This record is a partial extract of the original cable. The full text of the original cable is not available.

C O N F I D E N T I A L SECTION 01 OF 02 ABU DHABI 000046 
 
SIPDIS 
 
STATE FOR EB/TPP/BTA 
STATE FOR NEA, NEA/ARPI 
STATE PASS USTR FOR DOUG BELL, SHAUN DONNELLY 
 
E.O. 12958: DECL: 01/04/2016 
TAGS: ETRD ECON EFIN TINT AE
SUBJECT: UAE RETAINS CONTROL OF TELECOM SECTOR 
 
REF: 2005 DUBAI 1520 
 
Classified By: Ambassador Michele J. Sison for reasons 1.5 b and c. 
 
¶1. (SBU) Summary.  Recent decisions by the UAE's 
Telecommunications Regulatory Authority (TRA) indicate the 
UAEG intends to maintain its control over the telecom market 
for the short and mid-term, despite the UAE's WTO obligations 
to liberalize.  In December of 2005, TRA announced the name 
of the second telecommunications operator, which will be a 
government-owned company.  On December 28th, Etisalat -- the 
state-owned telecommunications operator -- raided and 
shut-down unlicensed Voice over Internet Protocol vendors in 
the northern Emirate of Ras al-Khaimah.  End summary. 
 
The Second Telecom Company, Also State-Owned 
-------------------------------------------- 
 
¶2. (SBU) The company that was granted the second UAE 
telecommunications license, Emirates Integrated 
Telecommunication Company (EITC), is expected to start 
commercial operations by the middle of 2006.  This new 
operator will offer mobile services, fixed phone lines, and 
Internet access.  High expectations for the long-anticipated 
launch of a second telecom company are mitigated by the fact 
that this company is UAEG-owned.  The UAEG owns 50 percent of 
the capital of EITC, and Mubadala Development Company and 
Emirates Communication and Technology each own 25 percent of 
EITC.  An official at Mubadala told econoff on December 24th 
that the three owners will reduce their total share ownership 
so that EITC can offer 20 percent of the company's capital to 
the public via an IPO.  He did not know when the IPO would be 
offered, but speculated that it would be within a few months 
of EITC commencing operations. 
 
¶3. (SBU) Press articles have noted that industry experts are 
concerned that a second UAEG-owned telecom operator will not 
lead to increased competition in the market.  In September 
2005, the UAE's Telecommunications Regulatory Authority (TRA) 
announced it will control the price of services of both 
telecom operators.  UAEG officials maintain that the two 
companies will compete, but with price controls in place, it 
is not clear how.  In a December 12th article in the Khaleej 
Times, Sultan bin Saeed al Mansouri, the UAE Minister of 
Communications and chairman of the UAE Supreme Committee for 
the Supervision of the Telecommunications Sector, said, "This 
new license affirms the UAE's intention to introduce 
competition in the telecom sector and spare no effort to 
develop the sector." 
 
Etisalat Shuts Down Unlicensed Competition 
------------------------------------------ 
 
¶4. (C) On December 28, the national telecom company Etisalat 
shuttered the operations of a group of mainly south Asians in 
the northern Emirate of Ras al-Khaimah who were selling 
access to Voice over Internet Protocol (VoIP) technology. 
(VoIP services enable routing of voice conversations over the 
Internet, and Etisalat blocks internet sites -- such as Skype 
-- that provide this access.)  Customers were paying a 
nominal fee to make international phone calls, skirting 
Etisalat,s telecommunications monopoly and significantly 
higher rates.  Colonel Abdullah Hamis Al Hadidi of the Ras 
al-Khaimah Police Department (RAKPD) confirmed to ConGen 
PolEconoff that Etisalat confiscated the technology and shut 
the operation down.  Al Hadidi denied press claims that 
arrests were made but said RAKPD &went along with 
Etisalat.8  According to Al Hadidi, the unlicensed 
commercial activity of this group was against Etisalat's 
regulations.  Etisalat has not responded to inquiries from 
post.  (Note: In September of 2005, local press reported that 
TRA was considering allowing VoIP services in 2006, once the 
second telecom operator entered the market.  According to 
Mohammed al-Ghanim, Director General of TRA, as of January 
3rd TRA has not decided whether it will permit the use and 
sale of this service in the UAE.) 
 
Comment 
------- 
 
¶5. (C) Consulate contacts had long-speculated that Dubai's 
TECOM (a company owned by the Government of Dubai that 
provides the telecommunications support to businesses in 
Dubai Internet and Media Cities and to some freehold 
residential developments in Dubai) would be granted the 
second telecom license (reftel).  The surprising announcement 
of a second UAEG-owned telecommunications company as the 
long-awaited "competitor" to Etisalat is a disappointment. 
This decision -- coupled with Etisalat's strong action 
against the unlicensed VoIP vendors -- indicates the UAEG is 
continuing its policy of retaining control of the telecom 
sector. 
SISON