A Model of Telecommunication Sector Development and Economical Growth in GCC Countries: A Case Study of UAE

Abstract

Many studies were conducted in America, Europe and Africa with regard to the Economics of Telecommunication's infrastructure. However, studies with the similar subject were never found published about the GCC countries. This thesis studies the elements that affected the development of Telecommunication's infrastructure in GCC countries by modeling the Demand and Supply of sectors by two independent empirical models. A third model is developed to measure the economical growth in GCC in terms of telecommunication's infrastructure development factors. Accordingly, based on the developed models and their results, the thesis puts in hands the first attempt to identify elements shaping the Telecommunication market of GCC countries and promoting its growth. The thesis also provides a model that can act as a measure for the changes of telecommunication sector contribution toward the economy in the future. The thesis employs econometric modeling techniques to develop empirical models and to test for their validity. Models were founded based on hypotheses that were derived from economic theories or proposed by other researches. Hypothesis testing was used to validate significance of variables in each model. The models employ economical, socio-economical and telecommunication indicators collected for GCC countries from 1980 to 2003. The used models were simple regression equations applied on a panel of six GCC countries. Results of this study showed that the demand of fixed-line in GCC countries is affected by the subscribers' income. For mobile service, countries with lower economical standing had higher growing demand over mobile service. On the other hand, supply responded dramatically to GCC infrastructure progress. The major finding of this study was that income generated from telecommunication sector is already taking place in promoting further economical growth in GCC countries. In the case study of UAE, demand of mobile services increased dramatically after the introduction of new technology in the market. Likewise, supply of telecomm services responded strongly to the introduction of new technology into the market. Both demand and supply in UAE showed a growing pattern suggesting that there is room in the market for additional operators. Telecommunication infrastructure development started taking place in the UAE economical growth from 1986 up to 2003. Additional studies are needed for GCC region to further investigate the economy of telecommunication sector in order to give telecomm operators, telecomm regulators and economy policy makers a clearer view of the interaction of different elements in the sector. This will help the policy makers to take better informed decisions to shape the future of this sector.