Business | Telecoms
Lower roaming rates likely to hurt telecom operators
GCC roaming could now be more of a volume-based game
- By Samia Badih, Staff Reporter
- Published: 00:00 February 3, 2012
- Image Credit: Gulf News Archives
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Abu Dhabi: Reduced roaming rates for voice calls across the Gulf Cooperation Council (GCC) countries will have a negative impact on all telecoms operators in the region, said research company Moody's Investors Service in a statement published yesterday.
Regional telecommunication regulators had been required by GCC telecoms ministers to apply reductions to their roaming rates for voice calls starting February 1.
In compliance with the policy, etisalat announced on January 31 that it would cut its roaming rates within the GCC by up to 26 per cent. This brings the operator's roaming rates to those of du, its only competitor in the UAE.
"Given that competition for market share is likely to remain intense, the policy will likely result in further margin compression in the operators' respective domestic markets, which have historically been highly cash-generative," Moody's said in its statement.
Moody's believes that measures to protect profitability levels will increasingly become more challenging, as has been evident in recent reported results.
"For the first nine months of 2011, etisalat reported a margin decline of 5.6 per cent for its UAE segment (specifically, it reported a 47.8 per cent segment margin in the first nine months of 2011 vs. 53.4 per cent for the same period in 2010). For the same period, Qatar's incumbent telecoms operator, Qtel, reported a decline in its segment profit-before-tax margin for Qatar to 27.5 per cent from 44.2 per cent, compared with the same period in 2010. Moody's notes that services other than voice services can be included in the reported segment results of individual issuers," Moody's said.
Matthew Reed, a telecoms analyst with consultancy Informa Telecoms and Media, said that while the telecoms operators argue against the regulation it is not going to have a very big impact on the operators' revenue. "I think the financial effect will be fairly small," he said. "It could that it generates more traffic and usage which is part of the rationale for doing it."
Partial impact
"It's important to bear in mind that this move is only related to countries within the GCC, so it's only affecting a portion of roaming use," he added.
"Obviously more users are now expected to use roaming facilities while travelling intra-regionally," said Hasan Sandila, telecoms analyst with IDC Middle East, Turkey and Africa, who said the step had been long overdue as rates compared to other regions had been higher. "GCC roaming could now be more of a volume based game rather than a margin one."
- 26%: etisalat's announcedcut in roaming rates
- 5.6%: etisalat's margin decline for first 9 months of 2011
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