Telecommunication industry Essay Example for Free

Telecommunication industry Essay Telecommunication industry is a fast growing industry all over the world, During the beginning era of mobile phones, call charges was highly expensive and it was not affordable to common public, during period of 2000-2007 telecommunication industry become a highly competitive and mobile phones become a common commodity, this development gave extra energy to the telecommunication sector and mobile phone service providers started to attract subscribers Most of the countries have multiple operators and they do have very tight competition among them. Big countries like India, China, USA, have plenty of mobile operators, Most of the operators are offering low call costs and added value services to attract the subscribers. UAE is a very fast developing economy in MENA region and growth in UAE telecommunication sector is very aggressive. From 2003 UAE telecom sector started growing rapidly by increasing of mobile users, internet users, adding new broad band technology etc. UAE’s first telecom provider is Etisalat and it is established in 1976, up to 2007 Etisalat was the sole player in UAE telecom sector. When compare to some other countries UAE was the only country that had a single operator for long time. By 2007 UAE government has given the permission for one more operator, hence a new company has started which is Emirates Integrated Telecommunication PJSC. Currently UAE have two telecom operators which is Etisalat (Emirates Telecommunications Corporation) and DU (Emirates Integrated Telecommunications). Both companies are governed by TRA, Telecom Regulatory Authority. TRA UAE has been established according to the UAE federal law, TRA is responsible for the managing of every part of telecommunication information technology industry of UAE. As per a recent press release by TRA, (Telecom Regulatory Authority of UAE) number of mobile subscriptions in UAE growing hurriedly and it is expected to reach 11.7 million by the next year. This indicate that this rate is one of the high mobile penetration rates in the world. During 2008 -2012 the number of internet service subscribers increased 10.5% to over 1.3 million showed the figures. The percentage of internet subscriptions connected by fiber technology increased by 7.8% of customers were upgraded from copper networks to new advanced networks. As per the figures in 2011 telecommunication industry contributed a significant part in UAE’s economic growth and this sector an employer for around 10,000 people from different nationalities. Since UAE Is a place who have lot of expatriates, number of intern ational calls are very high than some other countries and the revenue from ISD calls are also high. There is a lot of illegal VOIP calls provides in the market which is a threat to the telecom sector in UAE, Government has started a campaign to prevent this but still illegal VOIP providers are active in the market. Both operators Etisalt DU has published lot of notices and warnings via media to educate people to stay away from illegal VOIP phone services. The development of information technology energized the telecommunication sector, in some cases the IT development helps the mobile companies to make more revenue, but some cases the IT development become a reason for their revenue lose also. Let me take the example of smart phones, since smart phones are very popular among the public, the revenue from the DATA usage has increased significantly, but in other ways the revenue from the calls has declined drastically as people has started to use messenger services with the help of mobile data internet. About DU- Profile Emirates Integrated Telecommunication Company Emirates Integrated Telecommunications Company (EITC) is a telecommunications company in the United Arab Emirates. Although Emirates Integrated Telecommunications Company is its legal name, it was commercially rebranded as DU in February 2006.They started their operation in 2006 with mobile and fixed telephone services, broadband connectivity and IPTV services to individuals, homes and businesses. The company, has invested AED 1.7 billion in 2011 and has a total of 4,993,600 active mobile subscribers, 623,7000 fixed-line telephony subscribers and 127,000 broadband internet subscribers. By end beginning of 2012 DU have employee strength of 2000 peoples from 60 nationalities. As a part of their commitment with UAE government they have employed a lot of UAE nationals in their senior level posts. Since Etisalat was the one and only service provider in UAE for long time, and there was lot of complaints among the public about the call rates of Etisalat while compare to the other operators in other regions, DU has got a warm welcome to the UAE telecom sector, they have faced lot of technical issues in the starting era, Etisalat was so established in the market as they are the one who started the telecommunication in UAE with fixed telephone lines, it was a challenge for DU to break the barriers of an industry leader like Etisalat. During the beginning time DU has started with mobile phone services, fixed lines and internet, services, but their main focus was in mobile phone subscriptions, obviously the coverage of mobile network was an important concern, DU has started investing on new mobile towers and highly advanced equipments to overcome this issue. gradually they have started focusing on internet services providing as well as fixed telephones, By 2010 DU has become a prominent player in UAE telecom sector, DU has implemented a lot of new marketing strategies to grab the market share.e.g. Etisalat billing method for long time was 10 second billing and DU has started one second billing which clicked in the mind of the public as they start think about saving call costs. Due to the tight competition Etisalat also forced to reduce their call costs to protect their subscriptions. Year by year the gap between DU and their competitor become shorter, as of October 2012 DU has got a market share of 47.2%. In terms of revenue during the time of 2009 DU got a revenue growth by 35% to aed.5.3 billion, 2010 also considered as a robust year as DU achieved