Khalid Sekkat (2) Aristomene Varoudakis
Part D. MENA Country Liberalization Profiles in Telecommunications: A snapshot
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| Part D. MENA Country Liberalization Profiles in Telecommunications: A snapshot
Morocco Morocco can be considered, together with Israel, the country whose liberalization process is more advanced in the MNA Region. The reform process started with Law 24/96, which: 1) separated telecommunications operations from postal operations, creating two different public companies (Itissalat-al-Maghrib for telecommunications, and Barid-al-Maghrib, for postal services); 2) created an independent regulator (Agence Nationale des Réglementations des Télécommunications, ANRT); 3) allowed competition in all market segments; 4) established regulatory principles in key areas, such as licensing and interconnection. The test bed for effective competition in Morocco was the award of the second GSM license. ANRT led the process with high independence and professionalism. The design of the license included rights for the operator to build and operate own long distance infrastructure, and to lease it to others. It conferred the right to the operator to offer international voice services to its own customers, after two years from the award of the license. It conferred the right to offer fixed wireless services to its own customers, under authorization from ANRT. The transparency of the license process and the features of the license text, attracted the interest of 7 groups of leading international investors. After an highly competitive bid process, the license was awarded to the Telefonica-led consortium, which paid over US$1bn. for the license, a record for the region and for developing countries. The threat of competition stimulated the incumbent operator, IAM, to lower tariffs four times in one year. This produced an unprecedented growth of the mobile market, which increased from 150,000 at the beginning of 1999 to 4,000,000 customers at the end of 2000. In two years, thanks to effective competition, Morocco was able to transform its mobile communications market from a niche market to a level of development similar to that of advanced markets. Morocco capitalized on the success achieved on the mobile market to do considerable progress on the privatization front. Following Law 24/94, the incumbent operator, Itissalat-Al-Maghrib, has been corporatized, and its name changed to Maroc Telecom. Following a long tender process, 35 percent of Maroc Telecom was sold, in December 2000, to France’s Vivendi Universal, for US$2.2bn. The strategic investor was also given management control of the company, in order to be free in its day-to-day management of the company, as well as in strategic planning and corporate strategy. Through minority rights, the Government of Morocco, still has some residual decision power, especially on long-term decisions for the company. Considering an enterprise valuation in excess of US$6bn., Vivendi has paid price equal to US$76.5 per capita, one of the highest ever paid for a telecommunications privatization9.. A subsequent public flotation of an additional 10 percent of the shares of Maroc Telecom, is expected in 2002. Contrary to earlier WTO commitments, Morocco granted an exclusivity period on fixed line voice services for Maroc Telecom, till December 31, 2002. This decision, which did not contribute to raise the price paid for Maroc Telecom, had negative implications in terms of stability of the liberalization timetable. To stick with its new liberalization timetable, and confirm the international credibility that it has recently gained, Morocco started the process to award fixed line licenses in 2002. Unfortunately no bidder presented final offers for this license. This has been attributed to the adverse international financial situation of the telecommunications sector, but can also be related to too restrictive obligations placed by the license on the fixed line operator. These obligations have discouraged bidders, as they were contemplating the entry in a market highly saturated by the development of GSM services. The lack of interest in the second fixed line license has caused the Government to start an analysis of its options to continue the liberalization process. The Government has expressed its commitment to telecommunications liberalization, and is exploring new ways to introduce competition in the fixed line, data and international markets. Jordan Jordan has also achieved considerable progress in telecommunications liberalization in the last years. Telecommunications Law 1995 has introduced the main regulatory principles of independent