1. May 2012 UAE Telecommunications Sector Developments & Indicators, 2008 – 2011 3 rd Annual Sector Review

2. Disclaimer 2 The TRA has compiled this report based on information received from industry, as well as from publicly reported information from other sources. While this report and the information contained herein is, to the best knowledge of the TRA, free from error, the TRA does not make any representations or warranties, either express or implied, as to the accuracy of the information. Furthermore, the TRA is not liable for any inaccuracies, errors or omissions in the information contained in this document or any harm that may be incurred in reliance thereon. If a reader wishes to use any of the information contained in this report as the basis for any decision, whether or not related to investment, the reader is obliged to determine the accuracy of the same. Furthermore, the information is provided for educational purposes only and is not intended to be a recommendation to take any particular course of action. UAE Telecommunications Sector Developments & Indicators (2008-2011), issued May 2012

3. Table of Contents 3 Page Introduction ………………………………………………………………………………….. Economic Summary ………………………………………………………………………… 4545 Industry Background …………………………………………………………………………6 Summary of Telecommunications Indicators …………………………………………….7 Sector Contribution to UAE Economy.……………………………………………………..8 TRA Regulatory Policy and Procedures ……………………………………………………9 UAE - Rankings..........................................................................................................15 Fixed Telephony Services ………………………...………………………………………..16 Mobile Services ………………………………………………………………………….…..21 International Voice Services …………………………………………………………….….29 Internet Services …………………………………………………………………………….31 Data Services ……………………………………………………………………………….40 Annex1 : Abbreviations & Acronyms ……………..……………………………………….41 Annex2 : Usage Indicators ……………..…………………………………………………..42 Annex3 : Sources and Acknowledgments..………………………………………………..43 Annex4 : Additional Charts from 2007-2010Review ……………………………………..44 UAE Telecommunications Sector Developments & Indicators (2008-2011), issued May 2012

4. 4 Introduction This report is the third TRA Annual Sector Review. It summaries the state of the fixed, mobile, and data telecommunications services in the United Arab Emirates (UAE) in terms of subscribers, penetration, revenues usage (traffic volumes) and Quality of Service for the years 2008 – 2011. The report also outlines the contribution of the telecommunications sector to the UAE economy. The data contained in this report is published in aggregate form only and statistics for individual licensees are not listed. The TRA has taken this step to protect the commercially sensitive information of each Licensee while recognising that for the purpose of transparency, sound regulatory practice, and to aid in the development of competition a publication of this nature is warranted. The TRA wishes to thank each of Emirates Telecommunications Corporation (Etisalat) and Emirates Integrated Telecommunications Company PJSC (du) for their respective contributions to this report through the regular supply of sector specific information and statistics to the TRA. UAE Telecommunications Sector Developments & Indicators (2008-2011), issued May 2012

5. Economic Summary Indicator2008200920102011 Population4,765,0005,066,0005,378,4605,883,653 Number of Households707,150747,817 790,822836,300 Population Growth (estimated rate (1) ) 6% GDP (billions)AED 934AED 941 (2) AED 880 (2) AED 959 (2) GDP Per CapitaAED 196,512AED 171,107 (2) AED 174,132 (2) AED 244,707 (2) The table below provides some high level metrics for the UAE economy: (1) The TRA has calculated the 6% population growth rate based on the Ministry of Economy and National Bureau of Statistics historical publications‏‏ (2) Estimated by IMF 1 US$= 3.6729011132 as of December 31,2011 XE - Universal Currency Converter‏ XE - Universal Currency Converter‏ Source: Ministry of Economy, TRA estimation,IMF 5 UAE Telecommunications Sector Developments & Indicators (2008-2011), issued May 2012

