Strategic Analysis of Etisalat
2011
Paritosh Kashyap

Etisalat, the telecom giant from UAE is among the one of the non oil sector based success stories from the Gulf. This given analysis will consist of the basic introduction followed by the overall telecomm market in UAE. Post which the growth and expansion of various businesses of Etisalat over the last decade will be studied which will be followed by some of the major international subsidies of Etisalat. In the concluding part the future strategies of Etisalat will be analyzed.
Introduction
Emirates Telecommunication Corporation, branded as Etisalat is one of the major telecommunication companies in the world, operating across Middle East, Asia and Africa. It provides mobile and fixed line data and voice services to individuals, enterprises, telecomm companies etc. It also provides a wide range of high tech and complimentary services to telecomm companies including SIM card manufacturing, payment solutions, staff training, peering, voice and data transit, sub marine and land cable services. (Etisalat.ae, 2011) The company was founded in 1976 as a joint venture between International Aeradio limited, a British company and local partners. Later on in 1983, the govt. of UAE had a 60% stake in the company and rest was publicly traded. From 36,000 exchange lines in 1976, it was having around 7, 47,000 lines in 1998. Today Etisalat is considered as one of the biggest success sagas in Middle East and is one of the biggest contributors to the UAE government after the traditional oil sector. Currently operating in 18 nations world wide, it enjoys around 135 Million aggregate subscribers and annual revenue of US $ 8.7 billion (Etisalat Annual report, 2010).

Fig 1: the following figure shows various companies of the overall Etisalat group

Fig 2: shows breakdown of revenue ,as on Dec, 2010 (Source: Etisalat annual report 2010)

Fig 3: shows the breakdown of Etisalat group as on Dec, 2009 (source: Etisalat annual report 2009)

Telecommunication sector in UAE
The growth of telecommunication sector at UAE has been synonymous with the growth of Etisalat, its major telecommunication company. The telecom sector in UAE has been highly regulated with Etisalat having monopoly in the market for most of the time. In spite of having monopoly like many of its other Emirati counterparts, Etisalat has always been upfront in coming up with newer technologies and value based innovation in the market. By 2005 mobile penetration was more than 100 % where as internet and broad band penetration was more than 60 %.
The market dynamics changed in 2006 with the emergence of Du, another telecomm company in the market (2dayDubai.com, 2009). Du is owned- 40 % by Dubai government, 20% by Mubadala, 20% by TECOM (Dubai technology and commerce free zone) and rest 20 % is owned through publicly listed shares in Dubai financial market. Presently due to saturation as well as competition the top line of the Etisalat seems to be affected in UAE, but it is growing rapidly through international expansion and acquisitions of other players. Moreover the overall ICT sector of UAE (consisting of IT along with telecom) is poised for a strong growth in the near future. Both the major Emirates of UAE- Dubai as well as Abu Dhabi have ambitious growth plans in the form of Dubai 2015 and Abu Dhabi 2030 respectively and they realize the fact that strong ICT sector is a precondition for achieving the ambitious plans. The ICT sector is expected to get strong boost due to multibillion dollar infrastructure development plans, economic diversification and an exuberant SME segment in the coming time.

fig 4: Annual Etisalat mobile subscriber in UAE, over the last ten years
Key Insights from fig 4:- * The CAGR (compound annual growth) for the entire period is 18.5% * The CAGR for 2000-05 is 26.1%, whereas for 2005-10 is 11.4%. * There has not been any substantial growth in the last three years.

Fig 5: Annual Etisalat fixed line subscriber in UAE, over the last ten years
Key Insights from fig 5: * The CAGR for number of fixed line subscribers over the entire period of 10 years is very modest at 1.97 %. * The CAGR for the period 2000-05 is 4 % whereas for 2005-10, there had not been any substantial growth * The overall fixed line market for Etisalat UAE had reduced in the last two years.

Fig 6: shows the total number of internet subscribers in UAE over the last 10 years.
Key Insights: * The CAGR of internet subscribers for Etisalat UAE, over the entire period is 20.2 % * The CAGR for 2000-05 is 20.3%, whereas for 2005-10 is 20 %. * After showing substantial year on year growth for the 1st nine years, the market has taken a dip in the last year.

fig 7: shows the national as well as international calls in billion minutes, over the last ten years
Key Insights: * The CAGR for national calls is 10.5 %, international calls is 11.9 %, over the given time span. * The CAGR during 2000-05, for national calls is 18.2% and for international calls is 25.31 %. The CAGR during 2005-10, for national calls is 3.3 % and for international calls is 0 %. * Both national as well as international calls have taken dip in the last two years.
General Insights: Two important trends could be concluded from the above graphs- * Etisalat has shown strong growth in all the sections during the period 2000-05 compared to 2005-10. * In every section the market is reducing down for Etisalat in UAE in the last couple of years, owing to saturation (In 2008 penetration in the mobile market had already reached 190 %, thereby providing less scope for further expansion), competition by DU and global economic slowdown.

