x Abu Dhabi, UAEThursday 18 January 2018

Opportunities and threats for Etisalat

What's Down: Etisalat has more to lose now that its rival, Du, will be able to provide fixed-line services in the same districts by the year's end.

The Government's plan to allow the public the freedom to choose between phone operators by the year's end is both an opportunity and threat for Etisalat.

The phone company has been losing market share to its rival du over the past year, which has hit its earnings.

On Monday, it posted a 15 per cent decline in second-quarter profit, missing expectations. Not all of the earnings news was bad, however: the company saw a slight increase in mobile subscribers. But as the bigger of the two players in the market, Etisalat may have more to lose from increased competition in the fixed-line broadband and phone market than du, which has been largely confined to operating in Dubai's newer master-planned property developments.

"Until now, du has offered fixed-line services in the free-zone areas in Dubai, while outside of that Etisalat has been the main provider," said Nishit Lakhotia, an analyst at the Securities & Investment Companyin Bahrain.

"But with the opening up of the market, du will be able to offer its services across the UAE and will have a bigger market to capture," he said.

Etisalat lost a significant portion of its share in its domestic market when du, launched in 2007, started offering mobile services.

The former monopoly, which operates in 18 countries, reported second-quarter net income at Dh1.59 billion, down from Dh1.87bn in the year-earlier period. Revenue was also down, to Dh7.93bn from Dh8.05bn for the same period last year.

Etisalat will need to focus on retaining UAE mobile subscribers, who contribute 70 per cent of its revenue, Mr Lakhotia said. "This segment is where the real profits are, and Etisalat has not been able to defend well. They will need to focus on it closely because subscribers are still growing in the UAE."

Etisalat shares, listed on the Abu Dhabi Securities Exchange, declined 0.4 per cent to Dh10.85 yesterday.