Rivalry between Etisalat and du is forecast to intensify, despite the UAE telecoms market having been named one of the least competitive in the Arab world.
Etisalat and du set to lock horns
Saudi Arabia, which has four mobile operators, stands as the tightest mobile market in the region, with a competitiveness score of 76 per cent, according to the consultancy Arab Advisors Group.
But the UAE, which has just two mobile operators, is one of the least competitive markets, with a score of just 47 per cent, ranking it behind Yemen, Oman and the Palestinian Territories.
"The UAE is not the most competitive market," said Jawad Abbassi, the founder and general manager of the Arab Advisors Group.
"It's a duopoly market. And the two operators have a very rational, rather than a cut-throat, competition."
Mr Abbassi said the shareholder structure of Etisalat and du did not encourage stronger competition.
"They are both partly owned by government entities," he said. "When your shareholders have common interests, you're not going to have aggressive competition."
Despite this, there is still room for more intense rivalry between Etisalat and du, analysts say.
Marketing initiatives and a plan to share broadband and landline networks are likely to boost competition between the two.
"It's going to be their marketing strategy that truly differentiates them," said Philip Brazeau, who heads the telecoms practice at the Middle East law firm Al Tamimi. "Marketing is going to be critical for Etisalat to maintain its position in the market."
Some commentators say Etisalat's recent appointment of Matthew Willsher as the chief marketing officer is indicative of where its strategy may be heading.
Mr Willsher previously held the same position at Maxis Communications in Malaysia, where competition in the telecoms sector is fierce.
His appointment comes at a time when Etisalat is rapidly losing its mobile market share to du. In the first quarter, du added 272,000 active mobile subscribers, while Etisalat lost 334,000.
The Emirates's second operator du has 41.8 per cent of the mobile-subscriber market, but only 32 per cent of mobile revenue share - which could represent an opportunity for it to attract more lucrative customers, said Irfan Ellam, a telecoms analyst with Al Mal Capital.
"That implies that there is still more room for growth for them in terms of revenue," he said.
"At the moment, the growth in the mobile space is more on the data side rather than voice or SMS. In the mobile broadband space, du has a more compelling offering at the moment, but that could change."
Changes in regulation are also expected to prompt more competition between the two operators.
Matthew Reed, an analyst at Informa Telecoms & Media, said a plan for infrastructure sharing - under which both Etisalat and du would be permitted to sell landline and broadband packages across the UAE - could benefit du.
Currently, du is restricted to selling broadband and landline services to a few high-density areas of Dubai. But a plan for the two operators to share networks should enable du to compete on fixed-line services across the country by the end of the year.
"The next area of potential growth for du is the broadband market," said Mr Reed.
Simon Simonian, a telecoms analyst at Shuaa Capital, said infrastructure sharing would provide "another step up in competition".
But Mr Ellam said while the infrastructure sharing deal could help du gain market share, it would not have a significant impact in the short term. He added, however, there was "a huge scope for du to capture additional fixed-line and broadband customers".
Another regulatory change due is the introduction of mobile number portability - under which consumers will be able to swap operators while keeping their phone numbers.
Mr Reed said that was unlikely to have a great impact in a market where pre-paid mobile subscriptions were common.
"I don't expect it to have a huge effect on the market share. That's because in mobile markets that are generally pre-paid it doesn't usually have a substantial effect," he said.
Martin Mabbutt, a telecoms analyst at Nomura, said mobile number portability had not had much of an impact in other telecoms markets.
"The history of mobile number portability is that it doesn't make a lot of difference," said Mr Mabbutt. Analysts said the current competitive environment ruled out the immediate need for a third mobile operator.
Mr Simonian said calling rates and broadband prices had already been lowered in the UAE.
"The two players did the job without a third player coming on board," he said.
A third operator is unlikely to be introduced after the financial crisis, he added.
"You could have made a case for a third operator if it were not for the financial crisis," said Mr Simonian. "You need to let the dust settle a little bit."
Mr Ellam agreed, saying there were "a lot of question marks" over the need for a third operator.
"Is the UAE market sizeable enough to attract a third operator? On a global scale it's a relatively small market in terms of people," he said. "I don't think it really needs a third operator at the moment."
However, Mr Ellam said the Abu Dhabi satellite company Yahsat, which intends to launch commercial broadband packages across the region for as little as US$30 (Dh110.19) a month, "could shake up the market" when it launched internet services next year.
So, even without a third mobile operator, the UAE telecoms market is likely to get more competitive in the future.
"It's a misnomer when people say we haven't got competition," Mr Ellam said.