Growth of Etisalat
From a humble beginning in 1976, Etisalat has morphed into a giant organization. According to financial times it holds 140th position among the top 500 companies in terms of market capitalization. By the mid of 2000 Etisalat successfully evolved from a local player that once provided basic wire line and data services to an international player providing a wide range of sophisticated services. The given section of the analysis will discuss the growth track of Etisalat along with some of its high end services and international expansion

fig 8: showing the revenue and net profit of Etisalat, over the last eight years. Global Expansion
Etisalat is a truly global brand. It operates across 18 nations in the Middle East, Africa and Asia. It identifies underserved markets and targeting them with high quality, value based innovative services. The international expansion strategy for Etisalat consists of both, having fully owned subsidies as well as having majority and minority stake in various existing local telecom companies. In its attempt with inorganic growth and expansion, Etisalat has got commendable success and is known for expanding the subscriber base quickly. The following part will be discussing some of the Geographical success stories of Etisalat.
Etisalat Misr
Etisalat entered into Egypt (also called Misr in Arabic) in 2006, as 3rd mobile service provider in the country. Within 50 days of its launch it captured a base of one million subscribers, which had increased to around 10 million by today. Etisalat’s 2G network covers around 98 % of population while 3G network covers around 73 % of the population. (Etisalat.ae, 2011)

Atlantique Telecom, Moov Atlantique Telecom (AT) operates in seven countries across West Africa. Etisalat initially had a 50 % stake in AT, which increased over a period of time and eventually by February 2010, it got full ownership of AT. Though all the seven nations are different in their socio economic cum political outlook but Moov, the common brand name for AT across the region enjoys a very strong brand value across all of them. The region which is underserved with a penetration of 10 %, presents a very strong potential for future growth. AT has coverage of 54 % in the region.

Etisalat Nigeria
Nigeria the most populous African state with 22 % mobile penetration is high up on Etisalat’s agenda of international expansion. Etisalat entered into the Nigerian market in October 2008 and captured one million subscribers by June. By September 2011 it was having a subscriber base of 5 million in Nigeria. Etisalat is known in Nigeria for its top quality service and within year of its launch has been credited with the best service provider by the national telecom regulatory authority, Nigerian Communication Commission (NCC). Currently Etisalat is active across all the 36 states in Nigeria and has coverage of 73 %.

Fig 9: Growth of subscriber base of Etisalat Nigeria, source: (www.itp.net)

Etihad Etisalat
Etihad Etisalat (also branded as Mobily) is the second mobile service provider in the kingdom of Saudi Arabia after Saudi Telecom. It entered into Saudi Arabia in May 2005, after winning the bid for second GSM license. Mobily is one of the fastest growing GSM service providers in Middle East and North Africa and captured 3.8 Million subscribers just within a year of its launch. Presently it has more than 17 million subscribers. Etisalat’s GSM service covers almost 97 % of the populated areas where as the 3.75 G service covers 80 % of the populated areas. Etisalat has a 27 % share in Mobily where as 45 % are with six local partners, rest are publicly traded (Etisalat.ae, 2011).

Pakistan Telecommunication Public Limited (PTCL)
Founded in 1947, Pakistan Telecommunication Public limited or PTCL is the largest telecomm service provider in Pakistan. In 2006, the Pakistan govt. sold 26% stake to Etisalat. 62 % is retained by the govt. whereas the rest 12 % is publicly traded.

Future Strategy
The future of Etisalat depends how well it expands in to various new geographies and technology verticals along with the kind of value based innovation it brings into the existing portfolios of geographies and product. Though a considerable part of revenue will come from the UAE, but due to intensifying competition and saturation of the market, maintaining a healthy top line from UAE will not be very easy. Following factors can play important role in deciding the future strategy for Etisalat.

