Monday, May 13, 2013
DUBAI (Zawya Dow Jones)--The U.A.E. telecoms authority is considering regulatory options to boost competition in the sector which will help lower prices, a move that may face some resistance from the operators.
The U.A.E. is currently served by two telecom operators, who, between them, cater to a population that comprises a majority of expats--a duopoly that has allowed the largely state-owned companies to set prices and generate billions of dollars in revenue for the government.
The Telecommunications Regulatory Authority, in a request-for-proposal document issued in April and seen by Zawya Dow Jones, has asked consultants to pitch for work to carry out a study that will estimate the value of economic activity generated by the sector.
Importantly, the TRA wants the study to estimate the likely impact of reduced telecom retail prices on the overall contribution of the sector to the economy.
"The TRA considers that the retail prices of some telecommunications services exceed competitive levels," the regulator said in the document. "As such, it considers that implementation of regulatory initiatives to improve competition will exert downward pressure on retail prices."
The regulator has previously undertaken similar initiatives to increase competition and lower telecom prices in the country but made little progress.
In December, it published a consultation outlining areas where Etisalat and Du possessed a dominant "market power" that could be used to each telco's advantage. But Abu Dhabi-based Emirates Telecommunications Corp., or Etisalat, in a response document seen by Zawya Dow Jones, criticised the proposals and the consultation process has now fallen behind the timeframe set by the TRA.
Some analysts say that the issue of pricing is a politically sensitive one as the federal government is not only a major shareholder in both the telcos, but also receives royalties from the operators.
The RFP issued in April makes clear that the new study would need to assess, among other things, the impact of lower prices on government royalties, foreign direct investment into the country and the benefit to consumers and businesses of cheaper services.
Etisalat and Dubai-based rival Emirates Integrated Telecommunications Co., or Du, jointly generated 34 billion dirhams ($9.3 billion) of revenues in the U.A.E. last year, according to the RFP document. Profits amounted to AED8.7 billion and royalties worth AED7.3 billion were paid to the federal government.
Write to Rory Jones at rory.jones@dowjones.com
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(END) Dow Jones Newswires
13-05-13 1220GMT
