1. 2011
Strategic Analysis of Etisalat
Paritosh Kashyap

2. Strategic Analysis of Etisalat
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).
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3. Strategic Analysis of Etisalat
Fig 1: the following figure shows various companies of the overall Etisalat group
Break down of revenue ( as on 31st Dec, 2010)
9%
10%
Mobile
Telephone
12% 51%
Internet
10% Data Services
8% Interconnect
Others
Fig 2: shows breakdown of revenue ,as on Dec, 2010 (Source: Etisalat annual report 2010)
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4. Strategic Analysis of Etisalat
Break up of revenue, as on 31st Dec, 2009
8%
15% Mobile
48% Telephone
7%
Internet
12% Interconnect
10% Data Services
Others
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
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5. Strategic Analysis of Etisalat
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.
9
Annual mobile subscribers in millions 7.74 7.76
8 7.29
7 6.37
6 5.52
5 4.53
4 3.68
2.97
3 2.43
1.90
2 1.42
1
0
00 01 02 03 04 05 06 07 08 09 10
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.
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6. Strategic Analysis of Etisalat
1.6
1.33 1.36
1.4 1.29 1.31
1.24 1.24
1.19
1.2 1.14
1.05 1.09
1.02
1
0.8
0.6
0.4
0.2
0
00 01 02 03 04 05 06 07 08 09 10
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.
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7. Strategic Analysis of Etisalat
1.4 1.33 1.32
1.2 1.15
1 0.88
0.8
0.66
0.6 0.53
0.42
0.4 0.31 0.35
0.26
0.21
0.2
0
00 01 02 03 04 05 06 07 08 09 10
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 1 st nine years, the market has
taken a dip in the last year.
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8. Strategic Analysis of Etisalat
25
19.4
20 18.3
17.8
15.7 16
15 13.6
International calls (billion
11.6
minutes)
10
10 8.8 National calls (billion
7.4
5.9 minutes)
5 3.8 4 4.2 3.9 3.4
2.9 3.4
1.9 2.2
1.1 1.1
0
00 01 02 03 04 05 06 07 08 09 10
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.
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9. Strategic Analysis of Etisalat
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
10.0
9.0 8.5 8.7
8.0
8.0
7.0
5.8
6.0
5.0 4.4 Revenue in US $ Billions
4.0 3.5 Profit in US $ Billions
2.8
3.0 2.5 2.3 2.4 2.1
2.2 2.0
2.0 1.6
1.2
1.0 0.7 0.8 0.9
0.0
02 03 04 05 06 07 08 09 10
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
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10. Strategic Analysis of Etisalat
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 %.
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11. Strategic Analysis of Etisalat
Sep, 2010 5.0
June, 2010 3.5
June, 2009 1.0
0.0 1.0 2.0 3.0 4.0 5.0
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)
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12. Strategic Analysis of Etisalat
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.
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13. Strategic Analysis of Etisalat
Geography Population Coverage Penetration Un served
( Millions) 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.
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14. Strategic Analysis of Etisalat
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=a79a8e621187b010V
gnVCM1000000c24a8c0____&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=5c78e15c0b56a010Vg
nVCM1000000a0a0a0a____&contentid=534c9c7342b15210VgnVCM1000000c24a8c0RCR
D&parentid=ed38800d1f52a010VgnVCM1000000a0a0a0a____>
5> Etisalat.ae, 2011, Etisalat Etihad ‘ Mobily’ Saudi Arabia, available at
http://www.etisalat.ae/index.jsp?parentid=ed38800d1f52a010VgnVCM1000000a0a0a0a__
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__&contentid=f1fb9c7342b15210VgnVCM1000000c24a8c0RCRD&currentid=5c78e15c0b5
6a010VgnVCM1000000a0a0a0a____&lang=en&type=content
6> Comm.com, 2011, Seizing the moment, available at< C:Documents and
SettingsAdministratorDesktopEtisalat vs DuSeizing the moment Comm_ Decisive
coverage of telecommunications strategy.mht >
7> Comm.com, 2011, Seizing the moment, available at < C:Documents and
SettingsAdministratorDesktopEtisalat vs DuSeizing the moment Comm_ Decisive
coverage of telecommunications strategy.mht >
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