* New Markets: - Newer markets will play a crucial role in influencing future strategy of Etisalat. Many of the existing markets like Pakistan, Sudan Tanzania and Waste Africa are still underserved and have huge growth potential. Take for instance Sudan where fixed line penetration is just 1-2 %, and hence offer a great growth potential for telecom majors like Etisalat. Similarly in other parts of Africa, where many of the nations are expected to make strides across the path of economic progress- the mobile, internet and fixed line penetration is expected to shoot up, thereby providing a strong growth potential. Along with the existing markets, Etisalat needs to continue searching for newer underserved markets and devise strategies for them.

Geography | Population ( Millions) | Coverage | Penetration | Un served Present Market Size (Millions) # | West Africa | 57 | 56 % | 58 % | 13.4 | Nigeria | 155 | 59 % | 57 % | 15.7 | Egypt | 80 | 99 % | 92 % | 4.2 | Tanzania | 41 | 43 % | 42 % | 6.6 | UAE | 5 | 100 % | 241 % | 0 | Saudi Arabia | 26 | 99 % | 194 % | 0 | Afghanistan | 30 | 73 % | 52 % | 10.5 | Pakistan | 183 | 76 % | 60 % | 12.8 | Sri Lanka | 22 | 67 % | 67 % | 9.9 | India | 115 | NA | 52 % | NA |

* Future Growth of UAE: - UAE has strong future growth plans in the form of Dubai 2015 and Abu Dhabi 2029. It no more wants to be solely dependent on petroleum for its revenue and wants diversify into various alternate industries such as ICT, High tech, defense, tourism, trade, media, SME segment etc. Currently these sectors are seeking huge capital investment and their expected future growth will influence Etisalat’s business in a positive way.

* Innovative products for local markets:- Like any other globalized company, Etisalat needs to understand the dynamics of the local market and needs to come up with innovative solutions customized for the local markets. One very good example can be the partnership between Etisalat Afghanistan and PTCL which offered attractive rates between the two countries, resulting in quadrupling of traffic since the launch in 2010. Etisalat needs to roll out such innovative customized packages to lure more customers. * Newer technologies: - The top management at Etisalat believes “Cloud Computing” as a deeply transformational trend worldwide, and hence Etisalat is planning to launch a wide range of service in this field in the near time. Another area that provides a great future potential is M2M (Machine to Machine) technologies. Etisalat is attempting to develop industry specific solutions in the given field as M2M technology holds a great future potential. According to research done by Research Infonetics in 2009 there were 87 million mobile embedded M2M connections, which are forecast to rise to 428 million by 2014, a compound annual growth rate (CAGR) of 38 %. (Comm.com, 2011)

# Un Served present market size= population * Coverage * (100 – Penetration) * Etisalat’s stake

Reference 1> Etisalat.ae, 2011, company website, about us: corporate profile, available at http://www.etisalat.ae/index.jsp?lang=en&type=channel&currentid=a79a8e621187b010VgnVCM1000000c24a8c0____&parentid=ed38800d1f52a010VgnVCM1000000a0a0a0a____ 2> Etisalat annual report, 2010, p-3, 3> 2dayDubai.com, 2009, United Arab Emirates ICT sector and Dubai’s knowledge economy, available at < http://www.2daydubai.com/pages/dubai-ict-sector.php> 4> Etisalat.ae, 2011, Etisalat Misr, available at < http://www.etisalat.ae/index.jsp?lang=en&type=content&currentid=5c78e15c0b56a010VgnVCM1000000a0a0a0a____&contentid=534c9c7342b15210VgnVCM1000000c24a8c0RCRD&parentid=ed38800d1f52a010VgnVCM1000000a0a0a0a____> 5> Etisalat.ae, 2011, Etisalat Etihad ‘ Mobily’ Saudi Arabia, available at http://www.etisalat.ae/index.jsp?parentid=ed38800d1f52a010VgnVCM1000000a0a0a0a____&contentid=f1fb9c7342b15210VgnVCM1000000c24a8c0RCRD&currentid=5c78e15c0b56a010VgnVCM1000000a0a0a0a____&lang=en&type=content 6> Comm.com, 2011, Seizing the moment, available at< C:\Documents and Settings\Administrator\Desktop\Etisalat vs Du\Seizing the moment Comm_ Decisive coverage of telecommunications strategy.mht > 7> Comm.com, 2011, Seizing the moment, available at < C:\Documents and Settings\Administrator\Desktop\Etisalat vs Du\Seizing the moment Comm_ Decisive coverage of telecommunications strategy.mht >