6. Industry Background The UAE telecommunications sector is currently served by two integrated telecommunications operators, Emirates Telecommunications Corporation (Etisalat) and Emirates Integrated Telecommunications Company PJSC (du). Competition in the UAE telecommunications sector started de facto in early 2007 when du, the second licensee, launched its mobile network services ending nearly 30 years of telecommunications monopoly by Etisalat. Today, the sector continues to be served by both Etisalat and du across multiple services as illustrated in the table below: LicenseeFixedMobileInternetLeased Lines Other data services Etisalat du 6 Several other niche licenses where granted by the TRA in 2010 and 2011, these are namely : Al Yah Satellite Services Company PJSC (2010), Al-Yah Advanced (2010), Star Satellite Communications (2010), Al-Maisan Satellite Communications (2011) and Media Zone Intaj FZ LLC(2011). The impact of providing these licenses on the market is yet to be seen and measured. Therefore all the data given in this report relates only to Etisalat and du, hence the term “licensee” in this report refers to either Etisalat or du. UAE Telecommunications Sector Developments & Indicators (2008-2011), issued May 2012

7. The table below sets out a range of main indicators specific to the UAE telecommunications sector for 2011: Source: 2011 Industry data, Indicator Fixed Telephony Service Mobile ServiceInternet Service Subscribers 1,825,49611,727,4011,324,059 Revenues(Billions, AED) 2.819.93.3 Voice Minutes (Billions) 4.124.3 Not applicable (N/A) ARPU (3) (Monthly, AED) 138148206 AMPU (4) (Monthly, Minutes) 198181N/A (3) ARPU : Calculated by dividing the total revenues for a given period by the average number of subscribers during such period (4) AMPU : Calculated by dividing the total minutes for a given period by the average number of subscribers during such period Summary of Main Telecommunications Indicators 7 UAE Telecommunications Sector Developments & Indicators (2008-2011), issued May 2012

8. The UAE Telecommunications Sector plays an extremely important role in the economy. It contributed nearly 4.9 % to UAE GDP and employed 10,798 persons in 2011. Sector Contribution to UAE Economy Contribution of UAE Telecommunications Sector to UAE GDP 20084.4% 20094.9% 20105.3% 20114.9% Telecommunications Industry Employees (1) Total investment represents Licensees’ cash flows used in investing activities. 8 Emiratization Total Investment (5) (AED, millions) Employees Contribution to GDP UAE Telecommunications Sector Developments & Indicators (2008-2011), issued May 2012

9. 9 TRA Regulatory Policy and Procedures - Consultations In years 2010 and 2011, the TRA conducted the following consultations: Public Consultation on Consultation Procedures Public Consultation on Consolidated Consumer Protection Regulation Public Consultation on specific matters concerning two of the TRA’s Regulatory Policies: Electronic Communications & Mobile Spam Policy (EC&MS Policy); and Privacy of Consumer Information Policy (PCI Policy). Public consultation on re-planning of 1800 MHz band for LTE Public consultation on the allocation of 2600 MHz band for LTE Consultation with Broadcasting operators regarding the introduction of digital audio broadcasting services. Public Consultation on the Adoption of Green ICT best practices in the UAE Consultation about the Regulatory "Registration Requirements for Mobile Consumers" (two consultations rounds one 2010 and the other in 2011) Consultation about “Voice over Internet Protocol Regulatory Policy” UAE Telecommunications Sector Developments & Indicators (2008-2011), issued May 2012

10. 10 TRA Regulatory Policy and Procedures - Regulatory Instruments issued or amended In years 2010 and 2011, the TRA issued or amended the following regulatory instruments: Determination No (1) of 2011 - Relevant Markets for Telecommunication Services and Related Products in the UAE Update on TRA Determination No 3 of 2010 - Mobile Site Sharing Charges Directive No (3) of 2011 - Twice Annual Audit of Billing Systems Determination No (2) of 2011 - Carrier Pre-Selection charges Cost Accounting, Accounting Separation and LRIC modeling Instructions V 3.1 A number of Determinations specifically related to the on-going project to secure competition in fixed-line services through bitstream access and network sharing National Emergency Plan for the Telecom Sector (NEP-T) Regulatory Policy on Non-Ionizing Radiation Limits for Telecommunications Networks Regulatory Policy regarding VoIP Regulatory Policy regarding Unsolicited Electronic Communications Directive No (5) of 2010 – Business Continuity Regulations of Mobile Telecommunications Apparatus – International Mobile Equipment Identity Numbers (2011) Directives No (6) & (7) of 2011 – Duplicate International Mobile Equipment Identity (IMEI) Regulatory Policy regarding Registration Requirements for Mobile Consumers (2011).emarat Arabic Domain Name Policy V 1.0.emarat Launch Policy V 1.0 13 policies related to.ae Domain Administration (amendment) UAE Telecommunications Sector Developments & Indicators (2008-2011), issued May 2012

