x Abu Dhabi, UAEWednesday 24 January 2018

Local telecoms firms need to be smarter about sales

Etisalat is one of the UAE's flagship companies, yet it and rival du are missing out on lucrative opportunities because they don't know how best to sell their services.

Regional telecoms companies in the Arabian Gulf handle only 2 per cent of mobile-phone sales. Galen Clarke / The National
Regional telecoms companies in the Arabian Gulf handle only 2 per cent of mobile-phone sales. Galen Clarke / The National

You would not think Etisalat is one of the UAE's flagship companies when taking a casual stroll through Dubai's Ibn Battuta Mall.

The telecommunications company, the largest in the UAE, has just opened a store in the ornately decorated shopping centre, itself one of the biggest in its field.

But the shop doesn't quite reflect the might of Etisalat, which last year reported revenues of Dh32.2 billion (US$8.76bn).

That's because it measures just 92 square feet and is dwarfed by most other shops in the mall, which has 1.2 million square feet of retail space.

Etisalat's new outlet - as the press release detailing its opening optimistically calls it - would better be described as a kiosk. It's the kind of place where one would expect to buy cologne or DVDs rather than interact with one of the country's largest companies.

Yet this somewhat lacklustre presence reflects a wider problem: many regional telecoms companies are bad as retailers and are missing out on opportunities because of it.

In markets such as the United States, most consumers buy mobile handsets direct from telecoms companies.

It seems counterintuitive that could be of benefit to the operators, given they often charge little or nothing for the latest smartphones.

But in markets such as the US, handsets are subsidised to entice consumers to take out 12 or 18-month contracts. That allows telecoms companies to tie customers in to higher tariffs and, in doing so, more than recoup the cost of the handset.

Two-thirds of US phone and contract sales are controlled by telecoms carriers in an industry worth about $200bn in annual revenue, according to a report last year on the telecoms retail business by the consultancy Booz & Company.

Telecoms companies in the US also benefit from sales of items such as car chargers and phone covers. According to Booz, 41 per cent of US customers buy accessories with a new phone, spending an average of $44 each.

Such is the telecoms companies' stranglehold in the US that traditional retailers are upping their game. The likes of Best Buy and RadioShack are posing a threat to their retail dominance, according to Booz.

The opposite is true in the Arabian Gulf, where regional telecoms companies handle only 2 per cent of mobile-phone sales, according to Microsoft. That means, if you live in this region, you probably paid through the nose for your smartphone because most handsets are sold in general electronics shops - without any subsidy.

Carriers such as Etisalat have made attempts to address this.

The operator offers a few handsets for free or at subsidised rates. With the carrier's most expensive price plan - which costs Dh449 a month - it gives away an iPhone 4S, HTC One X or Samsung Galaxy SIII handset.

Rival operator du, by comparison, does not offer any subsidised handsets to individual customers, although a few are available to businesses.

Both UAE telecoms companies have attempted to increase their retail presence. Etisalat now has 107 outlets in the UAE, while du has opened new stores in popular locations such as Mall of the Emirates.

But it could be too little too late. In its latest results, du said its average revenue per user for its mobile customers had declined to Dh112 per month, down from Dh124 in the last quarter of last year.

Regional telecoms companies are coming under increasing pressure to maintain revenues, partly due to high infrastructure costs and greater competition due to the rise of free calling and SMS services.

Against this backdrop, subsidising handsets looks like a sure-fire way to boost revenues as well as attract higher-spending, more loyal customers.

Opening more stores in malls and introducing better online-purchasing options will be key to this.

The region's telecoms companies should act more like retailers - and that means more than just opening a kiosk.


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