The launch of Virgin Mobile UAE might change the UAE telecom landscape for the better by introducing competition; but only if it’s here to stay long enough.
In an interesting turn of events for the GCC telecom market, EITC (Emirates Integrated Telecommunications Company), the ‘parent company’ of Dubai-based telco du, has launched Virgin Mobile UAE (VMUAE) as its second mobile telecommunications brand.
Given the fact that Virgin Mobile is well-known globally as a leading MVNO, confusion went up several notches when the EITC statement positioned VMUAE as just a ‘brand’ and ‘not a MVNO’. Several questions instantly come to the fore. Is this yet another attempt by du to regain market share? Is the market positioning aimed at staying safe of the regulatory and licensing complications? For telco professionals who have been in the region for several years, EITC’s announcement also brought back memories of another Virgin Mobile venture: the brand’s ill-fated launch in Qatar in 2010.
In May 2010, Richard Branson, chairman of the UK-based Virgin Group, jet-skied into Doha for the launch ofVirgin Mobile Qatar over the network of Qatar Telecom (Qtel) as a new mobile service brand. Just a year later, in June 2011, Qatar's telecommunications regulator ordered Qatar Qtel to close all its Virgin Mobile-branded services in the country. That decision came after Vodafone Qatar threatened to take legal action against ictQatar for allowing the partnership. Vodafone Qatar claimed Virgin's foray into the country constituted a third service provider in Qatar and so violated the terms of Vodafone’s licence.
The Qatar incident underscored just how complicated regulation around MVNOs can be. The challenge for operators and regulators is that the definition of MVNO is open to interpretation.
It is perhaps telling that Virgin Mobile has not mentioned the planned UAE launch of its brand on its own website; the company is no doubt keen to tread carefully and let EITC, or du, take the lead.
The positioning of VM UAE as a brand and not an MVNO still remains unclear though. While in a few GCC countries such as Oman and Saudi Arabia, local telecom regulators offered dedicated licences to encourage the introduction of MVNOs. However, EITC's announcement stressed that Virgin Mobile will only run as a brand alongside du. In contrast, while Virgin Mobile mostly carries out business as an MVNO.
Masarweh says: “MVNOs have many operating models depending on how many components they actually manage across the ‘service provider’ value chain. In this particular case, and according to information released in the media, VM is expected to operate under the lightest model, which is a branded reseller.”
Riad Hartani, a partner at Xona Partners believes the ‘brand-licensing partnership’ of VM-EITC is ‘mostly a marketing strategy to address new customer segments without increasing CAPEX/OPEX’.
On a positive note, IDC expects the launch of Virgin Mobile to help EITC address the issue of declining profits caused by intensifying competition and growing customer expectations. Within the UAE, frequent discussions have taken place about the need for the Telecoms Regulatory Authority (TRA) to either license a third mobile operator or outline regulations that would allow for the establishment of a mobile virtual network operator (MVNO). Virgin Mobile has made it clear that its interest lies exclusively in the youth segment, and the brand is viewed positively in this space.
"The entrance of a new player in the UAE telecom market is long overdue," says Paul Black, director of telecommunications, media, and IoT at IDC Middle East, Africa, and Turkey. "Given the country's large youth population and Virgin Mobile's international experience in actively targeting this segment, the potential for the company's success is high. However, EITC must ensure that the du brand does not become diluted as a result of direct competition from within its own stable. One option would be for du to leave the youth segment to Virgin Mobile, allowing it to focus more intently on attracting customers with a higher average spend."
Tareq Masarweh, senior consultant, MEA at Ovum seconds the opinion. He draws attention to the time in 2016 when Osman Sultan had highlighted an opportunity for du to recover losses by trying to re-gain share and grow in the prepaid consumer segment, a segment that still has potential in the UAE.
Black further adds that this development will further prompt Etisalat to improve its digital services offerings to attract the youth segment of the market. He says: “As long as the growing digital service needs of this population are met, both Virgin Mobile and the telecom consumers of the UAE stand to benefit greatly going forward.” Masarweh agrees that a market like the UAE could use the extra competition and innovation a player like Virgin could bring to the wireless segment. “The prepaid segment constitutes a large portion of the country's subscribers and has a lot of room to improve, in terms of proposition and profitability.”
Will du and VM UAE end up competing against one another? Analysts are hopeful that the two brands will possibly target different segments of the UAE customer base; while VM can aim at the youths and tourists, given its brand legacy and global identity, du can shift its focus to the high end consumer segment. With reports suggesting that the ARPU of Etisalat continues to be higher than du in the UAE; EITC might be hoping to even-out the scores with Etisalat by allowing du to be more focussed on high ARPU segments.
The launch of VM UAE can be considered a bold move by EITC to adapt to the fast-evolving market landscape. Given there are no objections to the venture from the regulators and competitors in the coming days, this might be a good news for the UAE customers who can expect to receive better customer experience as well as more variety in the digital services they get from the operators.
But what if the Qtel-VM episode gets repeated? Let’s not forget that Etisalat is even a stronger contender in the UAE market than Vodafone was in the Qatar market. No statement has been issued by the Abu Dhabi headquartered operator yet.
Some market experts even think that the whole launch event might just be a move of EITC to test the waters and see how the market responds; and any next development would come only later. The latest marketing development from Virgin Mobile UAE has been a launch of a youth-centric Valentine’s Day campaign.
VM UAE could become a test-case in the application of branded reseller agreements in the region and help redraw the definition of what an MVNO is (or isn’t). Given that a full-fledged MVNO can gain up to 10% of the consumer market in a given country, the Virgin brand – even applied as a branded reseller agreement – could help win significant business for EITC, especially given the UAE’s large population of young people.
But past experiences in other countries also show that “branded reseller agreements” and MVNOs can be fraught with legal issues. Telco executives from across the region will no doubt watch the development of Virgin Mobile UAE with close interest.