11. 11 Consumer Complaints PCRs (Price Control Request) The TRA is required to assess all requests from UAE licensees to change retail prices. In 2011 the TRA received 451 price approval requests (PCRs) of which 90% where approved. In 2011 the TRA handled 980 complaints from business and residential consumers concerning Licensees. The increase in the number of complaints is a result of increased consumer awareness about the services provided by TRA to consumers. TRA Regulatory Policy and Procedures - Price Control and Consumer Complaints Number of PCRs Number of Complaints UAE Telecommunications Sector Developments & Indicators (2008-2011), issued May 2012

12. 12 Spectrum Allocations Processed TRA Regulatory Policy and Procedures - Spectrum Applications Number of Allocations The TRA is responsible for managing the radio spectrum in the UAE. UAE Telecommunications Sector Developments & Indicators (2008-2011), issued May 2012

13. 13 Public Lands Number of Application Received and processed TRA Regulatory Policy and Procedures - Public Lands Application Requests UAE Telecommunications Sector Developments & Indicators (2008-2011), issued May 2012

14. 14 TRA Regulatory Policy and Procedures - Numbering Applications Numbering Request & Application UAE Telecommunications Sector Developments & Indicators (2008-2011), issued May 2012

15. 15 UAE - Rankings (2010-2011) The UAE ranked 1st of all Arab states in the 2010-2011 Networked Readiness Index (NRI) study issued by the World Economic Forum, and 24th among all 138 countries assessed The UAE ranked overall 32nd in the world in the 2010 ICT Development Index (IDI). This was the highest of all GCC and Arab states in the index. The UAE ranked the highest of all GCC and Arab states in the IDI ICT Usage sub-index. Key findings include the following: -The UAE ranked 2 nd in the world in the fixed telephony sub-basket (1) -The UAE ranked 2 nd in the world for the mobile telephony sub-basket (2) -The UAE ranked 5 th in the world in the ICT Price Basket (3) (1)This measures the 2010 prices of fixed telephony as a percentage of GNI per capita (2) This measures the 2010 prices of mobile telephony as a percentage of GNI per capita (3) The ICT Price Basket measures the sum of the 2010 prices of fixed telephony, mobile telephony and fixed broadband Internet as a percentage of a country’s monthly Gross National Income (GNI) per capita. The lower the price as a percentage of GNI per capita, the better the ranking UAE Telecommunications Sector Developments & Indicators (2008-2011), issued May 2012

16. Fixed Telephony – Number of Fixed Lines The significant increase in the number of fixed line subscribers is largely due to the inclusion of double play and triple play subscribers which were not reported in 2010. The number of residential lines between 2010 – 2011 increased by 52% and number of business lines by 2%. Fixed line penetration rate as of end of 2011 is 31%. Number of Fixed Lines (6) (1000s) Business Vs Residential Fixed Lines(1000s) 16 Fixed Lines, 1000s Penetration (6) Fixed lines include ISDN fixed lines,double and triple play internet subscribers of du and Etisalat UAE Telecommunications Sector Developments & Indicators (2008-2011), issued May 2012

17. Fixed Telephony – Revenues (7) Total fixed revenues include fixed telephony, calls from Payphone and calls to directory enquiry(does not include revenue generated from Double Play & Triple Play Subscriptions) Fixed telephony revenues declined by 10% between 2010 and 2011, the majority of the decline comes from a decline in international voice revenue which fell by 28% compared to the previous year. Total Fixed Telephony Revenues (7) (AED, millions) Monthly Fixed Line ARPU, AED 17 Millions, AED ARPU, AED Breakdown of Fixed Telephony Revenues (AED, millions ) Revenue, millions UAE Telecommunications Sector Developments & Indicators (2008-2011), issued May 2012

