The announcement of a third mobile service provider in the UAE late last month caught the market unawares and set off a barrage of questions and speculations: who is it? What changes will it bring to the telecom market? How would it benefit consumers who have long been under the yoke of the duopoly of Etisalat-du?
Emirates Integrated Telecommunications Co (EITC), the holding company of UAE operator du, announced on January 31 that it has bought the license from British entrepreneur Richard Branson’s privately owned Virgin Group to operate Virgin Mobile-branded services in the country.
Call for reforms?
Experts are certain EITC’s launch of Virgin Mobile will bring increased competition to the market and is a positive development for consumers.
“The company’s unexpected announcement that it will introduce Virgin Mobile as an additional brand to run alongside du has caused intense speculation about the possible ramifications – not only for du, but also for the wider market,” says Paul Black of consultancy firm International Data Corporation (IDC).
Osman Sultan, CEO of EITC, says the license term is for more than five years and it grants the group full rights to ownership, management and operation of the brand in the UAE.
He also insists it is not a new operator but a brand and will use EITC’s network and infrastructure in the same way that du does. Moreover, he asserts that the launch is “fully compliant with the current regulatory framework” in the UAE.
So it is clear that Virgin Mobile will not serve as a mobile virtual network operator (MVNO) as it does in other markets.
Time to change
“Within the UAE, frequent discussions have taken place about the need for the Telecoms Regulatory Authority (TRA) to either license a third mobile operator or outline regulations that would allow for the establishment of an MVNO,” says Black, who is director of telecommunications, media, and IoT at IDC Middle East, Africa, and Turkey.
“In fact, Virgin Mobile, which already has offices in the UAE, had previously made it clear that it would be interested in operating in the local market if the existing telecom framework was changed to accommodate MVNOs. However, no such changes have been forthcoming.”
Nonetheless, IDC believes that the move will help open up the country’s telecommunications market and stimulate some much-needed competition.
Good news for youth
The new player is expected to be good news for the country’s young consumers as calls and data services are forecast become cheaper as the three brands compete to increase their market share.
“Given the country’s large youth population and Virgin Mobile’s international experience in actively targeting this segment, the potential for the company’s success is high,” says Black.
With Etisalat likely to react by improving its own digital services offerings for the youth segment, IDC expects Virgin Mobile’s arrival on the scene to be a positive development all round.
“In the absence of any objections from a licensing standpoint, IDC believes this added layer of competition will have a positive impact on the provision of services to the UAE’s brand-conscious young population,” says Black. “As long as the growing digital service needs of this population are met, the telecom consumers of the UAE stand to benefit greatly going forward.”
“However, EITC must ensure that the du brand does not become diluted as a result of direct competition from within its own stable. One option would be for du to leave the youth segment to Virgin Mobile, allowing it to focus more intently on attracting customers with a higher average spend,” adds Black.