Thursday, June 08, 2006

How mobile savvy is the UAE?

Come 10th of this month I am completing an year in Dubai. I was chatting up with someone who has been here for the last 18 years. The discussion was about mobile telephony, this man was proud to say that UAE is one of the most evolved markets as far as mobile telephony goes. According to this friend, people here exploit the technology available to the fullest and they have a great deal of understanding about things.

Having had the opportunity to work with a couple of mobile telephony service provider brands back in India, I have my own opinion about this market. I thought it would be better if I had my opinion validated. So I started doing a dip-stick on this market, its expectations from the mobile service providers and more importantly the level of understanding the subscribers have about mobile telephony.

I have also tried checking some secondary data sources like a recent interview among people here about mobile phones (instruments) which appeared in a leading lifestyle magazine here and some reports I found on the net. I have also used some of my own understanding about this market.

Why this study / post now?

UAE is getting a second operator in the next couple of months. So I wanted to see how prepared this place is in welcoming a new operator, what do the people expect, what the operators have to offer now and what they must focus on for their better future.

All this said, there are still some people in the UAE who believe that we are moving from monopoly to Du-poly situation with the launch of the new operator Du. This is mainly due to the reason that Du also belongs to the government, Etisalat and Du have reached an agreement already – they wouldn’t compete on cost.

Do let me know your comments / feedbacks.

Special thanks due to Vinay M for helping me collate responses for the research.

The United Arab Emirates market

It is a monopoly as of now. Etisalat, the sole operator in town has been in business for 30 years now. It was established initially in 1976 (the Federal Act 1 of 1991 made this industry a monopoly). UAE is one of the first countries to introduce mobile telephony way back in 1982. Digital GSM service is operational since September 1994. People would be surprised to know that Etisalat is the second largest revenue generator for the government after the oil sector. Though Etisalat is a government owned company it is very active pitching for business in the neighboring countries including Saudi, Pakistan etc.

So here we are talking about a government controlled monolith, in monopoly.

Mobile penetration

The global standards say that the developed countries have about 34% mobile penetration and in the developing countries the penetration is about 5%.

In UAE the mobile penetration is at 79% compared to a 30% fixed line penetration. This figures would show us how dynamic the UAE market is and its wealth & its ever increasing expatriate population.

In Dubai the usage / penetration is at 90% and Abu Dhabi follows next with 62.5%. Both these centers combined contribute to 74% of the total penetration of the country.

Despite these very high penetration figures the market grows by a conservative 10% an year. This 10% could be mainly attributed to the SMS and MMS services. The market is also known for its frequency of changing handsets (that would be a good study by itself).

The offering

Etisalat offers both prepaid and postpaid services. With WASEL being its very popular prepaid offering. In my estimate (due to lack of support) the skew towards prepaid is about 8:2. This could be mainly attributed to the cost of the postpaid connection, you are supposed to pay a deposit of about $140.

By December 2003 there was a reduction is the cost of international calls, notably to India, Pakistan, Sri Lanka, Bangladesh, Egypt, Iran, Syria, Lebanon, Sudan and Yemen. Reduced tariffs have increased revenue, rather than reduced it, since consumers make more and longer calls.

The target audience

Mainly the expatriate population and not to forget the local population. This ranges from a construction laborer to a CEO of a multinational company. It is a very disparate crowd and therefore their expectations differ as per their usage.

Awareness among the users

Recently, in one of the leading publications I saw an article. They had spoken to a few people. All these people looked educated, having a decent job. The question posed was simple “What do you use your mobile phone for?”

And you would see below the kind of response from the people (in the order of importance)

1. Receive / Make calls
2. Send SMS
3. Set Alarm (Check out the BBC report on a Nokia commissioned survey)
4. Take pictures
5. Check time (Check out the BBC report on a Nokia commissioned survey)
6. Listen to Radio / MP3 (Check out the BBC report on a Nokia commissioned survey)
7. Send MMS
8. Connect to the web

Looking at this survey I decided to do a dipstick survey. I decided my survey would be from a service provider’s perspective and ask people about the mobile service usage based questions.

I contacted 15 young men & women with a questionnaire. Here’s what they had to say.

1. All of them have a mobile connection
2. All of them have a postpaid connection.
a. 7 said they have a Wasel (that is the name for the prepaid subscription plan).
b. 8 said they have a Etisalat connection
3. Next question asked was “What is GSM?”
a. 3 of them had said it was “Global System for Mobile communication”.
b. The other 12 had an interesting answer, GSM according to them is a type of mobile phone connection where you get a monthly bill and you pay it month on month. You also get a international roaming with this connection. Interesting!!
4. Three functions you use your mobile phone for frequently. (Services provided by Etisalat, in the order of importance)
a. Incoming
b. SMS
c. Outgoing
5. Do you know about anyother service provider in Dubai? (the reason being an impending launch of another service provider Du)
a. 3 said they knows Du is getting launched shortly
b. The others had no idea
6. What would make you switch to another operator from Etisalat? (in the order of importance)
a. Reduced call charges – International & local
b. Low rentals (the annual subscription)
c. Free international roaming
d. Good network
e. Good customer care
7. Are you okay with switching operators at the risk of loosing your existing phone number?
a. All 15 said yes they will
8. Have you switched numbers at least once? (have you changed your mobile connection ever?)
a. 8 said they have
b. 7 have not changed their numbers

Making sense of the numbers shown above.