regulation, competition and sector reform. The Telecommunications Regulatory Commission (TRC), was established as an independent regulator of the sector, while the policy-making function was maintained by the Ministry of Post and Telecommunications. Corporatization of the incumbent fixed line operator, Jordan Telecom, followed. Privatization of Jordan Telecom was completed in 1999, with the acquisition of a 40 percent share in the company by France Telecom. Through majority in the board of directors, France Telecom was also attributed management control. A follow–up flotation of shares is expected in 2002. Parallel to the privatization of Jordan Telecom, the Government has achieved good progress in the liberalization of mobile communications services. In 1995, a private provider, Fastlink, owned by Orascom Telecom, was licensed to provide GSM services. A second license was attributed to Mobilcom, owned by Jordan Telecom. The competition between Fastlink and Mobilcom generated several reduction in the prices of mobile telecommunications services, and an expansion of services to reach 9 percent penetration at the end of 2000. Further competition in the mobile market, with the award of a third license, will be considered in 2003. Orascom Telecom has recently sold its 91.6 percent equity stake in its Jordanian subsidiary, Jordan Mobile Telephone Services Company Ltd. (Fastlink) to Kuwait's Mobile Telecommunications Company. Competition in other market segments is actually precluded till December 31, 2004, since Jordan Telecommunications enjoys exclusive rights on all fixed line services till that date. Egypt Telecom Egypt, formerly known as ARENTO, is the state-owned telecommunications operator. It has an installed base of over 5 million lines and its assets in 1999 were estimated at $6.5bn. The regulatory entity is the Ministry of Telecommunications and Information Technology. In 1999, while the Government has announced its intention to privatize Telecom Egypt in several occasions, little progress has been achieved towards this objective. Competition, however, was introduced outside the core business of activities of Telecom Egypt. The mobile sector in Egypt has been competitive for quite some time, with the award of two licenses to Mobilnil and Vodafone Misr. The introduction of competition, however, did not produce the spectacular growth experienced by Morocco. At the end of 2000, it is estimated that the Egyptian GSM market would have [about 900,000 customers], or a penetration of 1.5 percent, against 15 percent penetration in Morocco. An explanation for this different growth is that both mobile operators need to rely heavily on the fixed line infrastructure of Egypt Telecom, which is of lower quality with respect to the mobile infrastructure put in place by the two mobile operators. The cost of leased lines in Egypt is also reportedly higher than good international practice. As a consequence, due to the bottlenecks in the fixed network, the mobile customer experiences higher costs and lower quality with respect to the Moroccan equivalent. The Government has recently announced its intention to introduce more competition in the sector, through the award of a third mobile license. This third competitor is unlikely to increase the level of effective competition in the sector, for two reasons. The first is that the license could be attributed to Egypt Telecom, that would then have the potential to abuse from its dominant position in the fixed line market. But even if the license is attributed to an independent operator, the same bottlenecks experienced by the two existing companies, in terms of fixed line network, would still persist. While on privatization and fixed line market Egypt has not introduced reform, and on mobile the success of the reform is partial, on data services Egypt is one of the most open countries of the region, with several VSAT operators, and competing data service providers. Private companies, especially in the ICT sector, have strongly benefited from the opening up of the data segment. International resale of voice services is also open to competition and private participation from international investors, with Global One, American Express and MCI offering international calling card services. Full-fledged competition in the market will not come before 2005, when the Government has announced full liberalization of all communications markets. Telecom Egypt's monopoly over PSTN and International connectivity is expected to end by 2005. Tunisia. Tunisia, which has an higher GDP per capita with respect to the three countries considered above, is the least advanced in terms of market