18. Fixed Telephony – Usage Total fixed telephony minutes decreased by 3.8% between 2010 and 2011 Calls to mobile represented 65% of total voice minutes from fixed lines in 2011. Monthly Fixed Line AMPU (8) Minutes Breakdown of Total Annual Voice Minutes (millions ) 18 Minutes, Millions AMPU, Minutes Total Annual Voice Minutes (millions) Minutes, Millions (8) In the 2 st Annual Review, the TRA used subscriptions as end December to calculate average revenues/ usage. In this report the TRA has used average subscriptions over the calendar year. UAE Telecommunications Sector Developments & Indicators (2008-2011), issued May 2012

19. 19 Fixed Telephony – Quality of Service (QoS) - Reported Faults Number of Reported Faults Per 1000 Subscriber Lines As a requirement of the TRA’s Policy on Quality of Service, Etisalat and du began submitting QoS data to the TRA from 1 January 2009. This data is based on mutually agreed reporting specifications. See for more details “Quality of Service Regulatory Policy – Reporting Specifications” available at www.tra.gov.aewww.tra.gov.ae UAE Telecommunications Sector Developments & Indicators (2008-2011), issued May 2012

20. 20 Average Provisioning Time in Calendar Days Fixed Telephony – Quality of Service - Average ProvisioningTime Fixed Telephony – Quality of Service - Average Provisioning Time UAE Telecommunications Sector Developments & Indicators (2008-2011), issued May 2012

21. Mobile Services – Active Subscriptions (9) Active is defined as any subscriber who has made or received a voice or video call in the preceding 90 days, or has sent an SMS or MMS during that period. (10) Prepaid figures include mobile visitors. The number of active mobile subscriptions increased by 7.3% between 2010 - 2011. In 2011, the mobile penetration rate reached 199%. Subscriptions, 1000s Penetration Active Mobile Subscriptions (9) (1000s) Breakdown of Prepaid vs. Postpaid Subscriptions (10) 21 Percentage of subscriptions In 2011, the share of postpaid subscriptions reached 12% of total mobile subscriptions compared to 11% in 2010. UAE Telecommunications Sector Developments & Indicators (2008-2011), issued May 2012

22. 22 Mobile Services – BlackBerry Subscription/Smart Phone /Mobile Data User As of December 2011 Number of Subscriptions The TRA began the collection of these statistics in 2011 UAE Telecommunications Sector Developments & Indicators (2008-2011), issued May 2012

23. Mobile Services – Revenue Revenues generated from mobile services increased by 8.3% in 2011,and the majority of the increase comes from the increase in the postpaid revenue which increased 33.9% compare to the previous year. Mobile monthly Average Revenue Per User (ARPU) increased by 3.4% in 2011. Total Mobile Revenues (AED millions) 23 (11) Excluding mobile data revenue. ARPU, AED Millions, AED Mobile Monthly ARPU Breakdown of Total Revenue (10) (AED, millions) UAE Telecommunications Sector Developments & Indicators (2008-2011), issued May 2012

24. Mobile Services – Usage (Minutes) Total annual mobile originated call minutes increased by 7.9% between 2010 and 2011. International call minutes increased by 26% between 2010 - 2011. In 2011, outbound roaming minutes increased by 367% compare to 2010. Mobile Average Minutes Per User/Subscription (AMPU) 24 AMPU, Monthly Breakdown of Total Annual Voice Minutes (millions ) Voice Minutes, Millions Total Annual Voice Minutes (millions ) Minutes, Millions UAE Telecommunications Sector Developments & Indicators (2008-2011), issued May 2012

25. 25 Mobile Services – Usage (SMS & MMS) % Growth 2008-2009 % Growth 2009-2010 % Growth 2010-2011 SMS219%-9%-10% MMS58%-25%-19% Total SMS messages sent decreased by 10% between 2010 and 2011. Total MMS messages sent decreased by 19% between 2010 and 2011. MMS, Millions (12) SMS includes domestic SMS, international SMS and SMS sent by outbound roamers. SMS (12) SMS, Millions MMS UAE Telecommunications Sector Developments & Indicators (2008-2011), issued May 2012