UAE has an extremely high mobile penetration level. Mobile phones are more or less commodities here. Some people also have the tendency of changing numbers, the reason being getting a fancy number, a shift in jobs or just for the fun of it. You have an amazing skew towards prepaid connections. This is because of the high deposit / rental factor required for the postpaid connections. Postpaid is seen as a rich man’s connection.

The most important thing is the ignorance of people about their connection. A majority of them don’t seem to know what the prepaid offering of Etisalat is called – Wasel. Even this awareness doesn’t hold Etisalat in good ground as we move on to GSM.

The majority here seem to confuse technology with the offering. For many GSM is the postpaid offering from Etisalat. Even educated, high ranking men and women don’t know what GSM is in reality. Not that they should know the expansion for this acronym, but they should at least know that this a technology that enables you to speak. At least people back in India know this. Another thing to add here is Etisalat’s recent decision to enable full international roaming for its prepaid customers. People don’t seem to know this, they are all under the impression that roaming is available only for the GSM customers (that is the postpaid according to them).

On the usage part, we could clearly see that incoming calls are most preferred. This could be attributed to the high call costs and the amount of expatriate population living here in the UAE. SMS seems to be the next preference, but how many of the expat population are SMS savvy? Outgoing is for emergency situations because it is presumed a costly proposition.

Nobody knows that another operator is coming to town, Du is being launched shortly. But when prompted about this, almost all of the people interviewed say they would want to shift. The reasons that would prompt this decision of theirs is call costs, annual rental and the network (Thursday’s and Friday’s are the most congested days when there is a mad rush of international outgoing calls)

Some learning for the mobile service providers in UAE

1. When your customers crib about costs, it is not necessary that you need to reduce costs. You can create a feeling of reduction by making them feel that you offer more value for their money. Services like Cricket Scores through SMS, Football WC results and score updates, Dial-a-cab, Dial-a-flower, Dial-your-water services make a huge difference. These are some services for which the operator ties up with someone, makes money from this person and offer the services free of charge to the customer

2. There is a reduction in call charges past 10p everyday and on Fridays, but how many people know this? Communicate, may be an SMS to the people on Fridays at least only to those who seem to cough-up monies on making expensive international calls would do wonders.

3. Educate people about your offering. Let people know what your prepaid and postpaid offerings are and what the difference is. Let people know that your company works on a GSM plank and everyone is a GSM user. This should do wonders in a market like this where everyone has a misconception that GSM is postpaid, it would make a definite difference and create a sense of belonging when these guys know they also have a GSM connection. At least for starters.

4. Create more of Emotional loyalty and not the Behavioral loyalty (that’s what you have now). This comes out clearly from our interviews, people are sticking with Etisalat because it is the only player in the market. They would move the moment they have another option. But this option can’t be yet another Etisalat with a different brand name and identity. It has to differentiate itself by the product they offer, the Value Added Services, the packaging and more importantly in pricing (at least visibly)

5. Use the wealth of data you have to increase usage. You know who makes long ISD calls and who is an SMS freak. Offer them some add-ons, make them feel important and this would increase usage.

6. Remember visibility shouldn’t be limited to eyes, you need to take that to heart.

7. This is a service industry, beef your customers service centers up. Get people who understand the problems of your subscribers (at least the common complaints). Make sure all the complaints are addressed promptly.

8. Communicate about your offering clearly. When a person buys a prepaid card or a postpaid connection give him a welcome pack. This should explain him whatever he wanted to know about the connection, facilities and tariff etc.

9. For heavens sake make them use their mobiles for more than setting alarms, checking time and receiving an odd incoming call and make a call or send an SMS once in a blue moon. For a mobile phone’s primary use is not setting alarms and checking time, these need to stop with being value added services from the equipment.

10. As we could see, today a mobile is not just a phone. It is a watch, alarm clock, music player, camera and many more dimensions. It would be adding value if we provide the customer with services that supplement this kind of usage like a music server (like an iTune or a mobile radio station), simple software like the ones used for managing daily expenses etc.

The existing operator here doesn’t seem to have time. They have to react fast, otherwise the watch, clock, MP3 manufacturers are going to suffer a lot. More than that, the existing operators ARPU is going to take a nosedive soon with lots of people leaving out of the network and low usage among those remaining.

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