The UAE’s two big phone companies hope to slash their initial capital expenditure on new developments by sharing the cost of installing landline and television services.
The chief executive of du estimates those savings could run to 60 per cent of its capital spending on infrastructure.
Sustainable City in Dubai will be the first development to offer consumers the ability to decide between du and Etisalat for internet, landline and TV.
In the past, consumers in the UAE were restricted to either Etisalat or du for those services (based on their geographic location and the provider that was available in their area).
Competition between the pair has opened up gradually for fixed line and internet, but not yet for lucrative TV services.
Now for the first time they will share the cost of connecting new developments, giving homeowners the power to choose between the operators.
“Every new development in the country will be approached by du and Etisalat through a framework,” Osman Sultan, du’s chief executive said yesterday. “Tenants will be able to choose between the two operators from day one.”
He said it would allow du to increase its efficiency as the cost of civil engineering work would be shared with Etisalat.
Etisalat declined to comment.
Du’s capital expenditure is expected to range between Dh1.8 billion and Dh2bn in 2016, up from Dh1.7bn last year. Most of the spending will be on infrastructure, according to Mr Sultan.
As profit margins for telecom operators are squeezed, operators around the globe are opting to share their infrastructure costs and boost cash flow by reducing their initial investments.
Voice revenue, in particular, has been dwindling with the increasing popularity of voice over internet protocol (VoIP) applications — weighing on the margins of phone companies worldwide.
It is not yet clear if the sharing of construction costs will result in a reduction in bills for consumers.
“If the two operators are sharing the costs of building networks in new housing and business developments, then each operator should incur less expense than if they were building alone,” said Dubai-based Matthew Reed, practice leader Middle East and Africa at the telecoms analysts Ovum.
“In principle, that saving could be passed on to customers in the form of lower prices. Although the extent to which that happens will depend on factors such as the intensity of competition, and regulation.”
Du, which ended Etisalat’s monopoly in 2007, posted a fourth quarter net profit of Dh462.4 million, a 9.8 per cent decline on a year earlier. The net profit was after royalty, or tax paid to the government.
The country’s second operator attributed the net profit decline to the 30.1 per cent rise in royalty fees. Du also cited the competitive market environment for the 2.4 per cent decline in its revenue, which reached Dh3.15bn during the fourth quarter.
Follow The National’s Business section on Twitter