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Small-time internet shops threaten UAE telcos

Small-time internet shops threaten UAE telcos

With strong demand from UAE expatriates, back alley internet shops are offering VoIP despite government restriction and at a tenth of Etisalat and du’s regulated prices, making them tough competition.

November 10, 2011 4:30 by

Many smart phones come ready-installed with Skype, which can be used for internet-to-internet calls. Operators are pushing these high-end handsets as they try to offset falling profit margins on voice calls by selling data packages, so they are aiding the rise of a technology that could hurt their own businesses. Etisalat’s profits have fallen in six of the past seven quarters.

“There are really three big competitors (in the UAE) and one of those is VoIP…you can see it on the street corner,” said Matthew Willsher, Etisalat’s chief marketing officer.

So far, the UAE telecommunications regulator seems determined to resist the rise of internet-based phone calls as it tries to protect revenues in the government-controlled sector. Only Etisalat and du are licenced to provide VoIP services, and they have yet to do so. The two companies are majority-owned by government-linked institutions and the sector is an important source of state revenue.

“So long as regulators remain part of the government and the government continues to own controlling stakes, then protectionism will remain high,” said Oliver Wyman’s Oliveira.

In October, Etisalat unveiled plans for ePlus, an online platform it says will include social and instant messaging, plus VoIP calling. But it has not revealed likely prices for VoIP calls and the UAE regulator, which must approve these tariffs, has dampened expectations for any major savings for consumers.

“Do not expect prices to fall drastically just because voice over IP services are launched,” Majed Almesmar, deputy director-general of the Telecommunications Regulatory Authority, told reporters at an exhibition in Dubai. “We are waiting for them (the operators) to come with certain packages or proposals. We need to look at those proposals.”

As Mansour in Deira explained, low-cost calls are the main motivation for people using VoIP, so rolling out VoIP services that do not offer steep discounts to conventional services would be unlikely to satisfy consumers.

Du has also said it will launch VoIP services, but it is unclear when this will happen; other UAEinnovations such as number portability were delayed for over three years and a deal to allow open competition on fixed line services is running late.

Ultimately, fighting VoIP could harm the UAE’s economic competitiveness, some analysts argue.

“Protectionism could harm economic development if it places other industries at a disadvantage to those based elsewhere — eventually, governments could decide these negatives outweigh the positives and loosen VoIP restrictions,” said Oliveira.

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