du plans regional digital expansion

The UAE's second telecommunications company, du, says it will become a pan-Arab digital services business this year. Launched in 2007, du has quickly gained a 32 per cent share of the mobile phone market, but unlike its competitor, Etisalat, has no plans to acquire new mobile networks overseas.

The push into digital services such as online media suggests the company will take a new approach to international expansion. In the first half of this year, du will help launch an Arab online platform for content providers, a digital lifestyle offering similar to Etisalat's eLife telecoms bundle and an internet traffic management venture, said Osman Sultan, the chief executive of du. The company will also help launch a domestic mobile television service by the end of the year.

"We have been preparing since a year some projects, and these projects will develop into ventures that we will be announcing soon with partners," Mr Sultan said. "du will be one player in order for us to grow our scope of work and move within the value chain." The company has 32 per cent of the 10.3 million mobile subscribers in the UAE, about a 10 percentage point gain from 2008. It has also offered a domestic broadband, landline phone and television service since it launched in 2006.

Like Etisalat, du's largest shareholder is the Federal Government, and it has long stated that it will not pursue international acquisitions and licence purchases. But it is now considering up to four new ventures as it looks to expand its business outside the UAE and maintain its growth outlook. Mr Sultan said the ventures were related to developing a UAE-wide mobile television offering and an internet traffic management unit.

He declined to disclose further details, but said the company was developing some of the ventures with Injazat, a joint venture between Hewlett-Packard and Mubadala Development. "The UAE is very well positioned to become a hub for digital traffic," Mr Sultan said. All the new ventures except for the mobile TV service will be announced in the first half of this year, Mr Sultan said. The mobile TV venture, which will be worked on in conjunction with a group of partners in the telecoms and media sectors, is expected to be launched by the end of this year.

"Content now can be channelled in a completely different manner," Mr Sultan said. "There's a recomposition of that business model. I strongly believe in that." Antonio Carvalho, a partner at the telecoms consultancy Delta Partners in Dubai, said that while Etisalat focused on expanding its core telecoms operations internationally, du could take a different route to make a similar impact. "Dubai and Abu Dhabi are becoming centres of excellence in different areas," said Mr Carvalho, whose company has done consulting work for du.

"IT is one sector the Gulf is lagging behind. The UAE is well positioned to take become leaders in the market. But if Etisalat doesn't take advantage, du can be on the attack." But du still needs to focus on perfecting its existing operations while it looks for a growth strategy, Mr Carvalho said. "It's all very possible but there remains some questions to be answered." Like most telecoms companies in the Gulf, du saw its subscriber and revenue figures rise as the sector proved to be fairly resilient during the economic downturn.

The company added 233,000 mobile subscribers during the September quarter last year and now has about 3.1 million. du's growth exceeded its peers, including Etisalat, after it moved away from targeting low-spending customers towards lucrative subscribers with data-rich mobile devices. "In a year of macroeconomic challenges, being able to announce 30-plus per cent in top-line growth is something we're really proud of," Mr Sultan said.

Along with Etisalat, du recently launched telecoms services in the Burj Khalifa - formerly the Burj Dubai - the first location in the UAE where residents can choose their broadband provider. @Email:[e-mail]