UAE Telecom: Competition from DU

Osman Sultan, CEO of DU The introduction of Du in the UAE telecom sector had as a primary target the introduction of competition. Prior to launching Du, the TRA, the Telecommunication Regulation Authority, was established.

How do you cooperate with the TRA and what is the interaction between private and public sector towards common goals?

The introduction of Du in the UAE telecom sector had as a primary target the introduction of competition. Prior to launching Du, the TRA, the Telecommunication Regulation Authority, was established. So, to give you a straightforward answer; we, as a licensed operator, have to go by the rules that are set by the policy maker – the TRA. Of course, that happens in a very consultative framework. Because there is the transformation of the sector and because this transformation is important now due to the increasing importance that the telecommunication and information sectors have in modern society, this is done in a very open manner. We raise and discuss different issues; for instance, infrastructure or new developments, or optimizing the investments that are done in the country in order to ensure that you can have the necessary growth of the sector, or really forcing the incumbent to open to competition. I think all these are our classical roots in dealing with the TRA in our everyday life.

What do you have in terms of new mobile services and technologies in your portfolio?

To answer this question, I will make a short introduction. Launching in a market like the UAE had three very important, unique characteristics. The first one is that it is unprecedented in the world that, at the time when the second player entered the market, the level of penetration of telecom services was so high, not to mention the level of saturation. So, that is one thing that created very high expectations of the market and the necessity for Du to really differentiate itself. Secondly, I cannot think of another example where a start-up operation was licensed to offer fully fledged telecommunication services, not only mobile services but also fixed, broadband, TV and international traffic; all this at the same time. The third one is not related to the UAE market but is related to our company: the founding shareholders of this company decided that they would not partner with an existing operator, be it international or regional. So, this forced us to do everything using our own resources and to get the right talent in a very competitive market. This, along with the need to differentiate ourselves from the start, caused us to choose a very challenging operating model; to go from day one using an operating model that is based on the integrated operating model. We didn’t have a division in the company that was handling mobiles, another that was handling fixed and so on. Nonetheless, we tried to start where all other incumbent operators are trying to reach. Also, we came up with a very different type of brand; I hope that everyone recognizes that it stood apart, knowing that this would obviously create high expectations. We started by launching our mobile services one year after the announcement of Du, using our own mobile infrastructure with features, some of which were done for the first time in this part of the world. For example, we started offering, at launch, mobile TV through our third generation mobile network, mobile payments, an e-shop to buy our services, handsets, accessories and so on, in a very sophisticated way and e-self care. So, we really wanted to show that we’re not only positioning ourselves as the little player who will try really hard to catch its well-established competitor, but that we want to be seen as challenging the situation today and as a possible leader of tomorrow. As I said, we started with a lot of services from next generation technology and telecom, and we are continuing to do add new services. As I said, from day one, our mobile network had 3G and HSPDA; offering maximum speed and capacity to our customers. We also had, through the acquisition of telecom assets from T-com, triple play voice, broadband internet, and TV but we offered this on a restricted geographical zone that was serviced by T-com: the three zones of Dubai Internet City, Dubai Media City and the real estate development zone that surrounds it. Now, our challenge is to expand and offer these services nationwide. We are considering a potential alternative to DSL: to just offer broadband and expand this broadband offering. We are also considering all the developments of technology that exist in the telecom sector.

You mentioned at a panel discussion that there are four dimensions of convergence; multimedia, devices, environment and industry players. What is the level of convergence in the UAE and how converged is DU in the context of these four dimensions?

What I wanted to say in my statement is that convergence is becoming more and more a password; a very handy word in our industry. I just wanted to try to give an idea of how this convergence can happen at the customer level. As a customer, first of all, we all know that some time ago the multimedia content is one expression of being converged. We see more and more of this content being text, data, voice, and video combined. The second level is the level of the device. Today, I use my mobile phone to do more and more things that I used to on my computer, with a camera or on a gaming device. I use my laptop, or even my PDA, to do things I used to do on my TV: watch movies, accessing TV. So, that is in itself a convergence. The other level is the convergence that we don’t realise but that is happening more and more; that of my environment as a user. I do things while I am with my children by the pool that I only used to do in my office. I do things while I’m on the move, waiting in an airport for example, that I used to do at home. I do things in my car that I used to have to do in my office. So, basically, I am carrying my environment with me everywhere and technology is enabling all this. Next, at the level of infrastructure for us as operators, we hear more and more about the convergence of fixed infrastructure and mobile infrastructure and the convergence of IP and networks. Last but not least, I see around me, convergence happening between industry players; people that used to be in the internet world merging with people in the media world, people who were in telecom merging with media and vice versa. All these universes that used to be completely separate for decades are now merging. Is the picture very clear for the business model? No, it’s not. That’s the exciting thing; we still have a lot to do in order to ensure that this value is delivered to our customers and, through this, the power in the value chain is shifting more and more towards the customers. Their equation is very simple; they are looking for more value for their money, more convenience. Their logic is one of convenience, design and value. Within Du, for instance, we have a more and more converged business between our fixed and mobile businesses because we deliberately took an IP infrastructure for fixed years ago. Now, at the level of our billing – for the residential market, not for the enterprise market – it is converged billing: you have one bill for the different services that you have and we are building more and more services that are moving in this direction.

