Dubai ranks as most expensive city for mobile data

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• UAE telecom players are state-owned enterprises
• Du posted a 26.2% rise in net profit for Q2

Dubai has taken the unenviable top spot as the most expensive city for affordability of mobile data, with the average cost of 1GB equating to 0.55 percent of personal disposable income, said a new study.

In second place is Auckland with 0.37 percent, followed by Seoul (0.32 percent), Buenos Aires (0.32 percent) and Manila with 0.31 percent, according to the Digital Cities Index (DCI) 2022 – a ranking of 30 global cities across four key pillars: connectivity, services, culture and sustainability.

The DCI 2022, conducted by The Economist, surveyed 3,000 residents across 30 countries and assessed the impact of digitisation, across quantitative metrics like internet speed.

• Dubai ranks 18th in new index of top digital cities

It also assessed qualitative factors, such as strategies and plans for technologies like 5G and AI. 

“The main reason for Dubai’s high mobile data costs is the telecom players are state-owned enterprises and so it’s not a free market economy like you find in the west,” said Shankar Garg, managing director for the Middle East and Africa at Xebia, a US-headquartered global IT consultancy that advises UAE companies on their digitisation strategies.

“Increasing competition would help to bring down the costs.” 

The UAE has two major network operators: Du, which is based out of Dubai, and e& (formerly known as Etisalat), which is based out of Abu Dhabi, and both offer coverage throughout the seven emirates. 

Other industry experts agree that the lack of privatisation of the sector has kept data costs high, while also pointing to other contributing factors. 

“Obviously with government-backed entities and limited competition, users might be forced to pay a bit more,” Paolo Pescatore, founder at TMT consulting company PP Foresight, told AGBI. 

“There are numerous reasons to explain why mobile data might be slightly higher in the UAE than in other countries.

“This includes the cost of constructing networks in remote areas and supporting the backhaul with fibre as connectivity needs to be provided from the mast to an exchange.

“Furthermore, the population is still smaller than many other countries which impacts the return on investment.” 

The UAE’s relatively small population size, compared to countries such as India and Egypt, for example, means the economies of scale for the providers are lower.

Du posted a 26.2 percent rise in net profit for Q2 this year, which reached AED303 million ($82.5 million) after expanding its customer base to more than seven million subscribers and generating AED196 million ($53.36 million) in handset sales.

Du cited the connection of new premises to its fibre network as a driver of its strong performance. 

Meanwhile, e& reported a 1.5 percent rise in second-quarter net profit to AED2.43 billion ($745 million), compared with AED2.39bn during the same period last year, citing a growth in its number of subscribers.

Total subscriber numbers reached 13.3 million at the end of the second quarter, representing a 10 percent annual increase, while aggregate group subscribers increased 2.5 percent to 160 million.

“Our telecoms business has been the growth engine behind our company and its transformation into a techco,” Hatem Dowidar, group chief executive of e&, said. 

In June this year it completed a deal with artificial intelligence provider G42 to merge its data centre services under Khazna Data Centres as they seek to cater to increasing digital infrastructure requirements in the region.

In July Dubai’s crown prince Sheikh Hamdan bin Mohammed announced the Dubai Metaverse Strategy with an aim to place the emirate among the top 10 metaverse economies in the world, and turn the emirate into a global hub for Web 3.0 technologies that will also include blockchain and non-fungible tokens (NFT).

The emirate has set itself goals of attracting more than 1,000 firms in the metaverse sector, generating up to $4 billion in extra GDP by 2030 and supporting as many as 40,000 virtual jobs.

“The telcos will have to play a key role in supporting much needed mission critical applications in areas such as driverless and autonomous vehicles, remote surgery, energy, waste and water management, in this new fully digitised city,” Pescatore said. 

“All of these applications and more will be hugely reliant on communications which will need to be robust and resilient.

“Therefore, it is unsurprising to see the UAE investing in 5G and ensuring this remains the foundation of future connectivity.” 

Since the onset of the coronavirus pandemic, Dubai has been rolling out several sweeping digital reforms in a bid to lure new residents and future-proof the city. 

However, Pescatore thinks it is unlikely Dubai will reduce its data charges any time soon. 

“Over the years the government has implemented a cap on charges,” he said. “But with significant investment still needed to realise the overall connectivity vision, it is unlikely that we’ll see significantly lower charges in the future.”