Etisalat Diversifies To Ensure Growth

On June 4 2013, Etisalat announced plans to launch its first cloud computing service in the UAE. The service, called 'Cloud Compute', distinguishes itself by offering a pay as you go model, easy to scale up or down depending on business needs. BMI believes Etisalat's plunge into the IT services sector will be crucial to the operator's ability to generate strong revenues and remain competitive over the long term.

Etisalat's Cloud Compute provides an on-demand subscription to a customisable selection of computing resources, which will include servers, storage, applications, and services. The service can be access on a shared, private or hybrid platform, and will be targeting the private, corporate, public and government sectors.

BMI expects to see strong growth in the cloud computing and managed services market over the next five years, with sales increasing from US$1.05bn in 2012 to US$2.14bn in 2017. Some of the major growth drivers for this sector are strong economic growth, government diversification away from hydrocarbon-based economies, development of smart cities, businesses' emphasis on efficiency improvement to lower costs and increase customer satisfaction, and investment in next generation networks (s ee 'Opportunities In The MENA Enterprise Solutions Market, February 11).

Strong Growth In IT
UAE IT Services Sales Versus Mobile Subscribers Forecast, 2010-2017

Compared to European markets, there is much more opportunity for Middle Eastern telecoms operators to move into cloud computing and IT services because there are only a handful of third party companies already providing these types of services. Telecoms operators are also in a good position to diversify into the managed services sector because they have already made huge investments in the necessary infrastructure, including large fibre-optic networks, data centres and links to a number of submarine cable systems.

Etisalat's rival, du, is ahead of the game, having already made a number of strategic partnerships since the beginning of 2013 to boost its managed services and M2M platforms, and target small and medium-sized enterprises (SMEs) (s ee 'Du's M2M Targets Key Verticals', March 20 and 'Du's Deal With Sam Tech Boosts Managed Services Portfolio', May 3). Partially due to its aggressive pursuit of the SME segment, du showed a remarkable 10.7% growth in total revenue for the year ending in March 2013. In comparison, Etisalat's revenues dropped by 1.6% for its UAE operations for the year ending in December 2012.

BMI believes that by offering SMEs an unintimidating option to begin using cloud computing services, Etisalat will be able to capitalise on the boom in the IT service sector and compensate for diminishing growth opportunities in the saturated mobile sector.

This article is tagged to:
Sector: Telecommunications
Geography: United Arab Emirates

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