26. 26 Overall Call Setup Success Rate* Overall Call Drop Rate* * The drive tests conducted during the below mentioned periods: 2010: April 3 – July 27, 2010 2011: March 8 – June 12, 2011 Percentage UAE Telecommunications Sector Developments & Indicators (2008-2011), issued May 2012 Mobile Services – Quality of Service – Measured Mobile Networks Performance

27. 27 Mobile Services – Quality of Service – Calls Not Connected % of Failed Call Attempts Since September 2010, the Licensees have been measuring and reporting data on a comparable basis. UAE Telecommunications Sector Developments & Indicators (2008-2011), issued May 2012

28. 28 % of Calls Breaking Up While Talking On The Phone Mobile Services – Quality of Service – Calls Breaking up UAE Telecommunications Sector Developments & Indicators (2008-2011), issued May 2012

29. 29 International Voice Services Breakdown of International Outgoing Traffic (Millions, Minutes) Breakdown of International Revenues (AED Millions) International outgoing Minutes % growth 2008-2009 % growth 2009- 2010 % growth 2010- 2011 From Fixed37%-23%-18% From Mobile- 0.03%11%26% International Revenues % growth 2008-2009 % growth 2009- 2010 % growth 2010- 2011 From Fixed35%-26%-22% From Mobile- 9%-0.5%-2% Minutes, Millions Millions, AED UAE Telecommunications Sector Developments & Indicators (2008-2011), issued May 2012

30. 30 International Voice Services - 2011 International Traffic (Fixed & Mobile ) by Outgoing (top 10 countries) (13) Calls to India, Pakistan, Bangladesh and Egypt represented 52% of the total outgoing international traffic in 2011. 31% of the total incoming international traffic in 2011 came from India and Saudi Arabia. (13) sorted by outgoing traffic Percentages of international traffic UAE Telecommunications Sector Developments & Indicators (2008-2011), issued May 2012

31. Internet - All Subscribers As of December 2011, there are over 1.32 million Internet subscribers in the UAE. As of December 2011, the percentage of internet subscriptions by fibre technology increased by 70.8% compared to the previous year. The penetration of Internet users was 56.4% in 2011. Total Internet Subscribers (14) 31 Internet Subscribers Penetration (14) Internet User Penetration rate calculated by using the ITU methodology which assumes there are 2.5 Internet users per Internet subscription. (15) Copper contains active & inactive dialup subscribers. Less than 10% of dial-up subscribers are active subscribers in the UAE. In the TRA’s Annual Review for 2009- 2012 (due May 2013) the TRA will report only active dial-up subscribers see www.tra.gov.ae for further details.www.tra.gov.ae Internet Subscribers, Internet Subscription by Technology (15) UAE Telecommunications Sector Developments & Indicators (2008-2011), issued May 2012

32. 32 Internet - Broadband Subscribers Broadband Subscribers (16) Total number of broadband subscribers increased by 10.5% between 2010 – 2011. Penetration of broadband user increased from 35.6% in 2010 to 37.1% in 2011. Broadband Subscribers (16) Broadband User Penetration rate calculated by using the ITU methodology which assumes there are 2.5 Internet users per Internet subscription. Penetration UAE Telecommunications Sector Developments & Indicators (2008-2011), issued May 2012

33. 33 Internet - Double Play & Triple Play Subscriptions As of December 2011 Number of Double/Triple Play Subscriptions The TRA began the collection of these statistics in 2011 UAE Telecommunications Sector Developments & Indicators (2008-2011), issued May 2012

34. Residential Internet Subscribers, (1000s)Business Internet Subscribers, (1000s) Service Subscribers growth 2008 - 2009 Subscribers growth 2009 - 2010 Subscribers growth 2010 - 2011 Residential dial-up 9%-22%-26% Business dial-up 35%14%1.1% Residential broadband 22%13%11% Business broadband 42%30%11% 34 Residential Subscribers, 1000s Business Subscribers, 1000s Residential and Business Subscribers UAE Telecommunications Sector Developments & Indicators (2008-2011), issued May 2012

35. Distribution of Business Broadband Subscribers by Internet Speed 2008 - 2011 35 Distribution of Residential Broadband Subscribers by Internet Speed 2008 - 2011 Business Broadband Subscribers Residential Broadband Subscribers The Distribution of Residential and Business Broadband Subscribers UAE Telecommunications Sector Developments & Indicators (2008-2011), issued May 2012