liberalization, notwithstanding several recent efforts. The Tunisian telecommunications market was long characterized by the monopoly of Tunisia Telecom and the extensive role of the State as policy-maker, regulator and operator in the sector. Although Tunisia has achieved good progress in the development of the telecommunications sector in the last 10 years (relatively high fixed line penetration, well balanced network between major cities and rest of the country, good quality of the basic network), it is clearly below its full potential in some areas, such as wireless communications and Internet. In addition, the fixed line network, an asset for the country does not generate as high revenues as in other comparable economies. In particular, in the area of mobile communications, at the end of 2000, the Tunisian mobile network was only counting on less than 100,000 customers, or 1 percent mobile penetration, which is very small, compared with Morocco’s 15 percent penetration. The result of this delay is that telecommunications services represent about 1.9 percent of GDP in the country, while in other dynamic and emerging economies, like Chile, Morocco and Malaysia, the weight of telecommunications services reaches 4 percent of GDP. In addition, ICT-related services, such as software, IT-enabled services, which accelerated the growth rate of countries like India, Costa Rica, Hungary in the second half of the 90s, did not grow at an accelerated pace in the country. The Government recognized this delay, and started implementing a program of regulatory reform and introduction of competition. It enacted a new Communications Code in February 2001, which, similarly to the Moroccan Law, abolishes the monopoly of the State in the sector, states basic regulatory principles, and creates regulatory agencies (Instance Nationale des Télécommunications, an independent agency, and Agence Nationale des Fréquences, under the Ministry of Communications Technologies). In terms of introduction of effective competition, Tunisia has awarded a second GSM license to an international consortium, led by Orascom Telecom (Orascom Tunisie Telecom, OTT). OTT paid US$454 million for the license, awarded on March 20, 2002. Orascom Telecom subsequently entered into a joint venture agreement with the Kuwaiti operator Watanya Telecom to jointly develop and operate OTT. OTT launched its services in December 2002 under the brand name of Tunisiana The entry of a second GSM operator on the market is expected to increase mobile penetration dramatically. For example, the consulting firm Arab Advisors projected the GSM market to increase almost nine fold by 2006, reaching a penetration rate of 43 percent, or 4.4 million subscribers. Still in the area of introduction of effective competition, the Tunisian government has launched a license award process to install and operate a very small aperture terminal (VSAT) telecommunications network in Tunisia. This network will help meet the increasing demand for data services and provide additional telecommunications infrastructure. While managing the award of the second GSM license and of a VSAT license, Tunisia has also put forward changes in its regulatory regime (implementing decrees in key areas, such as interconnection), and has started discussions to privatize 10 percent of the incumbent operator, Tunisie Telecom. The implementation of a program to introduce effective competition seems to be the main bottleneck to sector development in the current telecommunications market. References Arndt, Sven and Henryk Kierzkowski, forthcoming. ‘Introduction’ in S. Arndt and H. Kierzkowski, ed., Fragmentation and International Trade, Oxford University Press, Oxford and New York. Blondal and Pilat, 1997. “The Economic Benefits of Regulatory Reform”, OECD Economic Studies, No. 28, 1997/I. Boylaud, Olivier and Giuseppe Nicoletti, 2000. “Regulation, Market Structure and Performance in Telecommunications,” Economics Department Working Paper No. 237, OECD, April. Cowhey, P. and M.M. Klimenko, 2000. “Telecommunications reform in developing countries after the WTO agreement on basic telecommunications services”, Journal of International Development, (12), 265-281. Dasgupta, D., M. Nabli, C. Pissarides and A. Varoudakis, 2002. “ Making Trade Work for Jobs : International Evidence and Lessons for MENA“, World Bank mimeo Dixit, Avinash K and Gene M. Grossman, 1982. “Trade and Protection with Multistage Production,” Review of Economic Studies 59, 583-594. Feenstra, Robert C., 1998. “Integration of Trade and Disintegration of Production in the Global Economy.” Journal of Economic Perspectives, vol. 12, number 4 (31-50). Grossman, Gene M. and Elhanan Helpman, 1999. “The Internationalization of Economic Activity,” National Science Foundation grant, July. Hummels, D., J. Ishii and K.