Introduction
The presented report is devoted to the peculiar competition between the two UAE telecommunication companies: Etisalat Group and Emirates Integrated Telecommunication Company that is alternatively called “du,” which is its brand name. The report presents the history of the development of the competition in the UAE telecommunication market, provides an overview of the two companies’ specifics, and describes their current position including the actions that they take to ensure their position in the market and their respective brands.
The latter aspect is specifically connected to their products and prices. These features of the UAE telecommunication market indicate that its current situation can be described as an oligopolistic competition. However, it appears that the competition is going to grow acuter since du proceeds to expand its share and both companies attempt to differentiate their products to the point when they become non-substitutable, which has the potential of changing the type of the competition to the monopolistic one (Mankiw 331-335).
Historical Development of Events
Etisalat has been providing “the complete range” of telecom services to the UAE since 1976, and it has been quite successful in developing both technologically and economically (“Etisalat Group” par. 1). For example, the company was proclaimed the most powerful one in the UAE in 2012 (“Etisalat Named Most Powerful Company in UAE” par. 1).
Since 2004, however, Etisalat has been operating internationally, and made notable achievements on the global market as well since it was proclaimed as the second largest company in the telecom market of the Gulf Cooperation Council in 2010 (Amine and Khan 95). 60% of the company’s shares are held by the UAE government, which makes this shareholder the only one that possesses over 5% of Etisalat; the rest of the owners are public (“Investor Relations” par. 1, 6). In the UAE market, Etisalat remained the monopolist until 2006.
In 2006, the second UAE telecom company was created, and soon it was rebranded to go by the name of du (“Who we are” par. 1). It is similarly owned primarily by the UAE Government that holds 40% of its shares (“Shareholders structure” par. 1). The company witnessed great success as within one year since its launch, in 2007, du’s share in the UAE market rose from 0% to 28% (Amine and Khan 76).
Nowadays, Etisalat has “169 million subscribers in 19 countries across the Middle East, Asia and Africa” (“Company Profile” par. 2). Du does not compete with Etisalat anywhere outside the UAE market, but it has been expanding in it since the creation of the company. As a result, in 2015, about 50% of the mobile phone market share belonged to du (Amine and Khan 76; “Who we are” par. 1-3).
Currently, both companies exist in a state of awkward balance that is defined by the geographic distribution of the UAE areas between them. Indeed, the temporary decision that helps du and Etisalat to divide the market consists in segmenting it geographically, that is providing the services to different areas of the UAE (El Gazzar par. 2). However, it is apparent that du is not satisfied with the current situation as it is going to offer home services to customers outside of its regions (El Gazzar par. 1-2). Apparently, both companies consider the UAE market to be very attractive and plan to maintain and expand their shares in it.
The Market
The telecom market is a very fast-developing segment nowadays. Apart from that, it is highly dependent on the new technologies, very innovative, and offers diversified products that are often affected by trends and fashion (Amine and Khan 75). All of these aspects make telecom market a competitive business segment, and the UAE is not exempt from this competition despite the limited number of its telecommunication players. It is apparent that the two companies now compete for their shares in the attractive market of the UAE telecommunication services, which forces them to adjust their strategies, create unique brands, and work to stay competitive.
Here, the specifics of the UAE telecom market should be mentioned. As an oil- and gas-exporting country, it can be defined as the market where the average household income is relatively high. At the same time, the UAE market is characterized by the fast development of technology and interest in technology exhibited by the population. According to Etisalat data, Abu Dhabi was the first capital of the world to become fully connected, which proves that the UAE are exceptionally interested in technological development (“Company Profile” par. 4).
As a result, modern UAE citizens are very technologically savvy, and telecom services are a significant part of their life. It is apparent that they prefer varied, diversified, high-quality and possibly fashionable services (Amine and Khan 75). Finally, it is noteworthy that the population of the country is large and diverse: over 5 million people with 80% of them being expatriates from varied backgrounds (“The World Factbook: The UAE” par. 3). To sum up, the UAE telecom market is attractive but challenging, and all of these specifics have defined the strategies of du and Etisalat as well as their branding activities, products and prices.
Oligopoly
The situation in the UAE telecommunication market could be described as an oligopoly since the number of the competitors is too small for the competition to become acuter while the products that are offered by them are essentially the same (Mankiw 351). According to Mankiw, oligopolies “are best off when they cooperate and act as a monopolist” (348).
It can be suggested that the geographical division between the companies had been a cooperation, which allowed both of them to maintain a certain share of the market. However, both companies work to distinguish themselves with the help of their brand, specific products, and prices, and the recent actions of du appear to indicate that it intends to move beyond the geographical division (El Gazzar par. 2). It might be suggested that Etisalat and du plan to change the current type of competition.