36. Internet Services – Revenue Internet revenues increased by 21.5% in 2011, compared to the previous year with the increase due to the inclusion of Double Play (internet & voice) and Triple Play (internet, voice & IPTV) revenue under Internet Revenue. This revenue growth can be attributed in part to the increasing proportion of subscribers on broadband rather than dial-up packages. 36 Total Internet Revenue (AED, millions) Revenue, AED UAE Telecommunications Sector Developments & Indicators (2008-2011), issued May 2012

37. Internet Services – ARPU Broadband Internet ARPUs has increased as the proportion of subscribers taking broadband packages has increased. Business broadband monthly ARPU is significantly higher than that of residential subscriptions. Broadband Monthly ARPU, AED 37 Broadband ARPU, AED UAE Telecommunications Sector Developments & Indicators (2008-2011), issued May 2012

38. 38 Internet Services – Quality of Service - Reported Faults Number of Reported Faults Per 1000 Subscriber Lines Faults per 1000 UAE Telecommunications Sector Developments & Indicators (2008-2011), issued May 2012

39. 39 Internet Services – Quality of Service – Provisioning Time Average Provisioning Time in Calendar Days Calendar Days UAE Telecommunications Sector Developments & Indicators (2008-2011), issued May 2012

40. Data Services – Leased Lines The number of leased lines subscribers increased by 17% in 2011 compare to the previous year. Leased line revenue increased by 1.5%. Total Leased Lines Subscribers Total Revenue (AED millions) 40 Number of Subscribers Revenue in millions UAE Telecommunications Sector Developments & Indicators (2008-2011), issued May 2012

41. 41 Abbreviations & Acronyms UAE United Arab Emirates TRA Telecommunications Regulatory Authority ITU International Telecommunication Union IMF International Monetary Fund AED United Arab Emirates Dirham GDP Gross Domestic Product ARPU Average Revenue Per User AMPU Average Minutes Per User SMS Short Message Service MMS Multimedia Message Service FTTH Fiber To The Home ISDN Integrated Services Digital Network ADSL Asymmetric Digital Subscriber Line Kbps Kilobits Per Second Mbps Megabit s Per Second QoS Quality of Service PCR Price Control Request Annex -1 UAE Telecommunications Sector Developments & Indicators (2008-2011), issued May 2012

42. 42 Annex-2 Fixed Lines Indicators for the year 2011 Average duration of domestic call from fixed line 1.97 min Average Revenue of domestic call from fixed line AED 0.31 /min Average International call duration from fixed line4.66 min Average Revenue from International call from fixed lineAED1.89/min Average International minutes by Fixed Line23 min/month Mobile Indicators for the year 2011 Average duration of mobile domestic voice call 1.69 min Average Revenue of mobile domestic call AED 0.34 /min Average International call duration3.35 min Average Revenue from International callAED 4.73 /min Average International minutes per user40 min/month Average National SMSs per subscriber16 SMS/month Average International SMSs per subscriber5 SMS/month Usage Indicators UAE Telecommunications Sector Developments & Indicators (2008-2011), issued May 2012

43. 43 Annex-3 Sources and Acknowledgments Ministry of Economy (MoE) http://www.economy.gov.ae International Monetary Fund (IMF) www.imf.org/ International Telecommunication Union (ITU)www.itu.int/ Industry statistics 2008 – 2011 Provided to the TRA by du and Etisalat on a monthly basis. TRA Mobile Networks Benchmarking studieswww.tra.gov.ae UAE Telecommunications Sector Developments & Indicators (2008-2011), issued May 2012

44. 44 Annex-4: Relevant Graph(s) included in 2 nd Review (2007-2010) International Voice Services - 2010 International Traffic (Fixed & Mobile ) by Destination (top 10 countries) India, Pakistan, Egypt and Bangladesh represent 55% of the total outgoing international traffic. India,Saudi Arabia and Pakistan represent 48% of the total incoming international traffic. UAE Telecommunications Sector Developments & Indicators (2008-2011), issued May 2012