-M. Yi, 2001. “The nature and growth of vertical specialization in world trade”, Journal of International Economics, (54), 75-96. Lucas, Robert E. B., 1993. On the determinants of direct foreign investment: Evidence from East and Southeast Asia. World Development 21 (3), 391-406. Mattoo, A., R. Rathindran, and A. Subramanian, 2001. “Measuring Services Trade Liberalization and its Impact on Economic Growth: An Illustration”, Policy Research Working Paper, No. 2655, The World Bank, August. Ng, F. and A. Yeats, 2000. “Production Sharing in East Asia: Who Does What, for Whom and Why?”, mimeo, The World Bank, Washington D.C. OECD, 1997. “The OECD Report on Regulatory Reform—Thematic Studies”, Paris. OECD, 2000a. “A New Economy: The Changing Role of Innovation and Information Technology in Growth”, Paris, 2000. OECD 2000b. Information Technology Outlook 2000, Paris. Petrazzini, B., 1996, “Global Telecom Talks: a Trillion Dollar Deal”, Institute for International Economics, Washington, D.C. Rossotto, C., M. Kerf, and J. Rohlfs, 1999. “Competition in Mobile Telecoms”, Public Policy for the Private Sector, Note No. 184, The World Bank, August. Sekkat, Kh. and Varoudakis, A., 2000. ‘Exchange Rate Management and Manufactured Exports in Sub-Saharan Africa’, Journal of Development Economics 61 (1): 237-54. Smith, P. and Wellenius, B., 1999. “Reducing Regulatory Risk in Telecommunications”, Public Policy for the Private Sector, Note No. 189, The World Bank, July. UNCTAD, 1998. World Investment Report. New York: United Nations. UNCTAD, 2001. World Investment Report. New York: United Nations. Vickers, J. and Armstrong, M. ‘Competition and Regulation in Telecommunications’, in M. Bishop, J. Kay and C. Mayer, eds., The Regulatory Challenge, OUP, Oxford, 1994, 283-335. Warren, T., 2000. 'The identification of impediments to trade and investment in telecommunications services', in Findlay, C. and Warren, T. (eds) 2000, Impediments to Trade in Services: Measurement and Policy Implications, Routledge, London and New York. (http://www.pc.gov.au/research/memoranda/servicesrestriction/traderestrictivenessindexes.xls) World Bank, 2000. Global economic Prospects and the Developing Countries 2001, Washington D.C. World Bank, 2001. Republic of Tunisia: Information and Communications Technology Strategy Report, Washington D.C. MENA Working Paper Series No. 1 Has Labor Migration Promoted Economic Integration in the Middle East? June 1992. Nemat Shafik, The World Bank and Georgetown University. No. 2 The Welfare Effects of Oil Booms in a Prototypical Small Gulf State. September 1992. Ahmed Al-Mutuwa, United Arab Emirates University and John T. Cuddington, Georgetown University.
October 1992. Ishac Diwan and Lyn Squire, The World Bank. No. 4 The Link Between Trade Liberalization and Multi-Factor Productivity: The Case of Morocco. February 1993. Mona Haddad, The World Bank. No. 5 Labor Markets in the Middle East and North Africa. February 1993. Christopher A. Pissarides, The London School of Economics and Political Science. No. 6 International Competitiveness of the Private Industry and the Constraints to its Development: The Case of Morocco. June 1993. Hamid Alavi, The World Bank. No. 7 An Extended RMSM-X Model for Egypt: Quantifications of Market-Oriented Reforms. September 1993. Karsten Nimb Pedersen, The World Bank. No. 8 A Report on the Egyptian Tax System. October 1993. Mark Gersovitz, Roger H. Gordon and Joel Slemrod, The World Bank. No. 9 Economic Development and Cooperation in the Middle East and North Africa. November 1993. Ishac Diwan and Lyn Squire, The World Bank. No. 10 External Finance in the Middle East: Trends and Prospects. December 1993. Ishac Diwan, John Underwood and Lyn Squire, The World Bank. No. 11 Tax Incidence on Agriculture in Morocco (1985-1989). April 1994. Jean-Paul Azam, CERDI, University of Auvergne, Clermont-Ferrand (France) et CSAE, Oxford (U.K.). No. 12 The Demographic Dimensions of Poverty in Jordan. August 1994. Chantal Worzala, The World Bank. No. 13 Fertility and Family Planning in Iran. November 1994. Rodolfo A. Bulatao and Gail Richardson, The World Bank. No. 14 Investment Efficiency, Human Capital & Migration A Productivity Analysis of the Jordanian Economy. May 1995. Gaston Gelos, Yale University, Department of Economics. No. 15 Tax Effects on Investment in Morocco. August 1995. David Sewell, Thomas Tsiopoulos and Jack Mintz, The World Bank. No. 16 Reconstruction in Lebanon: Challenges for Macroeconomic Management. April 1999. Daniela Gressani and John Page, The World Bank.