In this report, it is suggested that the kind of the competition between Etisalat and du is the oligopolistic one, which will be illustrated through the similarities in the companies’ strategies. At the same time, the differences that the companies attempt to foster seem to demonstrate their decision to further compete for the market and possibly, try to develop a kind of monopolistic competition; that is, a competition between the providers of different, non-substitutable products (Mankiw 331). Such a suggestion will be developed through the demonstration of the differences between the products of the companies, but it is important to remember that this assumption is very tentative.
Branding Differences
Branding is a complex process that basically includes the creation of the image and the identity of a company, which seeks to be distinguished among the other, generic organizations (Mankiw 342). For Etisalat and du, the option of not standing out does not truly exist since the brand is among the ways of helping them to distinguish their products and, therefore, attain a larger market share. It should be pointed out that brand is not a difference that “does not really exist” (Mankiw 342). In other words, the loyalty that branding attempts to foster in customers is not meaningless, even though it may be irrational and fashion-induced.
On the contrary, the brand acts as a guarantee of the quality that the company desires to be associated with. It is a means of providing the incentive for the customers to buy and trust the company and for the companies to correspond to this trust. The brand communicates the company’s promise and distinguishes its product from that of potential substitutes. To sum up, branding is supposed to provide benefits both for the company and the customers. In fact, a strong brand is among the key tools of a monopolistic competitor (Mankiw 343). As a result, it is not surprising that the two UAE telecom companies attempt to create their distinct brands. Let us analyze the promises they make to their customers.
The brands of the two organizations were produced by specialized agencies. Etisalat brand was developed by the Garden branding agency that followed the company throughout its development from the monopolist one-country enterprise to the international one. When creating the current brand, the branding agency sought to emphasize the experience and subsequent expertise that Etisalat has, which is supposed to inspire trust.
The Garden team wanted to make the brand appear elegant and mature. Apart from that, the brand of Etisalat is explicitly connected to Koran and uses the colors of Islam, which seems to be a logical decision in an Islamic country (“Etisalat Brand” par. 1-4; Temporal 3-7). To sum up, Etisalat’s brand and image appear to appeal to the loyalty of customers by emphasizing its trustworthiness that has been demonstrated for several decades.
Turquoise Brand designed the brand of du, which brought the company the award for the “Best Brand at the Telecoms World Awards Middle East” (“Du Brand” par. 7). Turquoise Brand reports attempting to create something fresh and new, which would correspond to the fact that du was an entrant in the market that no one was waiting for.
Turquoise Brand team wanted to make du welcome and attractive, which defined the warm and vibrant colors. The slogan “du: something better” was the key idea of the brand (“Du Brand” par. 4). At the same time, Turquoise Brand sought to demonstrate that du was a facilitator, a company that makes life simpler for its customers, which defined the minimalistic designs. To sum up, the whole brand and identity of du emphasize its role as an alternative to Etisalat while also indicating that this company is aimed at making the life of its customers better and easier.
Services and Prices
All the activities, policies, shops, and products of a company are typically in line with its brand an image, and it appears that the same is true for Etisalat and du. Apart from that, naturally, they are governed by the rules of the market, which means that the demands of the customers define their offers (Mankiw 75).
Both du and Etisalat emphasize the need for the promotion of technology and have been consciously investing in its development. In fact, the success of du is at least partially the result of offering a technologically advanced product (new high-bandwidth mobile applications) that was its trademark and unique product until 2011 (Amine and Khan 76).
Similarly, Etisalat has always developed technologies, and at the moment, it works on the “fifth generation mobile broadband” (“Company Profile” par. 4). It is apparent that this technological race is the result of the fact that the market, for which the companies compete, is technologically savvy and interested in best-quality products. Apart from that, the image of a reputable provide requires high-quality products from Etisalat. Finally, the image of a facilitator also corresponds to better-quality and newer telecom services.
As it would be expected from an oligopolistic market, the specifics of the products are largely similar for both companies. The analysis of the “bundles” of services of the companies, which have been summed up by Samoglou, shows that the principles of products offers and their pricing are mostly the same for both companies (par. 1-15). Etisalat an du offer either two services (phone and broadband) or three (plus television) in a bundle, which is undoubtedly caused by the demand in the market. The price obviously depends on the number of services in the bundle and the speed offered by the company.
Unfortunately, the speed options proposed by Etisalat and du are not exactly the same, which makes the comparison more difficult. For example, there are three speed options for du’s “Talk Surf and Watch” that include 16, 24, and 100 Mbps while those for Etisalat eLife Triple Play are 10, 20, 100, 300, 500 Mbps. Apart from that, du offers one and the same number of television channels while Etisalat plans are defined by the type of TV channels that the customer is going to purchase. For example, the cheapest plan includes only basic channels while a more advanced (and expensive) plan may include Sport or Movies channels. Also, the highest speed options of Etisalat come together with Premium TV, which is understandable since these plans are exceptionally expensive.
