Rise of the UAE's telecoms industry



The UAE recently celebrated its 40th anniversary - an occasion that should also be cause for cheer among local telecoms executives.

In the 1970s, telecoms subscribers were measured in the thousands, rather than the millions of today.

Back when the Union was formed, there were of course no mobile telephones - and only the most privileged homes were connected by landline.

Today, the country boasts an advanced 4G wireless broadband network, along with one of world's highest mobile-subscriber rates.

Ray Hassan, the president of the telecoms infrastructure firm Ericsson in the Middle East, said that the handset of choice back in 1971 was an analogue phone with rotary dial. It was a far cry from the iPhones of today.

"There were a few tens of thousands of homes connected with a fixed-line analogue home phone. It was quite a privilege to have a telephone at that time," said Mr Hassan.

"Somewhere around the mid-1970s there were about 30,000 to 40,000 homes that were connected," he added.

The British company Cable & Wireless, which traces its history back to the 1860s, was one of the main telecoms providers when the UAE was formed in 1971.

Several other companies were also operating, before their amalgamation in 1976 under the Emirates Telecommunications Corporation, or 'Emirtel'.

In a clue to the scale of its operations, Emirtel opened a new telephone exchange in Ras Al Khaimah in April 1977. It had 2,500 lines, and replaced an older exchange that had a capacity of just 750 lines.

Mr Hassan said that most of the 40,000-odd landline phones in the 1970s would have been in the fledgling cities of Dubai and Abu Dhabi. But wooden telegraph poles also carried the network to more rural locations, he said.

"There was probably one household in the village that had a fixed-line phone," he said. "If you wanted to contact someone somewhere, you would arrange a time."

It was not until the summer of 1984 that Emirtel was renamed 'Etisalat', in a response to a decree that all state establishments must have Arabic names.

At the time, Ericsson was working on the digitisation of the nation's telephone network, a precursor to the modern technology of today.

"We've been in the region for almost 100 years, starting in Egypt," said Mr Hassan. "Our first activities [in the UAE] really started in the early 1980s, when we won a large contract with Etisalat to modernise the old analogue systems and introduce digital telephony."

Today, the UAE has one of the highest rates of mobile-phone use globally, with an average of two SIM cards per person. Etisalat launched its high-speed 4G mobile broadband network earlier this year, and its rival Du - which launched commercial services in 2007 - has boosted competition in the sector.

"The UAE as such is probably one of the most advanced and most highly developed markets in the world," said Mr Hassan. "We believe that a lot of the development in the country is directly linked to telecoms, broadband penetration and connectivity."

Other telecoms providers agreed. "The UAE was the first country in the Middle East to establish a mobile network in 1982," said Igor LePrince, the head of Middle East region at Nokia Siemens Networks.

"Undoubtedly, information and communication technologies are one of the key economic platforms for the UAE's economic growth," he added.

Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”

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A foster couple or family must:

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  • A single, divorced or widowed Muslim Emirati female, residing in the UAE may apply to foster a child if she is at least 30 years old and able to support the child financially
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Name: Hassan Mohsen Elhais

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