed business user group, competitive calling ratescoupled with preferred international destinations and power -Bill foradded convenience to businesses across the UAE.Mobility solutions such as BlackBerry and Mobile Data extend thereach of business processes beyond the conventional boundaries;accordingly du enables business professionals to connect andaccess business data while on the move and from anywhere. duvoice solutions offer an array of value-added services as well aspremium reporting and billing options for inbound and outboundvoice traffic. Business contact centre, hosted voice, call select andseveral other solutions are also part of the product portfolio.du‟s internet & IP access solutions namely MPLS, IPLC, DLC, IP VPNand broad band services, are designed to provide reliable dataconnectivity for domestic and international business. Managedbusiness TV services include a wide range of TV content solutionssuited to commercial and hospitality industry customers. ManagedServices aim to enhance the business value of IT investmentsthrough improved operational efficiency and service levels ,enabling customers to manage control over IT operations asrequired, while staff focuses on core business .To stay ahead of competition, the fully integrated telco placescustomers at the centre of its strategy. Offering business customershigh-touch account management with industry expertise toproactively consult and advise specific businesses on how to bestutilize communication resources. Professional services offers pre-sales technical consultancy, complete project management,implementation and support, performance management and serviceauditing to enable businesses take the right decisions at everystage of the business life cycle.Designed for sophisticated and complex business needs, du offersdedicated service professionals with vast knowledge and experienceto tailor the best telecommunication solution. This is furtherbolstered by exclusive business customer support , offering top
quality multilingual round the clock service support to ensure thatrequests and queries are fulfilled within the agreed service levels.UAE telecom market lacks competitionThe UAE telecom market lacks competition but customers areseeing some improvement in the number of services offered bythe country‟s two operators.Du was launched in 2006 as part of a government plan toboost competition in the telecommunications sector but delaysin infrastructure and number portability deals have failed tocreate value.A shared infrastructure deal with Etisalat, which would allow duto reach areas that could not be accessed before for fixed linetelephone, internet and television services, is being hammeredby technical glitches.Prices are significantly higher in Dubai then they are in Qatarand this is due to lack of real competition.There is competition in what is happening to customers; everyday there is a new offer, every day there is new offer of gettingvalue for money, there is competition from the customer pointof view.Diversification:Du, is shifting its focus from growing mobile market share toincreasing subscribers to its data package services.The operator, which currently has a 44 percent share of theUAE mobile market has subscribers to data package services isincreasing four-fold,.Despite the shift in strategy there is no reason why du cannot
overtake its competitor, Etisalat, in terms of market share.Dubai-based du, which broke Etisalat‟s monopoly in 2007, hassteadily been gaining market share but mobile subscribergrowth is slowing down, making data services increasinglyimportant.The firm in August said its mobile phone subscriber base hadincreased by 171,100 in the second quarter to 4.8 million,while fixed-line customers grew 25 percent to 623,600 lines.The network currently has five million active customers in theUAE.Subscribers to the operator‟s data package services arequadrupling.“ Customer interest due to price 100 du 80 60 40 20 both Etisalat 0
VOIP- a threat to uae telecom:Voice over Internet Protocol (VoIP)-a revolutionary technology, it isa combination of hardware and software that enables companies,organizations and individual users to use the Internet as atransmission medium for telecommunication. In VoIP bothtechnology and services are involved where the Internet protocol isa technology which is using a common computer network andtransmission as a service. The VoIP mechanism is different from thetraditional phone system. In VoIP analog audio signals human voiceconverts into digital signals and then these audio digital datatransmitted over the Internet in the form of data packets. TheInternet plays a major role as a backbone in VoIP communicationsystem. Following are the key factors which come in favor of VoIPTechnolygy over Public Switched Telephone Network PSTN. Reduce communication cost• Multiple users• VoIP-Hardware and software• Reduced administrative cost• Improved manageability• Increased flexibilityIn UAE Etisalat and Du are two main telephone and Internetservices provider. Currently most of the business users and homeusers are making international calls either from Etisalat or from Duand VoIP in UAE is legally not allowed. On the other hand it is nodenying a fact that the large number of people are still using VoIPfrom different source like Internet cafes, homes etc. The major useof VoIP in UAE is mostly for cheap international calls through theInternet using software like Skype, SweetCalls, FreeCalls, IntVoIP,VoIPWise, etc., with relatively cheaper rates. Most of the VoIPsoftware use Virtual Private Network (VPN) for example, Hotspotshield, Smart surf, KongShare etc., where these VoIPcommunication packets can transfer through VPN tunnel and thatmake it easiest and safer way for making international calls andEtisalat or Du are mostly not able to chase these kinds of VoIP datapackets.