Despite the fact that the differences in the plans make them somewhat incompatible, it can be pointed out that the prices of Etisalat include higher numbers. For example, the relatively compatible plan of 100mbps is Dh180 cheaper when the du option is concerned. However, the TV channel package that comes with these plans is likely to be different. For Etisalat, it is the Premium TV; for du, it is their usual 31-channel TV.
The analysis of these services allows suggesting a couple of conclusions about the companies’ strategies and their positioning in the market. First of all, Etisalat offers a wider variety of services due to the way it splits the various TV channel offers. Secondly, this company suggests more expensive and, therefore, more exclusive options. Du, on the other hand, does not attempt to provide customers with a Dh5000 service bundle, but it offers similarly diversified and technologically advanced service with several options that are aimed at lower-income customers and those who are willing to acquire a less expensive plan.
These two different strategies correspond to the companies’ images. Etisalat appears to be a more mature and accomplished company that offers more upscale service while du is a cheaper but equally high-quality alternative that is easier to acquire. Apart from that, these strategies illustrate the development of the competition between the companies and their current positioning in the UAE market.
The Development of Competition
It had been stated that prior to du’s introduction Etisalat tended to take the customers for granted, but this policy had to change in order to help the company maintain its influence (Al Gergawi par. 7). The former monopolist Etisalat had to decide how to preserve its share at the UAE market and chose to position its product as a more expensive and elite one rather than attempt to lower the price (Al Gergawi par. 7; George-Cosh par. 7). Du, on the other hand, was an entrant to the market and chose to differentiate its product with the help of technology and lower price, which undoubtedly had helped it to win its share of the UAE telecom service industry. These positioning strategies are the logical result of the development of the competition in the UAE telecom market.
It also can be suggested that the introduction of competition in the market helped it to become more diversified and customer-friendly, and the UAE population must have benefited from this change. However, it should be pointed out that both Etisalat and du have also been noted for their rather aggressive promotion methods. In particular, customers have reported being aggressively persuaded into purchasing the bundles of products, which has lowered their satisfaction with the service and caused them stress (Samoglou par. 21).
Such a situation can be dismissed as employees’ fault, but it also can be interpreted as an indication to the fact that the telecom market in the UAE is still lacking competition, which may affect customer service in a negative way. Moreover, there exists some evidence which may indicate that the UAE Government intends to foster competition between the two companies. In particular, du’s initiative of leaving the “designated” regions of the UAE appears to be supported by the Government (El Gazzar par. 3-15). It can be cautiously implied that in the future the competition between the two companies will become tenser, which is bound to result in better-quality products and customer service.
Conclusion
The present report analyses both similarities and differences between the two UAE telecom companies, and it can suggest the following conclusions. The current situation in the UAE telecommunication market would be best defined by the word “oligopoly.” It is proved by the exceptionally small number of the competitors and the fact that their products are mostly substitutable. Similarly, the geographical division of the UAE areas between the organizations seems to remind one of a classic oligopolistic cooperation that helps the players to enjoy the benefits of a monopoly.
However, monopolistic markets are not very consumer-friendly. The lack of competition in the market appears to have attracted the attention of the Government that attempts to change the situation. Apart from that, the companies themselves seem to be interested in acquiring greater shares of the market. To this end, they work to differentiate their products, and the development of the companies’ brands as well as their intention to break the geographic cooperation might indicate the beginning of a monopolistic competition between them that is bound to be beneficial for the population of the UAE.
Works Cited
Al Gergawi, Mishaal. “How du made etisalat great”. Gulf News. 2009. Web.
Amine, Lyn Suzanne, and Golam Mostafa Khan. “Saudi Telecom: An Example Of Accelerated Internationalization”. Journal of Islamic Marketing 5.1 (2014): 71-96. Emerald.
“Company Profile.” Etisalat. 2015.
“Du Brand.” Turquoise Brand. Turquoise Brand Limited Incorporated. 2015. Web.
El Gazzar, Shereen. “Du and Etisalat go head to head for fixed-line customers”. The National. 2015. Web.
“Etisalat Brand.” Garden. Garden Branding Agency. n.d. Web.
“Etisalat Group.” Abu Dhabi Securities Exchange. Abu Dhabi Securities Exchange, 2015.
“Etisalat Named Most Powerful Company in UAE.” Khaleej Times. 2012. Web.
George-Cosh, David. “Competition forces change of strategy in Etisalat”. The National, 2010. Web.
“Investor Relations.” Etisalat. Etisalat, 2015. Web.
Mankiw, N. Gregory. Principles of Economics. Mason, OH: Cengage Learning, 2014. Print.
Samoglou, Emmanuel. “Etisalat and du customers paying the price for unwanted TV.” The National, 2015. Web.
“Shareholders structure.” Du.ae. EITC, 2015. Web.
Temporal, Paul. Islamic Branding And Marketing. Singapore: John Wiley & Sons, 2011. Print.
“The World Factbook: The UAE.” CIA. 2015. Web.
“Who we are.” Du.ae. EITC, 2015. Web.