TECH SAVVY

UAE, Dubai 2013 | ICT | REVIEW: ICT

With a reputation as an ICT hub in the UAE and beyond, companies operating in Dubai's free zones and the local market prepare for even faster growth.

As one of the most advanced markets in the Arab world, the UAE's ICT sector is forecast to register double-digit growth in 2013. With its impressive mobile penetration rates of over 200% and state-of-the-art technological infrastructure, Dubai in particular is expected to both benefit from and participate in increased activity in ICT in the Middle East and beyond. Although the overall number of employees in the sector has decreased since a peak in 2009, the level of Emiratization has steadily increased; in 2012, 40% of the sector's 7,961 employees were Emiratis. Contributing 5% of the UAE's overall GDP, the ICT sector continues to play an important role in the national economy.

According to the Telecommunications Regulatory Authority (TRA), the UAE ranked second among Arab states and 25th globally in terms of network readiness, according to a study issued by the World Economic Forum. Success in the ICT arena, and with internet services specifically, is largely a result of heavy government investment and support over past years, with AED7.6 billion and AED6.34 billion injected into the sector in 2011 and 2012, respectively.

Having recorded growth of 15% in 2012, the UAE's ICT industry is expected to continue delivering strong results. Analysts project growth to hit 22.3% in 2013, largely the result of increased activity taking place at Dubai Internet City (DIC), where multinational technology corporations such as LinkedIn and Facebook are based, and Dubai Media City (DMC), a tax-free zone designed to boost the UAE's media footprint.

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Although fixed-line telephony has long been experiencing a decline in popularity, Dubai's main mobile providers and infrastructure are fueling high penetration rates and sparking innovation in terms of internet service and smartphone technology. Etisalat and du are the two largest players in the market, with the former occupying a market share of 51% in late 2012. “Smartphones will take over very soon in Dubai, with both du and Etisalat striving to be at the forefront of technology," Victoria Strand, Vice-President & Head of GCC and Pakistan, Ericsson, told TBY. “And if customers have smartphones, it makes sense for providers to offer better bandwidth, and if you have better bandwidth, it makes sense to have a smartphone."

According to statistics released by the TRA, the number of people with mobile subscriptions in the UAE far outnumbers both internet and fixed-line users, with 14.6 million SIM cards—a penetration rate of nearly 180%—registered as of May 2013. Of mobile users, the vast majority, 12.8 million people, are subscribed to pre-paid services. In terms of market share, Etisalat boasted just over 7 million mobile phone subscribers at the end of 2012, while du registered around 6.5 million. Demonstrating its attractiveness to new subscribers, du signed up 1.2 million of the 2 million new GSM subscribers in 2012. Mobile services generated AED20.5 billion in revenue over the year, an increase of 2.6% compared to 2011.

Meanwhile, there are 2.04 million fixed-line subscriptions in the country, representing approximately 25% of the population. This means that nearly half of the households in the UAE have fixed-line telephone connections, with 95% of them using Etisalat services and the remaining signed up to local telephony provider du. According to a survey conducted by the TRA, of those that do not have fixed-line phones, 73% consider it an unnecessary service, with 67% of them preferring mobile phones. Meanwhile, the survey reported that only 11% of non-fixed-line users intend to subscribe to land services in the next six months. The total revenue generated by the fixed-line segment reached AED2.7 billion in 2012, down marginally on the previous year.

INTERNET FEVER

In terms of subscriptions, the number of broadband and dial-up internet users reached 1 million in May 2013. However, at a penetration rate of just 12%, it is clear that UAE residents prefer to access the web via smartphone or another mobile device. Nevertheless, fixed-line internet use raked in revenues of AED3.8 billion in 2012, a figure slightly above that of the previous year. This could be attributed to the rising number of internet users subscribing to fiber-optic technology, a figure that grew by 37.2% between December 2011 and December 2012.

As a hub for innovation in a variety of IT-related segments, DIC is the largest ICT business park in the Middle East and the epicenter of the Emirate's prosperous technology ecosystem. DIC has also played an instrumental role in transforming Dubai's vision of becoming a knowledge-based economy into a reality. Established in 2000, the city is home to dozens of multinationals, hundreds of SMEs, and many smaller ICT companies that form vital links in the sector's supply chain. Currently, over 850 companies with over 10,000 workers are based in DIC, which covers an area of approximately 5 million sqm and features prime commercial office space. The zone saw 164 new companies register in 2012, in line with the overall annual growth trend of 15%.

As a testament to its consistent success, DIC has numerous projects in the pipeline for 2013. One is the In5 innovation hub concept, which Malek Sultan Al Malek, Managing Director of DIC, described in an interview with TBY. “In5 provides infrastructure, support and a dynamic and engaging working environment for entrepreneurs," he said, adding “We offer mentoring, networking opportunities, and setup support to help them from the early stages of idea creation through to the commercial launch of a product or service." With solid support from the top down, new companies can expect smooth operations and open access to a variety of resources upon arrival in the city.

Multinational camera and imaging electronics manufacturer Canon has taken advantage of what Dubai's ICT sector offers by setting up its Middle East headquarters in DIC. “The headquarters at DIC allows us to build closer relationships with other renowned technology firms and explore alliances that will allow our office and consumer products to be integrated with the latest technology," Anurag Agarwal, Managing Director, Canon Middle East, explained to TBY.

IN THE MEDIA

Dubai's media industry attracted more than 250 new players in 2012. Analysts predict that continued growth in five key areas of the local media industry—such as digital publishing, internet advertising, and film and TV production—will keep the sector going strong in 2013. However, the local media segment faces challenges in the development of local talent, attracting funding, and battling piracy.

The heart of the industry is TECOM Media Cluster, which is home to DMC, Dubai Studio City, and the International Media Production Zone (IMPZ). Most of the newest additions in the zones are companies and freelance workers. Currently, there are more than 1,820 partners operating in the three centers, and occupancy levels reached 100%, 93%, and 70% for DMC, Dubai Studio City, and IMPZ, respectively, in 2012. In an interview with TBY, Mohammed Abdullah, Managing Director of DMC said, “The success of the Media Cluster is related to what Dubai can offer as a city when it comes to infrastructure." The cluster's 18,000 workers benefit from “accessibility and education, good government regulation, and aspects such as residency visas. That is an element that will encourage people to come and be here," he concluded. Some of the multinational media companies that have set up shop in DMC include the Financial Times, The Economist, and The Times. News agencies such as BBC World News, Bloomberg, CNN International, as well as documentary giant National Geographic, are also housed in DMC.

As more media business partners began to seek facilities such as workshops, warehouses, and studios, Dubai Studio City was established after extensive international and local research. Now, media enterprises have access to more parking and roads suitable for large trucks. Business has already increased 33% in 1H2013 as compared to the same period in 2012, and within the next two to five years, Dubai Studio City is aiming to increase a sufficient number of local industry workers to reduce its reliance on imported skills. “It is a significant collaboration because Dubai Studio City, the Dubai Film Commission, and the Dubai International Film Festival together make a tangible contribution to GDP within the context of Dubai's 2020 Vision," Jamal Al Sharif, Managing Director of Dubai Studio City, explained to TBY.

With the appropriate infrastructure in place and operations at numerous technology and media zones in full swing, Dubai is playing the lead role in the country and the region in terms of ICT. Attracting the right talent and boosting participation in ICT zones will ensure this success continues for years to come.