considerable milestones, in 2009 the net profit before royalty was 0.5 bi9llion and it had growth of 132% hence it reached in a level of 1.2 billion. As per the recent press release by DU regarding their financial result as of Q3-2012, DU got an increase in revenue by 12.9% year on year. In 2011 Q3 their revenue was 2.23 billion and as of October-2012 the revenue become 2.52 billion. In case of number of active mobile users DU has got an increase of 20.7%.in Q3 2011 it was 4,938,000 and Q3 2012 their active customer base become 5,960,700. They have achieved same level of growth in case of the number post-paid mobile users and fixed line users, broadband internet users etc. With more than five million subscribers, DU is now focusing on improvement the average minutes of use and average revenue per user. This ARPU rate was aed.113 in 2010 , DU has managed to make it as AED.119 in 2011. Growth in the revenue from internet is become a significant part of DU’ revenue. Based on the industry forecast and projections DU is expecting a rapid growth on the coming years. During 2011 year period DU has managed to reduce their overhead and reinforcing the operational controls. DU has made a significant reinvestment in 2011 which was aed.1.3 billion, they have added 1,275 new base stations, this has improved the network coverage of DU,and 3G data coverage also got very good improvement. In view of a shareholder, DU is a highly profit expecting company in coming years, as per the press release by DU by end of Q3 2012, they have made good control over the overheads. The published figures represents company’s ongoing focus on controlling costs and delivering shareholder values. The increase of overhead in Q2 –Q3 2012 is very tiny, Published financial data, 2009,2010,2011. An over view. Financial overview 2009. As per the financial documents published in end of 2009 , du has reached the mobile market share fof 32%.In terms of revenue growth DU has marked a growth of 35% ,in 2008 it was 3.9 billion and it touch 5.3 billion in 2009.Earning per share for DU share holders grew to aed.0.066 from Aed. 0.001 in 2008. DU has made a reinvestment of 2.4 billion in 2009. While compare to the year 2008 share holders equity has increased by 11% which raised from 2.5 billion to 2.79 billion. Earning before interest , tax, depreciation and amortization increased substantially to the DU’s highest level at AED.1.1. billion for 2009, up 185 from the previous year. Net profit before royalty reached aed.528.2 million, well growth than previous years. Financial overview – 2010 Year 2010 was a very significant year of DU, despite of economic uncertainty in UAE rest of the world DU has achieved a significant growth in terms of market share, gross profit etc. Net profit before royalty amplified by 132% which was a record in the region, in addition to this significant mild stone, DU received the confirmation from Federal Government about the royalty charge for 2010. This early determination from Federal ministry enabled them to plan their liability in terms of royalty payable to Government. As per the published figures by TRA DU has achieved market share of 40% by 2010. Since 2010 is a fourth year of operation this market share is a good achievement. Gross profit has increased from 3.5 billion to 4.6 billion. Financial overview – 2011 The year financial performances has led to the recommendation by the board of directors to purpose our first cash dividend of 1.5 fills per share for 2011. By end of 2001 DU has become the 46% share holder of UAE telecom industry, and subscription strength touched to 5 million, during this period the net net profit before royalty has grown rapidly, increased to aed. 1.8 billion in 2011 which is 48% increase year to year. During this year DU has marked a significant milestone in corporate governance, company has ranked number one in the recently rebalanced S P Hawkamah ESG (Environment Social Corporate Governance) pan arab index. Following chart shows the revenue growth of DU during the time of 2009-2010 period. About DU, a SWOT analysis Below SWOT analysis shows the overall picture of the organization’s current strengths, opportunities etc. STRENGTHSWEAKNESSES 1.A very good growth graph of last 5 years. 2.Highly advanced systems in telecommunication. 3.Good image among the public 4.Support from the Government 5.A strong chain of retail outlets 6.Recently started DU’s mobile WIFI internet 7.Very good plans for corporate sectors 8.Good business cooperation with mobile phone manufactures, Apple, Blackberry, Nokia etc. 9.Attractive plans for cooperate sector. 1.Lack of network coverage in some areas 2.Number of fixed phone subscribers are very less while compare to competitor. 3.DU doesn’t have any international operations which lead to high roaming charges in some regions. OPORTUNITIESTHREATS 1.High internet literacy level of people in UAE which leads to increase in internet usage. 2.Popularity of the smart phones, most of the people are opting smart phones with internet connections, which leads to the increase of data usages. 3.Increase in number of expatriates 4.People’s trend to use two or mobile phones at a time.1.Illegal VOIP phone services, this illegal phones are active in market, which decrease the revenue of DU in case of International calls 2.Pressure from the international telecom sector to allow more operators in the region. 3.Popularity of the messenger services, internet based messenger services which is possible via smart phones tend people to keep away to make calls, this reduce the income of DU in terms of local mobile calls. As per the above analysis DU has got a good path to proceed to the success, while comparing to the competitor DU have some disadvantages, but they got success to overcome this with their marketing strategies. While compare with the competitor DU have got more attractive data packages, and mobile hand set packages as they have managed to build good relationship with the mobile manufacturers which help them to implement more attractive packages. Since the smart phones are became a trend among the public usage of data packages are increasing and this can contribute more revenue in the coming years.