UAEG TO COLLECT ROYALTIES FROM NEW TELECOM

UNCLAS ABU DHABI 001179 SIPDIS SENSITIVE DEPT FOR EB/CIP AND IO/T DEPT PASS NTIA AND FCC E.O. 12958: DECL: N/A TAGS: ECPS AORC TC SUBJECT: UAEG TO COLLECT ROYALTIES FROM NEW TELECOM SERVICE PROVIDERS REF: ABU DHABI 1155 ¶1. (U) Following the April 12 announcement that the UAEG would end Etisalat's monopoly of the telecom sector (ref), the UAEG revealed today that it would hold a 60 percent equity stake in any new telecom service provider that enters the UAE market. The announcement followed the first meeting April 17 of the new Supreme Committee overseeing the telecom liberalization program and presided by Minister of State for Finance Dr. Mohammed Khalfan bin Khirbash. The Committee also discussed setting up a separate and independent telecom regulatory authority akin to the FCC in the United States. ¶2. (SBU) The watershed decision to open the UAE telecom sector to other providers was announced this week coincidentally as MEPI-funded contractors conducted training for the GCC states plus Yemen on Trade in Services in Abu Dhabi. A Ministry of Communications employee seconded to Etisalat who attended the seminar told Econoff that even Ministry of Communications and Etisalat employees were surprised by the decision, and heard about it through the newspapers. He posited that the UAEG would license new GSM and internet service providers (ISP) first, but require them to use Etisalat's existing network infrastructure. ¶3. (SBU) Comment: The federal budget relies, in large part, on revenue transfers from the two largest emirates of Abu Dhabi and Dubai. Etisalat traditionally has represented the single major independent source of income for the UAE federal government. The Supreme Committee's decision to require new telecom providers to pay royalties to the federal government probably is an attempt to strike a balance between liberalization of the telecom sector and the need at the federal-level for an independent revenue stream. End comment. Wahba