Etisalat seeks higher revenue in saturated mobile market

Etisalat is pushing more of its mobile subscribers to sign up to costlier post-paid plans to help the operator offset losses it incurred with customers leaving.

With the mobile penetration rate in the UAE hovering near 200 per cent - about two devices per resident - growth in the sector is slowing.

Since Etisalat lost its mobile monopoly in the UAE in 2007, the company's share of the domestic mobile market has levelled off at about 63 per cent. The company added only 10,000 mobile customers in the third quarter.

By comparison, post-paid promotions such as the Elite Plan helped the rival company du to add 159,800 mobile customers in the third quarter. The smaller operator has about 37 per cent of the market.

To try to buck du's growth, Etisalat introduced the MyPlan promotion last month for consumer and business customers, a new take on its post-paid offerings that provides more minutes for a lower monthly charge.

"In the UAE, the percentage of prepaid and post-paid is not at the right level. The UAE deserves to have a lot higher penetration for post-paid," said Khalifa al Shamsi, the senior vice president of marketing for Etisalat.

"We will be pushing more for the post-paid [customer] because the market is ready for that."

Etisalat has 1 million post-paid mobile subscribers and 6.8 million prepaid mobile subscribers, according to recent financial filings. The company's mobile operation is of increased importance to overall earnings, bringing in revenue last year of more than Dh12.1 billion (US$3.29bn) or 52 per cent of Etisalat's total business.

Protecting that revenue stream is becoming increasingly important to Etisalat as it pursues a foreign expansion strategy, recently offering $11bn for a 51 per cent stake in the Kuwaiti operator Zain.

As part of its effort to raise $8bn, Etisalat last month filed a bond prospectus with the London Stock Exchange in which it included previously unreported information on how competition with du has affected its business.

The prospectus revealed that Etisalat's monthly average revenue per user (ARPU), a key financial measure in the telecommunications business, decreased from Dh176 in 2007 to Dh118 in the most recent quarter.

Etisalat's mobile business has also experienced a high rate of "churn" - the number of customers leaving the operator.

Although it is not clear how many of Etisalat's customers have signed up with du or have simply left the country, Etisalat's churn rate rose from 15 per cent in 2007 to 25 per cent last year. It declined to 17 per cent in the first nine months of this year.

"At the end of the day, we have a big customer base and normally you have a small percentage from that [leaving]," Mr al Shamsi said.

However, Etisalat said its post-paid ARPU was Dh230 per month this year, more than 225 per cent above its prepaid ARPU figure. The churn in Etisalat's post-paid service is 11 per cent, the company says, versus 18 per cent in its prepaid service.

"When we looked at the plans, we wanted them to be tailored according to the user," said Mr al Shamsi.

"It matches users' behaviour because we found that if you get something that's more than what you need, you won't use it."