Telecom market to rise 63pc

Abu Dhabi, July 5, 2008 (WAM) - The UAE telecoms market is projected to grow 63 per cent to Dh35.27 billion in four years on the back of increased mobile phone penetration rate hitting a regional high of 188 per cent. The record high penetration, shared by etisalat and du, also implies that there are nearly two SIM cards per person in the UAE according to a report in daily 'Khaleej Times.'

UAE's population growth, projected at a five- year compounded annual growth
rate (CAGR) of 4.8 per cent, will be the key driver for the sector,
resulting in a combined CAGR of 8.6 per cent. In tandem, revenues from
internet subscriptions are also poised to double in four years, a forecast
by a market analyst said.

This year, telecoms market is on course to record a compounded annual growth
rate of 8.5 per cent to reach Dh27.27 billion from Dh21.68 billion in 2007.
By 2009, it is expected to reach Dh29.72 billion, Al Mal Capital said in its
latest forecast.

The report forecast the UAE mobile market to grow from 7.7 million
subscribers in 2007 to 9.2 million in 2008 and to 11.9 million by 2012.
'Given the already very high penetration rates in the UAE, we expect
penetration rates to grow modestly from 166 per cent in 2007 to 188 per cent
by 2012. Penetration jumped over 38 per cent in 2007, from 127 per cent in
2006, to 166 per cent in 2007. At face value, these rates imply that there
are nearly two SIM cards per person in the UAE.' However, fixed-line
penetration remains at a steady 30.0 per cent.

Revenue is projected to grow by 134 per cent in 2008 to Dh 3.61 billion as
the number of active subscribers continues to grow. 'As du continues to
capture market share from etisalat, we see further increases in revenue by
53.1 per cent to Dh5.52 billion in 2009 and to Dh8.86 billion by 2012.'

The forecast projected EBITDA (earnings before interest, taxes, depreciation
and amortisation) margins of 10 per cent in 2008, generating EBITDA of
Dh360.6 million growing to 24.8 per cent in 2009 with EBITDA of Dh1.37
billion and to 49 per cent by 2012, equating to Dh4.34 billion.

UAE's internet penetration is also projected to continue the rapid growth
(16.1 per cent CAGR since 2005). Current UAE internet penetration figures
assume 2.4 users per subscription, according to the Telecom Regulatory
Authority. 'Over the next few years, we project growth in both users and
subscriptions, coupled with a fall in the number of users per subscription.
We project the number of subscribers to increase from 0.90 million in 2007
to 1.15 million in 2008, 1.44 million in 2009 to 2.66 million in 2012.
Revenues from internet subscriptions should grow from Dh1.46 billion in
2007 to Dh1.82 billion in 2008, Dh2.19 billion in 2009 and to Dh2.95 billion
by 2012.'

In the UAE, the transition to newer internet access technologies has been
slower than expected, the report said. Although broadband internet was
introduced in 2001, high tariffs and low PC penetration rates have inhibited
uptake.
'
While etisalat commands 80 per cent of the UAE mobile market and is
aggressively expanding international operations (15 overseas countries, 36
million proportionate subscribers), du is still at an early stage of
growth as it builds out its UAE network and operations. du commenced
operations in December 2005, launched mobile services in February 2007 and
is currently targeting a 30 per cent market share by 2010. Once du completes
its mobile network roll-out, we expect genuine increased competition within
the UAE between the two players, although it will be based less on direct
price competition and more on special offers and promotions. While etisalat
should inevitably see its domestic market share decrease, the company's
growth and profitability should be driven by its rapidly expanding overseas
operations,' it said.