Analysis of the Telecom sector in The United Arab Emirates - Growth, Trends, COVID-19 Impact, and Forecasts (2022 - 2027)

Analysis of the Telecom sector in The United Arab Emirates - Growth, Trends, COVID-19 Impact, and Forecasts (2022 - 2027)

The Telecom sector in The United Arab Emirates is expected to register a CAGR of 3.5% during the forecast period from 2020 to 2025. The telecommunications sector is among the most robust and most advanced industries in the UAE due to the established policies and government initiatives well support operators. The principal regulator in the sector is the federal Telecommunications Regulatory Authority (TRA), based in Abu Dhabi city. This was established under the 2003 Telecom Law, which includes issuing licenses, enforcing regulations, promoting e-government initiatives, establishing access management policy, resolving disputes, and ensuring service quality and access equity.

Key Highlights

• The telecom industry in UAE is also growing with the expansion of end-user industry applications and growth in markets such as IoT, Cloud, data centers, and 5G. The country is also witnessing increasing internet consumption with growth in the market, such as Video on Demand(VOD). All these factors fuelled the growth of the studied market and created new revenue models for the country's telecom vendors.
• According to the recent data published by TRA, the number of telecommunications subscribers in UAE mobile, fixed-line and data services amounted to around 23.67 million in December 2019, 120,000 up from the preceding month. Also, the number of mobile phone subscribers increased to approximately 18.278 million in December 2019.
• The telecom sector has evolved in the past five years from a growth play to a semi-defensive play, in response to a rise in financial risk, heightened competition, and consumer sophistication. Service price reductions have favored consumers by creating stiff competition between local carriers, Etisalat and Du. The operators have witnessed continuous declines in their overall average revenue per user (ARPU), due to the lower charges per services, like voice call, SMS, etc., and discounts on data usage.
• The Dubai Smart City initiative is further bringing advancement into the studied market, as the government is continuously spending on telecom infrastructure development. Silicon Park is set to give access to 60 smart services with an investment of AED 100 million. In 2019, Telco du collaborated with Orange Business Services to deliver intelligent services at Silicon Park.
• However, the recent COVID-19 outbreak has negatively effected the studied market in the UAE. For instance, in April 2020, Etisalat reported that the company's net profit for the year's first three months was down 1.5% to USD 593.7 million, citing unprecedented market challenges amid the COVID-19 outbreak. However, to support the government's prudent efforts in the current COVID-19 outbreak, TRA launched several initiatives to enhance the country's telecom sector. Initiatives like free internet data via mobile phone for healthcare and educational applications, promoting online grocery and online training.

Key Market TrendsIncreasing penetration of 5G is Expected to Drive the Market

• The rising adoption of 5G in the country will create several opportunities for telecom operators to penetrate further other sectors, such as finance, retail, healthcare, and transport. Therefore, growth in the 5G market will develop new opportunities for the studied market. According to Ericsson, 5G subscribers in Middle East & African would reach 60 million in the next five years. Subscribers in these regions would almost double by 2024 when compared to 4G subscribers. A significant number of these subscribers are expected to be from the United Arab Emirates and Saudi Arabia.
• According to the Global Connectivity Index, UAE ranked first in the Arab Region and globally in the launch and use of 5G networks. In 2019 both Etisalat and du rolled out 5G networks in the UAE and are installing 1000 and 700 base stations, respectively, and are strongly supported by the TRA, which has identified the spectrum bands which will be made available for deployment.
• In February 2019, Etisalat selected Ericsson to deploy a 5G radio network in the United Arab Emirates. This deal is part of the strategic partnership, which would also see Ericsson and Etisalat working together to explore 5G opportunities. This partnership would focus on new immersive experiences using AR or VR applications, such as watching a 360° immersive 4K video on VR goggle.
• A high level of investments is targeted toward the development of 5G technologies in the country. Both Etisalat and Du are actively investing in technology and have even started providing pilot services in several test markets. As of April 2019, it is estimated that the Dubai telecom sector alone witnessed a 74% rise in Capex spending, owing to 5G readiness activities. As of Feb 2019, Etisalat announced plans to build 600 5G sites across the country this year, including 300 5G towers by the end of Q2 2019, while the 5G enabled hardware is expected to be commercialized by 2020. Such advancement is expected to open new opportunities to the telecom vendors in the market during the forecast period.

Mobile is Expected to Hold Major Share

• The UAE mobile telecom market is experiencing a qualitative shift with the changing socio-economic developments, resulting in the change of consumer behavior. With the increasing number of expatriates and growing population, the mobile subscriptions were estimated at 18,278,817 in 2019, a 200% penetration. Moreover, such growth is primarily driven by the prepaid segment. The prepaid subscriber accounted for 14,655,021 in 2019, while the post-paid service mobile subscribers reached 3,623,796.
• Mobile phone services, on the other hand, accounted for 77% of the revenues among leading operators in the country, that is, Etisalat Group and Emirates Integrated Telecommunications Company (du). Etisalat recorded 10.54 million mobile subscribers, while Du accounted for 7.736 million in the UAE as of September 2019. With UAE housing a 186% mobile penetration rate, it also records an 85% smartphone adoption rate across the MENA region. Virgin Mobile by Du and Etisalat’s Swyp are the two major mobile virtual network operators present in the country.
• The usage of more than one device per user, high rates of replacement, and users shifting from traditional phones to smartphones with the drop of prices were the major factors that contributed to the growth of the mobile segment. However, in recent times, there is much saturation in the market. The current low crude oil price situation, which has profoundly impacted the country’s economy, has limited the consumers’ purchasing power. Coupled with this scenario, there is a comparative slowdown in the country’s smartphone sales, as the market is moving toward saturation.
• The combined growth in mobile broadband and smartphone subscriptions and the proliferation of hardware and software, has led to the speedy adoption of 5G. Further developments on these lines, IMT-2020 standard along with the vision of the UAE 2021, the TRA aims at launching the fifth generation of mobile commercial service in the country. However, the country’s challenge towards commercialization 5G remains due to the heavy presence of 2G, 3G, and 4G networks.

Competitive Landscape

The Telecom sector in The United Arab Emirates is quite consolidated as the key players such as Etisalat, du, Thuraya Telecommunications Company, Al Yah Satellite Communications, and Virgin Mobile UAE occupy the majority of the market share and individual players are deploying the 5G network by partnering with various 5G Infrastructure providers globally.

• May 2020 - Etisalat announced the launch of ‘Easy Prepaid,’ enabling business customers to enjoy a prepaid feature on their existing postpaid mobile plan. With this new hybrid capability, customers can now switch between prepaid and postpaid functions without the need to change their current number. The users could also recharge the credit, make out-of-bundle calls, and subscribe to add-ons using standard prepaid tariff rates.
• January 2020 - du, from Emirates Integrated Telecommunications Company (EITC), has showcased the massive potential for 5G technologies to drive the UAE’s major industry verticals, following the telco powering an innovative 5G live stream in partnership with China Media Group. Taking place during the critical occasion of the Chinese New Year Spring Festival, du enabled CMG with the first-ever 5G live broadcast of this event, which was held at Dubai’s City Walk on 17 January.

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