Skype and all other major VoIP services are completely blocked in UAE. There arehowever some ways to get around. User can use a VPN hosted in foreign countriesand just connect to that VPN. So effectively all voice call traffic is carried on theVPN server and user can use VoIP from UAE. Etisalat and Du are trying their bestto block the known VPN and the new VPN are emerging to facilitate Etisalat and Duusers to connect to them and use the VoIP services and this hide and seek game isgoing on.Telecom Liberalization - WTO DriverThe liberalization of the UAE telecoms sector is driven by the UAE‟smembership of the World Trade Organization (WTO), which itjoined in 1996. In 1998 a total of 69 member countries agreed toopen their telecommunications sectors to competition, under theWTO Basic Agreement on Telecommunications. The WTO aims forthe global telecom sector to be completely liberalized, free frommonopoly or government protection by 2010. However, the UAE negotiated concessions and, under current WTOrules, its deadline for complete telecoms market liberalization hasbeen extended until 2015. The telecoms sector in the UAE isregulated by the Telecommunications Regulatory Authority (TRA).Telecom Regulatory Authority: (TRA)The UAE‟s Telecom Regulatory Authority was formed in 2003 withthe aims of:i) building and implementing a regulatory framework to foster andfacilitate competition between telecom operators in accordance withWorld Trade Organization stipulations, and
ii) helping meet the federal government objective of turning theUAE into a regional ICT hub by developing training institutes andencouraging research and development.The TRA is funded through license and spectrum fees as well asgovernment funding via royalty fee payments.The TRA granted licences for companies offering various telecomand IT services such as satellite services and Public Access MobileRadio based on its licensing framework as per the UAE Federal Lawby Decree No. 3 of 2003 – Telecom Law. Currently there are sixlicences that have been granted to different companies: Etisalat,du, Nedaa, Al Yah Satellite Communication Services and StarSatellite Communications Company.Key Regulatory Policies in PlaceNational Roaming: The TRA requires Etisalat to offer roamingservices to du on Etisalat‟s own mobile network. As du continues toexpand its own mobile network infrastructure, it is becoming lessreliant on the roaming agreement. We understand du is stillutilizing a limited amount of Etisalat‟s network in the western andmiddle regions of the UAE.Mobile Number Portability (MNP): Initially MNP was planned tobe introduced at the same time as du launched its mobile services,but its introduction has been delayed. The TRA has now stated thatit intends to introduce MNP in 2008. If this is implemented on thebasis of full number portability, including the prefix carrier code(i.e. 050 for Etisalat, 055 for du), we believe this will be have amaterial impact in determining market share and subscribergrowth. However we believe telephone number are “sticky”.Without full number portability, users may be deterred fromchanging their operator because of the inconvenience of having toinform all their existing contacts of a new telephone number andthe potential cost of having to changing business cards and otherstationery.
Voice-over-Internet Protocol (VoIP): VoIP is allowed to be usedon private telecommunication networks, i.e. corporate networks,but not to make international calls or calls to other networks. Thismeans use of VoIP services like Skype, Net2Phone and Vonage arebanned in the UAE. Under their license terms, both Etisalat and ducan provide VoIP services to the public, but neither operatorprovides such service nor has indicated they will do in the future.We assume that the UAE‟s ban on VoIP services such as Skype willcontinue for the time being. VoIP services were accessible from thefree zone areas serviced by du, but have been blocked recently asdu complies with the TRA policy on VoIP.Interconnection: Until recently, du enjoyed an unofficialmonopoly of fixed-line services in most of the areas colloquiallyknown as „New Dubai.‟ Within most New Dubai areas,Etisalat‟sinternet, voice telephony, and TV services are delivered viadu‟s infrastructure. At the same time, du relies heavily onEtisalat‟swireline infrastructure for outgoing voice and data trafficfrom New Dubai.Carrier selection and pre-selection: Under TRA regulations,fixed-line carrier and pre-selection is allowed and has beenimplemented by du, while Etisalat in the process of implementation.Once implemented fully, we could see users taking advantage ofdu‟s cheaper peak time international charges. This shouldencourage Etisalat to lower its international call rates.