The Chinese government is threatening to restrict what it describes as "illegal internet telephone providers", which could end access to Skype in one of the world's fastest-growing economies.
Last week, the ministry of information and industry technology called for a crackdown "on illegal Voice over Internet Protocol (VoIP) telephone services" and said it was investigating telecommunications companies with a view to bringing legal cases against them.
VoIP would be allowed as long as it was provided by the state-owned telecoms operators, China Telecom, China Mobile and China Unicom, the ministry said.
Juan Ignacio Cifre, a partner at Delta Partners, a telecoms consultancy in Dubai, said the main reason governments wanted to block VoIP was to protect and maximise the revenues of operators in which they had a financial interest.
"But no matter how much you want to try to block those services, there's always ways to work around and access these services," Mr Cifre said. "However, by banning them, the mainstream of users will not be able to access it and that will impact operators' revenues."
VoIP technology uses data transmitted across the internet to make phone calls free of charge or at rates a fraction of those offered by traditional operators. China's resistance to VoIP matches the stance of a handful of other countries, including the UAE, which have issued similar prohibitions.
The UAE remains one of four countries that do not at present allow Skype software to be downloaded, and block access to Skype's website. North Korea, Oman and Kuwait are the others, while Lebanon is also considering a ban.
The UAE's Telecommunications Regulatory Authority (TRA) said that only telecoms companies licenced to operate in the Emirates, such as Etisalat, du and Thuraya, may offer VoIP services.
Along with competition from du, Etisalat has been affected by VoIP. Although rates vary throughout the world, VoIP is the main reason that Etisalat's customers made 10 per cent fewer international calls over its network between 2008 and last year, the telecoms company said in recent financial filings.
But there could still be a future for Skype in the UAE. Mohamed al Ghanim, the director general of the TRA, says the regulator is in talks to launch the internet communication service legally.
Skype, which opened a Middle East office in Bahrain last year, could not be reached for comment. The TRA declined to comment.
Eric Benedict, the managing director of AlixPartners, a Dubai business advisory firm, said that as a technology, VoIP was not likely to go away and a decision to offer the service legally would come to the Middle East in the "next few years".
"The economics of VoIP make it an unstoppable wave in terms of impact it has had in the region by making phone calls cheaper," he said.
Mr Cifre said that in the future, restrictions on VoIP would be eliminate, and telecoms operators should start investigating how to reduce their dependence on revenue from international calls.
"VoIP will become part of an ecosystem of social networking and it will come to a point in time where it will be difficult for a user to access all types of online systems without having access to VoIP," Mr Cifre said.
dgeorgecosh@thenational.ae
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
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