How are you going to define the liaison between professional and personal space? How are you going to manage this relationship?

Let’s say I have a line that is given to me by my company for doing certain things. There are a lot of things that are related to entertainment that are not part of professional life and I would like to be able to do everything using one device. There are more and more applications that allow this to happen. I think we need to focus on this. We need to take into account that this executive also has a personal life, entertainment needs and a family life; managing the educational and infotainment space for his family. We bring these two worlds together but keep a possible separation and keep the financial equation easy to manage.

In less than two years you have been able to obtain 23.6% of the market share and marked two million subscribers. What is your competitive strategy towards Etisalat? In what ways are you are trying to compete and in what way do you cooperate?

First of all, I don’t think that your strategy should be built vis-à-vis your competitor but, of course, it should integrate the position of your competitor. You start by defining what you want to do for your customers; you have to make sure that you do the right thing and, ultimately, it will pay. Coming into a market with this level of penetration, we defined the different areas of growth. One track for our growth comes from the overall natural economic growth of the country. The tremendous momentum of growth that is happening in the UAE is definitely something that is a track of growth for us. There are more and more people coming to live in the UAE, more and more companies establishing themselves in the UAE and more and more people using the UAE as a hub for their international businesses. So, this is something that will definitely induce some growth for us. The second track of growth will come from the change of behavior that I was referring to. We all use telecommunications to do much more things so this is a qualitative growth not only a quantitative growth. Each and every one of us using more because we do much more through telecommunications in our day-to-day life. The third track of growth, referring to your question, is to attract customers from our competitors and this is something we’re very serious about doing. So, I think the fact that we have reached, in only 15 months, more than 2 million customers, is evidence that competition has bloomed fully in the UAE. I remember the questions we were asked before we launched; “do you think you will really be able to attract Etisalat customers?” I think this question is behind us; we have showed that we mean business. However, being competitive doesn’t mean you don’t cooperate; we have an interconnection agreement, it’s only normal that we pass traffic to each others’ networks if a Du customer has to speak to an Etisalat customer and vice versa. The second thing is related to a very important topic; existing wired infrastructure, be it fibre or not, in the country. This is a major domain, especially in a country like the UAE where these new developments are really something that is developing tremendously. We need to have a framework, which the TRA has announced, that will avoid having duplication of the infrastructure. It is not normal that we dig our own ducts to put fiber in a new development while Etisalat is doing the same thing. So, as His Excellency the director general of the TRA said, there needs to be a framework optimizing investments but allowing every resident and every company within these new developments that are happening to decide which service from which operator he wants to use. That is the competition framework and, of course, we will fully comply with it. This is for new developments; however it is a little bit more difficult when it comes to existing areas because the infrastructure is already laid in the ground so we have to figure out technically how it can work out.

What can you tell us about Du’s constant interest in social responsibility?

This is an area that we are really proud of, maybe as much as the two million customers! From day one, one way for us to really mark our uniqueness is to not only position our brand on the commercial side but to link it to a very structured CSR, Corporate Social Responsibility, approach and we show this in different domains. The cultural domain was our preference and, in that sector, we supported a 3D animation by a young UAE talent that became a big hit in the UAE and in the gulf. That was something that positioned us very strongly. We continued with a series of short documentaries on TV about the UAE heritage and a series of concerts that cater for the different ethnic sensitivities that you have in the country. The other very important part is education. We have very strong ties with different academic institutions. The third part is our responsibility in Emiratization because this is a government priority. We’re very proud that, as a company in a field where some specialized resources are very scarce, we have reached 23% Emiratization and the target is quite tough: 50% in the coming three years. So, on all these fronts, we wanted to show that, because we interact with the public at large, we need to be part of the society as well as responsible citizens of the society.

What are your future targets and objectives? How do you imagine in five years? Do you have any acquisitions or mergers in the pipeline?

As I mentioned, the mandate of Du today is focused on the UAE market. It’s worth highlighting that two of our major shareholders – the Mubadala group and T-com, representing respectively the Abu Dhabi government and Dubai Holding – already have some operations on the international arena in telecom. Now, if and how there will be synergies within this plan of our shareholders and Du is something that will be decided by the Board of Directors of Du – its shareholders – and I think it’s a little premature to mention this. I believe that Du has to be a shining star in this part of the world. I hope that people will not consider this as a lack of modesty but you need to have great ambitions and you need to ensure that you are putting great foundations to reach these ambitions. Also, in our market, the name of the game is not about quantity but quality. So, we hope that we will be knocking on the door of this brave new world that telecommunication and information is offering to each of us. We should do it with a lot of ambition and we should do it with humility because, ultimately, the customers have the last word in this game.

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