Telecoms revenues threatened by Skype

Etisalat and du are likely to suffer a reduction in revenues coming from international calls after the telecoms operators both lifted the ban on Skype, a voice over internet protocol service.

Etisalat and du are likely to suffer a reduction in revenues coming from international calls after the telecoms operators both lifted the ban on Skype, a voice over internet protocol (VoIP) service.

In a statement issued yesterday, Etisalat and du announced that users could now download the application online and make Skype-to-landline or mobile calls, which were not previously permitted.

"Generally the main fear of the operators here will be that customers will increasingly use Skype as a substitute for conventional international calls," said Matthew Reed, the principal analyst at Informa Telecoms and Media. "Those international calls make up an important part of operator revenues here in the UAE because of the large expatriate population and the role of the country as a commercial centre of the region."

Skype has become synonymous with VoIP and cheap phone calls. Through the use of a virtual private network (VPN), many users were able to bypass internet filters and download the application from their laptops, while others would download Skype when abroad and use it freely in the UAE.

Skype pay-as-you-go calls to the United Kingdom cost 8.4 fils a minute compared with Dh1.91 to Dh2.69 on Etisalat. Calls to India cost about 34 fils on Skype and Dh1.89 to Dh2.40 on Etisalat.

Users can also purchase monthly packages that can cost 20 to 25 per cent less than the rates given by the telecoms operators.

Besides international call rates, it could also have an impact on roaming costs. Users with access to Wi-Fi when abroad should now be able to make calls via Skype without incurring high data fees or roaming rates.

However, the lifting of the ban has done little to clear up the confusion over the legality of VoIP services in the UAE. Other VoIP services such as Viber and Tango are still not available here, while the upgraded BlackBerry Messenger (BBM) 7, which includes voice calling and video calling on BB10 handsets, is still blocked in the country.

According to a statement on the Telecommunications Regulatory Authority (TRA) website "only the licensees (ie Etisalat and du) [can] provide telecommunications services in the UAE including VoIP services," suggesting it is up to the telecom companies to decide which VoIP services can be made available. However, the statement goes on to say that "both licensees must seek approval to provide such a service after fulfilling regulatory and technical requirements of the TRA, which has not happened in the case of Skype. VoIP services through Skype are still unauthorised".

Ed O'Reilly, a co-founder and director of 4Front consultants in Dubai, said: "The TRA's VoIP policy is about 15 years old, which was put in place back when you could control internet traffic, but now there are loopholes to get around it. It is a step towards a more open sector, perhaps they are teeing up for something else."

While some analysts feel that both operators are likely to offset lost revenues by increasing data costs, others are not so sure.

"People who wanted to use Skype were using it already before du and Etisalat unlocked the webpage," said Petr Molik, the chief financial officer and head of financial advisory at MenaCorp. "It is a long-term trend for VoIP and overall erosion of Arpu [average revenue per user] per subscriber. The good news is that it gives users another possibility for cheaper calls, but will it have a dramatic impact in the next few quarters? I don't think so.

"The operators are likely to reduce call rates, but the voice revenues were already decreasing even before they unlocked Skype."

A wider variety of data packages may be made more available that could incorporate Skype services, similar to data packages available for Blackberry handsets.

Both Etisalat and du were unavailable for comment.