Etisalat SWOT and PESTLE Analysis

Strength

1. Huge subscriber base: Etisalat has a huge subscriber base of more than 142 million as of Dec 2017. Its Moroccan subsidiary, Maroc Telecom had a strong growth with 6% additions and overall 57 million subscribers in 2017. Etisalat UAE subscriber base witnessed a growth of 3% to 12.6 million subscribers in 2017.

2. Most valuable brand in MENA region: Etisalat has ranked as the most valuable brand in the Middle East and North Africa (MENA) region as per the report by Brand Finance, the world’s leading independent branded business valuation firm. Etisalat’s brand value has increased to USD 7,702 million in 2018 from USD 5,512 million in 2017 and USD 3,797 million in 2016 highlighting a persistent brand value growth. Initiatives such as innovative customer service driven strategy, adopting digital savvy marketplace, leadership position on the 5G revolution and leading sponsorships has contributed to the brand growth.

3. Diverse Operational Presence: Etisalat has access to high growth markets Middle East and Africa. Its subsidiary Maroc Telecom which is present across Morocco, Benin, Burkina Faso, CAR, CDI, Gabon, Mali, Mauritania and Togo and the Egyptian subsidiary, Etislat Misr, have delivered strong growth in recent years.

4. Strong credit rating: Etisalat has solid credit ratings (Aa3/AA-/A+) with low debt. It is also the top rated telecom player outside Asia and has the lowest debt amongst its peers like STC, Ooredoo, MTN, Bharti and Batelco.

5. Strong Relationship with the UAE Government: Etisalat was established by the UAE Federal Government Decree in 1976 and is UAE Federal Government is the major shareholder with over 60% stake. The majority of the Board of Directors, including the Chairman, are appointed by the government. It enjoys full support from the UAE government as highlighted by the Maroc Telecom acquisition in 2014.

Weakness

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Opportunity

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Threat

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Political

1. Strong government support from Emirates government: Etisalat which is being majorly owned by the UAE Federal Government with over 60% stake enjoys strong political support. The majority of the Board of Directors, including the Chairman, are appointed by the government. It enjoys full support from the UAE government as highlighted by the recent Maroc Telecom acquisition in 2014. The company’s government support is further highlighted by its partnership with government-supported accelerator, Dubai Future Accelerators (DFA) in 2018. This partnership is also a part of Etisalat Digital strategy to build a smart ecosystem and focus on technologies such as AI and Blockchain for smart city development.

2. Inefficiency in UAE telecom sector due to political interests: The UAE telecom markets have a duopoly structure with Etisalat and dU as the two players. Both the players are majorly government owned and the regulations have restricted the entry of new players. Further the royalty fees received from Etisalat and du have been a major revenue source for the UAE federal government with the companies paying 15 per cent of its annual revenues and 30 per cent of their net income as royalty. Though the duopoly has created overall inefficiency in the telecom sector, it is mutually beneficial for the government and the telecom companies in the short term. However in the future, if the regulations are eased and ban on services such as VoIP are lifted, it will greatly impact Etisalat.

Economic

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Social

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Technological

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Legal

1. Ban on VoIP services in UAE: UAE has impaired the use of Voice over Internet Protocol (VoIP) services, which compels residents to use alternatives like regular calls. The Telecommunications Regulatory Authority (TRA) clarifies that any applications or services of this kind must abide by the applicable regulatory framework of the nation and have maintained that the availability of VoIP is the choice of licensed telecommunication providers - du and Etisalat. The UAE and Saudi Arabia have been reluctant in embracing VoIP services primarily because of security concerns. However, KSA dissolved its ban on usage of Skype and WhatsApp in September 2018, but said it would continue to monitor VoIP activity. UAE telcos grave concerns over the usage of VoIP is fueled by steep slide in their voice and international calling businesses. Research by Ovum predicts that revenue in the UAE mobile segment will spike from $5.94 billion in 2017, to $6.73 billion in 2022, while mobile voice and SMS revenues will decline over the period, with the slump only mitigated by growth in revenue from non-SMS mobile data. Availability of VoIP calls would axe the telecom duopoly’s international call revenues. In a nation run by 80% of people who are expats, the international call business is definitely a large slice of the main pie. Etisalat’s 2017 annual report discloses the financial imperative with respect to the VoIP ban which says that VoIP would seriously cannibalize traditional mobile voice revenues. Despite having operations in 16 countries approximately 64% of Etisalat’s revenues come from domicile UAE markets.

2. Duopoly in the telecom sector in UAE: Under the Telecoms Law, the provision, operation or sale of any telecommunications services through a public telecommunications network in the UAE mandates a license from the TRA. Foreign ownership restrictions apply across the UAE and, generally, across all sectors. The two providers of public telecommunications services (‘Etisalat’, and ‘du’) are licensees of the TRA. TRA is not currently considering further licenses to wreck the duopoly. This cuts down competition and grants the licensees rope to offer services that maximize their profits.

3. Government ownership calls for interference from the bureaucracy: The licenses issued to Etisalat and du come with conditions such as filtering the content that flows through its networks that must comply with the priorities of the state. Significant content filtering takes place on issues that directly impact the state, foreign policy, religious beliefs and morality issues. There is a mutual discussion between TRA and the operators on which content to air (with reference to TRA policies on internet access), but there is no practice of publishing details on specific content-level filtering rationale. In this way bureaucracy highly regulates which content would be accessible by the public. There are no specific regulations mandating net neutrality in the UAE. Both of the public telecoms operators have offered plans with ‘zero-¬rating’ on certain social media applications, such as Facebook, WhatsApp or Twitter.

Environmental

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