December 2000. Elizabeth Ruppert Bulmer, The World Bank. No. 20 Achieving Faster Economic Growth in Tunisia. March 2001. Auguste T. Kouamé, The World Bank. No. 21 Trade Options for the Palestinian Economy: Some Orders of Magnitude. March 2001. Claus Astrup and Sébastien Dessus, The World Bank. No. 22 Human Capital and Growth: The Recovered Role of Educational Systems. April 2001. Sébastien Dessus, The World Bank. No. 23 Governance And The Business Environment In West Bank/Gaza May 2001. David Sewell, The World Bank. No. 24 The Impact of Future Labor Policy Options on the Palestinian Labor Market June 2001. Elizabeth Ruppert Bulmer, The World Bank. No. 25 Reform and Elusive Growth in the Middle-East – What Has Happened in the 1990s? July 2002. Dipak Dasgupta, Jennifer Keller, T.G. Srinivasan, The World Bank. No. 26 Risks and Macro-Economic Impacts of HIV-AIDS in the Middle East and North Africa: Why waiting to intervene can be costly. July 2002. David A. Robalino, Carol Jenkins, Karim El Maroufi, The World Bank. No. 27 Exchange Rate Regime and Competitiveness of Manufactured Exports: The Case of MENA Countries. August 2002. Mustapha Kamel Nabli, Marie-Ange Véganzonès-Varoudakis, The World Bank. No. 28 Governance and the Investment Climate in Yemen September 2002. Arup Banerji, Caralee McLiesh, The World Bank. No. 29 Exporting Labor or Goods? Long-term Implications for the Palestinian Economy. October 2002. Claus Astrup, Sébastien Dessus, The World Bank. No. 30 Poverty and Transfers in Yemen. December 2002. Dominique van de Walle, The World Bank. No. 31 Yemen and the Millennium Development Goals. March 2003. Qaiser Khan, Susan Chase, The World Bank. No. 32 Making Trade Work for Jobs : International Evidence and Lessons for MENA. July 2003. Dipak Dasgupta, Mustapha Kamel Nabli, Christopher Pissarides (LSE), Aristomene Varoudakis, The World Bank. 1The WTO General Agreement on Trade in Services (GATS) commits members governments to undertake negotiations on specific issues and to enter into successive rounds of negotiations to progressively liberalize trade in services. The first round of negotiations started officially in early 2000 under the auspices of the Council for Trade in Services. The Doha Declaration endorsed the work already done, reaffirms the negotiating guidelines and procedures, and establishes some key elements of the timetable including, most importantly, the deadline for the conclusion of the negotiations as part of a single undertaking. 2In 1996, components accounted for about 30 and 25 per cent of total Philippines and Malaysian imports, while they totaled only about 7 per cent of Japanese and Taiwanese imports. By contrast, components represented as much as 20 per cent of Japanese and Taiwanese exports, but only about 17 per cent of total exports in the Philippines and Malaysia (see Ng and Yeats, 2000). 3The data source is a 1998 ITU survey on Telecommunications regulation (http://www.itu.int/ITU-D/treg/index.html). The data presently available does not allow to refine the indicator assessing the distinction between competition at a service provision level only, and competition at both network operation and service provision. Ideally we would define ‘partly competitive conditions’ the degree of competition associated to services only, as opposed to network operation and services, or the presence of a duopoly on network and services. ‘Full competition’ is when there would be free entry on both networks and services. Developing a more refined indicator could be the object of future research. 4The detailed ratings for the MENA countries can be found in annex, part B. 5Fixed telephone networks in transition economies in Eastern Europe and Central Asia also turn out to be larger than would have been expected on the basis of their per capita income and population, as these countries had considerably invested in public utilities in the past (eq. 1; table 2). 6Estimations of the potential impact of regulatory reform in telecommunications for eight industrial economies are reported in OECD, 1997, Chap. 1, and also in Blondal and Pilat, 1997. In the case, for example, of France, the estimated impact of a 40 percent increase in labor productivity is a 30 percent drop in telecommunications costs, while in Spain, a 35 percent increase in productivity is associated with a 22 percent decrease in costs. 7This is a traditional specification in the literature. It may be derived from a formal model of export supply in LDCs. 8This component explains 54 percent of the total variance. The loading factors are 0.93, 0.83, -0.36 and 0.67 for the fix, wait, cost and mobile respectively. 9The particular time in which the privatization took place might also have contributed to this high valuation. Looking forward, countries of the region are likely to see lower per-capita amounts of Telecom privatizations proceeds. Directory: curated curated -> Concept stage curated -> Concept stage curated -> Republic of Côte d'Ivoire Urbanization Review curated -> Report No: aus11011 Central America curated -> Report No. 94474-pk fiscal Disaster Risk Assessment Options for Consideration curated -> Environmental and Social Management Framework for the Costa Rica Telecommunications Sector Modernization Project curated -> Environment Impact Assessment For Jiangxi Shangrao Sanqingshan Airport Beijing Guohuantiandi Environmental Technology Development Center. Ltd. 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