United Arab Emirates Telecommunications Report Q1 2013

BMI View: Despite some of the highest mobile penetration rates in the world, UAE continues to poststrong growth in terms of mobile subscriber numbers - although the vast majority of these are on prepaidpackages. Both operators are investing in the development of their network infrastructure, and thisincreased investment will help the market expand, particularly in terms of mobile broadband.

Competition in the market is limited as there are only two mobile phone operators in the country, with thegovernment owning shares in both of them. In October 2012, the regulator confirmed that there are noplans to for a third operator to launch services. Fixed-line services continue to post single digit growth,although we forecast that this will taper off during the course of our forecast period, while broadband isanother strong growth area.

Key data

The mobile market continues to post growth, despite the fact that penetration rates are high. InQ312, q-o-q growth stood at 2.1% while y-o-y growth was 15.5%.

The fixed-line sector maintained positive growth in Q312, expanding by 7.7%, despite the everincreasing threat from fixed to mobile substitution. This does represent a loss of 13,000subscribers q-o-q, however.

Broadband subscriptions rose by 8.8% y-o-y during Q312, highlighting the strong demand fordata services in the country. Operators are responding with faster download speeds.

Risk/Reward Ratings

The UAE dropped to 6th position in this quarter's update to BMI's Risk/Reward Ratings (RRR) table.The UAE's mobile market experienced strong subscriber growth and a slight uptick in ARPU during2011, but the country continues to be held back by its low Industry Risk score. Government involvementin the telecoms sector is high - it has a stake in both of the country's operators - so there are fewincentives, or opportunities, for external investment.

Key Developments

The UAE has one of the highest mobile penetration rates in the world, with the latest data from theregulator, TRA, putting the mobile penetration rate at 159% at the end of August 2012. BMI expects thatthese figures will be revised in 2013, when operators will be obliged to disconnect unregistered mobilephones.

Second-ranked operator du concluded trials on its 4G LTE network in October 2012; in the same monthEtisalat launched its first 4G LTE Mobile WiFi device. .

In October 2012, the regulator, TRA, announced that it was extending the deadline granted to subscribersto register their mobile phones. Originally set to expire on October 16, 2012, the regulator has givenunregistered phone users in the first phase of registrations an additional three months to submit theirdetails.