Although privatization and deregulation efforts have been slow in the UAE, it has become the model for other Gulf States, especially as the government recognizes the need to expand investment opportunities to both foreign and domestic investors.  In order for the UAE to continue to be a regional and global player in the information technology industry it is imperative that ETISALAT be privatized.  Most other industries are either partially or fully liberalized. 

Background:
In 1971, the seven Trucial states in the Gulf region joined under a common government to establish the United Arab Emirates.  Five years later, in 1976, the Emirates Telecommunications Corporation (ETISALAT) came into being as the sole state-owned telecommunications provider.  The President and Chief Executive Officer of ETISALAT is Ali Salim Al Owais. The Minister of Communications, Ahmed Humaid al-Tayer, is ETISALAT’s Chairman which is representative of the lack of separation between the state and the telecommunications industry.  Expatriates and UAE nationals do hold key management positions in the organization. The mix of Emirians and expatriates in key management positions at ETISALAT reflects the government's awareness of the need to leverage foreign expertise

ETISALAT is one of the most profitable telecommunications organizations in the Gulf region, comprising almost 30 percent of market capitalization in the UAE, or approximately $27 billion.  The government owns 60 percent of ETISALAT while the remaining 40 percent is controlled by private investors.   The UAE officially opened a stock exchange (the Dubai Financial Market) on 26 March 2000; however, the organization is not listed.  Rather, ETISALAT is traded on what is known as the parallel or “grey” market.  For the foreseeable future, stock trading for ETISALAT will continue to operate on the floor of the UAE Central Bank (3) . A constant struggle persists between succumbing to capitalist interests and operating as a government entity.

Although private investors control 40 percent of ETISALAT, the government still completely dominates the telecommunications industry.  Prominent businessman and Chairman of the Bin Zayed Group, Shiekh Khaled bin Zayed, has noted, "It is difficult to compete with ETISALAT on the services they provide because they have the government’s support, the power, money, and infrastructure. It requires the government’s intervention to break this monopoly” (4).

The fixed line telephone system in the UAE was growing rapidly until the advent of cellular technology.  A drastic decrease in prices for cellular technology in 1996 thwarted the growth of fixed line telephones.   ETISALAT offers free use of the local telephone system, which has further increased domestic trade and commerce.  Current estimates suggest there are 20,207 international circuits and 209,675 local circuits available.
 

Although ETISALAT controls all telecommunications services numerous distributors sell mobile handsets.  The 12 primary providers are: Agrinde Trading Company, Al Guttaim Sons Company, Al Futtaim Telecom, Al Sayegh Brother, Central Trading Company, Dafoos Fire Protection Establishment, Juma Al-Majid, Jumbo Electronics, Motorola, New Medical Centre, Siemens AG, and Tele Tec. 

The United Arab Emirates is by no means unique in its monopolistic approach to telecommunications. The following chart identifies other GCC countries, the primary cellular service provider, as well as the number of subscribers:
 

Cable television access is also controlled by ETISALAT.  It recently started offering pay-per-view movies and is developing a children’s channel and a documentary channel.  In the near-term, ETISALAT intends to offer an interactive multimedia experience for subscribers in the Emirates.  Currently, there are 78 cable television channels, many of which are the same as in the United States (MTV, Nickelodeon, TV Land, and CNN). This service however will only be available to 20,000 homes initially in the two most prominent states of Dubai and Abu Dhabi. Click here to view the intended coverage areas. 
 

ETISALAT has actually been quite succesful in keeping up with modern technology standards which will enable it to further advance its goals of economic diversification.  Companies and businesses from around the globe will be increasingly drawn to the UAE for its strong telecommunications infrastructure and lack of significant barriers to trade and investment.

As a member of the World Trade Organization (WTO) it is mandatory the UAE privatizes its telecommunication activities to allow for competition.  The Crown Prince Sheikh Mohammed bin Rashid al-Maktoum seems supportive of the idea and has been cited as saying that the government was currently performing a feasibility study for licensing private ISPs.  He believes that it will boost competition and put an end to the monopoly (23).  Definitive plans have not yet been made with regards to the privatization of telecommunications.  For futher information on privatization efforts please refer to Transborder Data Flows.

In order for the UAE to continue to attract foreign business and compete both regionally and locally it is imperative that privatization efforts continue.   Dissension with the services provided by ETISALAT (to include price, quality, and quantity) will ultimately negatively affect the attraction of foreign investment. 
 

The Emirians however feel very differently.  Even though GSM prices were reduced, the cost of other telecommunications services remains severely inflated.  A volatile exchange on the Internet regarding pricing and services offered by ETISALAT can be found by clicking here.   The people are unhappy and are beginning to voice their complaints..  This will probably not have a significant effect on pricing though. It is still more expensive for an individual residing in the UAE to dial directly into an Internet server in a neighboring country than it is to pay ETISALAT's fees.