OVERVIEW

Two telecommunications service providers were analyzed in this report; Etisalat and du. A total of 653 clippings out of 112 publications throughout the month of December were monitored and analyzed. Etisalat’s stock performance along with NBK Capital Telecom report, TAB Research GCC Market Report and Global Investment House Economic Report were correlated and integrated in this report.

Etisalat has enjoyed being a telecommunications service provider monopoly in the United Arab Emirates since 1976 up until du’s entrance in February 2006. Etisalat still maintains its pole position in the market, while du continues to capture more market share.

Global Economic Downturn

According to an NBK Capital report, published in December 16, 2008, the global economic downturn is expected to have a slight effect on the telecom market in the UAE. The growth in the telecom sector is expected to slow down. Since over 80% of du’s subscribers are prepaid customers, who are characterized by low ARPU (Average Revenue Per User) and price-sensitive. Etisalat and du are competing head to head and are providing very competitive products and pricing. Thus, more pressure is expected on prices, subject to TRA’s regulations.

MEDIA COVERAGE

Etisalat and du were monitored in newspapers, magazines and websites throughout the month of December 2008. Etisalat had 504 clippings while du only had 208 clippings. Etisalat’s newspaper and magazine AVEs were substantially greater than du’s. While Etisalat achieved newspaper AVE’s of $780K, du achieved $220K and while Etisalat achieved magazine AVEs of $500K, du only achieved $130K. Both Etisalat and du’s prominence values were relatively high with 0.52 and 0.48 for Etisalat and du respectively.

Etisalat was mentioned in 40 feature reports, 32 financial reports, 17 investigations and 231 press releases, while du was mentioned in 9 feature reports, 17 financial reports, 7 investigations and 115 press releases. Etisalat was also featured in 90 ‘Business’, 16 ‘Communication’ 33 ‘Computers & IT’ and 7 ‘Media & Broadcasting’ publications, while du was featured in 45 ‘Business’, 7 ‘Communications’ 14 ‘Computers & IT’ and 17 ‘Media & Broadcasting’ publications.

Etisalat’s language penetration was balanced between Arabic and English, while du’s coverage was 36% Arabic and 64% English. Du had 33% the amount of magazine coverage, 37% the amount of newspaper coverage and 85% of the amount of website coverage Etisalat had.

Etisalat’s coverage included many messages, such as its sponsorship of the Sharjah Etisalat Water Festival, winning the Iranian mobile license, being crowned number one in Middle East Telecom, announcing discounts, cutting rates for the holiday, launching new services, strategic alliance with France Telecom and posting profits.

Du’s coverage included messages such as du cutting rates, introducing first unified roaming tariff in the GCC, wining awards and announcing crossing the 3 million milestone.

Overall, both Etisalat and du penetrated many messages in the month of December, reflecting positively on the companies, as the messages were on their healthy financial status, their growth, their receipt of various awards, their offering of more services and their rate cuts. It seems clear that the competition between Etisalat and du is a heated one, evident by their activities.

STOCKS PERFORMANCE

Etisalat’s stock prices have been falling from the beginning of 2008 and reached rock bottom on the 22nd of November 2008 approximately, where the shares took a turn, climbing upwards steadily with minor fluctuations.

Despite the economic crisis, the Internet service disruption and growing competition, Etisalat’s stocks continued with a healthy recovery from its November 2008 dive. This may be partly due to their positive messages’ penetration and positive analysts’ expectations of end of year results.

Interestingly, news on the Internet service disruption, which received substantial coverage on the 14th, 16th and 17th of December 2008, was followed by a dip in Etisalat stock prices.

CONCLUSION

Evident from the coverage and from du’s increasing market share, Etisalat and du are facing stiff competition from each other. Etisalat maintains a significant lead, but with du’s fast growth, Etisalat should not take its lead for granted. Du has been growing rapidly, its revenues reached AED2.7Bn during 9M2008, compared to AED 1.5Bn in the first 10 months of operation in 2007.

Etisalat is expanding outside the UAE and has an advantage over du in that regard, as the UAE ranks only 3rd in terms of mobile phone penetration rates relative to the GCC. NBK Capital forecasts penetration rates to increase from the current 141% to 163% by 2013.

The economic crisis is expected to lead to a slowdown in tourism activity, as well as population growth of expatriates, tighter liquidity and higher cost of borrowing. All of these factors will lead to the slowdown of growth in their voice, data and roaming services as well as affect their expansion plans, as banks will be more conservative in providing finances.

However, despite the shift down in gears for their growth, it seems that the telecom sector is not as affected by the economic crisis as others, such as the finance and real estate sectors. This is due to the nature of the service they provide, as everyone needs telecom services. They are also aided by the fact that the UAE’s telecom industry is a duopoly, which gives both plenty of market share.