Dubai: The Telecommunications Regulatory Authority (TRA) has denied reports that it intends to introduce a new player by 2015.
"TRA would like to state that it does not have any intention whatsoever to license a third operator in the market," Majid Al Mesmar, Deputy Director-General of TRA said in an emailed statement.
The deputy director was previously quoted in the media as saying that the UAE is considering plans to open the market to new telecommunications service providers by 2015.
He said both etisalat and du are meeting the needs of the country.
"TRA sees no need to add a new operator at this time; hence it has no immediate plan to do. What was circulated in few local newspapers is misleading and does not accurately express the actual statements of the TRA regarding the issue," he said.
"The UAE telecoms market represents a classic case of a government controlled duopoly. Etisalat and du being the only telecoms operators in the country leaves consumers with limited choice. Besides, high government ownership of both companies has probably somewhat restrained price competition in the market," Bhanu Chaddha, IDC senior research analyst, telecommunications, Middle East, Africa and Turkey, told Gulf News.
He said service tariffs have remained relatively stable in the UAE, and both operators have resorted to strategies such as service bundling and sachet-based tariff models to stimulate usage and thereby earn higher revenue.
Both operators have near universal mobile coverage and any new player coming into the market will find it difficult to compete on quality of service. They would need to bank on innovation and pricing to establish operations.
The UAE had 199.3 mobile subscriptions per 100 inhabitants and 31 fixed lines per 100 inhabitants as of last December.
"The move could have helped TRA in its endeavour to stimulate competition as demonstrated by its efforts to introduce mobile number portability and to open up the fixed-line services market. This also would have struck the right chord with the consumers with the resulting normalisation of the tariffs," he said.
Moody's Investors Service said early yesterday that plans for a further possible market liberalisation is credit-negative for etisalat.
"If the plans come to fruition, they would be credit-negative for the incumbent integrated telecom provider etisalat [Aa3 stable] — which currently only faces competition from du [unrated] — since its market share, revenues and cash flow are likely to further erode given the already high penetration rates in the UAE," Martin Kohlhase, Vice-President - Senior Analyst in Moody's EMEA Corporate Group, said in an emailed statement.
He said when competition is introduced into more developed and saturated markets, both players suffer.
Etisalat's financial results are already under pressure. In 2011, etisalat recorded revenue losses of 3 per cent for the UAE in the face of fierce competition from du.
Although etisalat has initiated a number of efficiency improvement initiatives, he said high-yielding product offerings — such as broadband and triple play — to stem the margin erosion in its home market, these are unlikely to fully offset the negative impact from competition and further market liberalisation.