SINCE it was set up in 1976 Emirates Telecommunications Corporation (Etisalat) has been consistently profitable and earned itself a reputation for offering its customers the latest technologies. The company is aiming to accomplish much more in the decades to come.

At the core of its ambitions is the $1,000 million Thuraya project - the first communications satellite scheme of its kind in the region.

Etisalat first looked at developing and launching a mobile satellite system in collaboration with regional service providers and telecommunications operators in 1995 when it commissioned studies by KPMG and Clifford Chance of the UK. One of the motivating factors was the low telecom penetration in a region of over 1,800 million people. In most countries there was only one telephone line per 100 people. At the same time, the cellular explosion in the cities called for extensions.

Etisalat then took on the US' Booz Allen & Hamilton as management consultant, Merrill Lynch as financial adviser and Deutsche Telepost Consulting (Detecon) as its technical consultant. The UK's Ashurst Morris Crisp was appointed legal adviser.

To execute the project, Etisalat set up the Thuraya Satellite Telecommunications Company in early 1997 as an autonomous company with a paid-up capital of $500 million. So far $250 million has been secured, with the remainder due for collection by next January. In partnership with Etisalat, the single largest shareholder, are 15 regional service providers and investment firms (see table).

For the supply and launch of two satellites and the construction of ground facilities, Etisalat went to the US' Hughes Space & Communications International, signing a $1,000 million deal last September. The first of the two satellites with capacity to provide 1.8 million connections will be launched by 11 May 2000; commercial operations are scheduled to start on 11 September. The primary gateway will be set up in Sharjah, while four to five national gateways will be built in the coverage area. The second satellite will be launched in 2002.

'We are very optimistic and comfortable about the project and will meet our launch target,' says project manager Yousuf Al-Sayed. 'Thuraya's mission and objective is driven by its commitment to the region's infrastructure development - to bring the benefits and advantages of state-of-the-art personal satellite communications to both users and service providers in a competitive manner.'

The main target market is roaming mobile phone users, industries, utilities and government agencies, with the aim of providing connections where there is no coverage. Based on GSM technology with adaptations for operation in the satellite environment, the system is designed to be flexible enough to accommodate changes in traffic by means of a reprogrammable payload in the satellite. This will allow modifications to the coverage area after launch, and optimisation of performance over areas where demand is highest.

There has been a major effort to ensure that the right equipment is acquired. More than 50 months were spent evaluating the bids alone. Says Al-Sayed: 'We have a good, conservative business plan that has taken into consideration all inaccuracies. On the first day of its operation, Thuraya will already have up to 500,000 subscribers. By mid-1998, agreements with four regional service providers will be in place. By 2004-5, we anticipate the number of subscribers to increase to more than 1.8 million.'

An order for 250,000 hand-held terminals has already been placed with Hughes and a second source. Under the deal signed with Hughes for the supply and installation of the satellites, a risk mitigation plan has also been structured to protect the system.

Service providers in Thuraya's coverage area can subscribe through a gateway nearby or, if demand justifies it, can have their own gateway. They can also become shareholders in the project by contributing a minimum $1 million of the paid-up capital, or 0.2 per cent. The suggested retail price of the service is 50 cents per minute of air time; hand-held terminals will be available to service providers for less than $600 a unit.

Air time will be assigned through gateway agreements. Thuraya Development Company will help service providers by offering billing services and customer and marketing support. Service providers that already have GSM services will be able to offer the service to users without having to change the SIM cards used in their ordinary mobile phones. They will, however, have to buy the hand-held terminals from Thuraya.