Talking Shop

CommsMEA reports from the Arab Telecom and Internet Forum in Beirut, where around 600 delegates from industry and government gathered to thrash out regulatory and technical issues pertaining to the development of the region’s telecoms sector. The sell-off of Lebanon’s mobile networks was also high on the agenda.

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By  Richard Agnew Published  June 30, 2003

Introduction|~||~||~|True to its word, the Arab Telecoms and Internet Forum provided a platform for some telling exchanges concerning the major issues currently developing in the region’s telecoms market.

Coinciding with the International Telecommunications Union (ITU)’s annual development meeting, the forum, running from May 28th to 31st, allowed telecoms ministers and executives to hold sway on topics ranging from liberalisation and the movement towards IP core networks, to the case for satellite mobile services and e-government.

Helpfully, the event also came shortly after the publication of the short list of applicants for entry into Lebanon’s mobile market — a useful case study right on the forum’s doorstep, and an issue which provided one of the main bones of contention at the event.

In particular, the complex structure of the sale, and the delays that have hit the process so far, led to a long line of criticisms being aired at the show.

Lebanon’s telecommunications minister Jean-Louis Qordahi, who opened the event, sought to emphasise that the country’s liberalisation programme would remain free from corruption and would attract investment. He also said that the country’s new regulatory authority — due to be set up shortly — would remain independent, other than in the area of 3G licencing.

But other attendees were less optimistic about the structure of the licencing process and expressed doubts about the likely independence of the planned regulator. “There are a number of questions to ask about the Lebanese mobile process,” says Rory Macmillan, an international lawyer who helped write Lebanon’s telecoms law and secondary legislation now under consideration, as well as advising on regulatory matters in Jordan and Saudi Arabia.

“The first question is [Lebanon’s] seriousness about moving to a new regulatory regime... whether, indeed, transparency is comparable to other countries, and whether we will see a properly independent regulatory authority,” he adds.

Concerns were also aired over the three-track nature of the tender and auction of the two mobile networks — these of former incumbents Cellis, and Libancell — and the room left for government inteference or an indeterminate outcome.

The sale will either see a revenue-sharing scheme adopted, where the government takes a 40% cut of turnover, a ‘full-value’ sale, or if the bids are deemed unsatisfactory, a tender where the management of the two operators will be privatised and fees paid by the government to the lowest bidders.

“The 40% revenue sharing proposal — that economic interest of the government in the mobile operator — suggests that there will not be a separation of government, operation and regulation,” says Macmillan.
“There are questions to ask about whether indeed the regulatory authority should have been set up before the licences were auctioned.

Further, the coupling of the management option in the process raises more questions about the underlying intention of the government,” he adds.

Even operators involved in the bidding — of which there are six — expressed dissatisfaction. For example, Dr. Saad Al Barrak, director general of MTC-Vodafone, called the 40% revenue sharing option a “recipe for instability.”

“There isn’t a solid legal infrastructure that would be protective of the investor,” he argues. “There is political squabbling all the time, which provides instability. Politicisation is... shading the opportunity, so there are problems. But we have decided to bid [and] we will bid. We hope it’s going to be transparent,” Dr. Al Barrak says.

While Qordahi has argued that the auction will not see a “firesale” of the networks, contestants sought to play down the value of the two licences at the forum. Potential prices that have been quoted range from US$350 million to US$500 million, but doubts were cast over the ability of the government to raise that amount.

“The expectations are too high,” claims Dr. Al Barrak. “If you look at all the other [markets], some of them are more lucrative than Lebanon, [but] they would not even exceed US$150 million or US$200 million max. So people will not be killing themselves to go after the Lebanese licence,” he claims.

David Murray, chief executive officer of Wataniya, however, was less forthcoming when asked how much it would be prepared to pay, despite the Kuwaiti operator officially launching its bid at the event.

But Murray did seek to give reassurances that Wataniya, which missed out to MTC-Vodafone on the award of Bahrain’s second mobile licence in April, would not overstretch itself to catch up in the race to form a region-wide presence.

“We will not pay over the odds,” he says. “I don’t want to get into numbers, because that’s not a public forum, but we don’t just buy things for emotion’s sake. I think that lesson has been learnt by a number of telcos and we are not in a strategic hurry that says we must have the following number of countries by the end of the year,” he adds.

Considering the delays that have characterised the process so far, concerns also emerged over the length of time it would take to complete the re-organisation, despite the government saying the licence would be issued by July. “It’s very hard to say. When dealing with governments I gave up a long time ago,” Murray adds.

||**||Opening Up|~||~||~|

Meanwhile, at the Forum, there was little other news on the opening up of other markets, although the announcement earlier in May of the impending introduction of a third mobile operator into Jordan proved a major talking point.

The move, which will see the new operator handed a licence by the end of this year, will add to other plans hatched by the Kingdom’s Ministry of Telecommunications to grant a second licence to a new fixed line operator in 2005. A digital trunking provider, called X-Press, will also start to operate in Jordan from next April.

Additionally, Dr Mohammed Alghatam, chairman of Bahrain’s Telecommunications Regulatory Authority (TRA), laid out the new structure of the Kingdom’s telecoms market following the award of its second mobile licence a month before.

Dr Alghatam said VSAT, public access mobile radio services, paging and international facilities licences would be offered in the first quarter of next year, followed by national and international fixed services licences in the third quarter.

With liberalisation high on the agenda, the focus of the forum then turned to the issues facing regulators and governments as these markets are opened up. Khalid Al Molhem, president of Saudi Telecom Company (STC), kicked off the first day’s sessions with a presentation on the future of the fixed line sector in the Kingdom, while others, such as Macmillan and Dr. Kamal Shehadi, managing director of Connexus Consulting, gave speeches on ‘Investment-oriented Regulation’ and ‘Appropriate Regulation for Transition to Competition in Telecommunications’ respectively.

Of the specific issues that were highlighted, the growing trend of fixed-to-mobile substitution was perhaps mentioned most.

With fixed operators experiencing far lower growth in telephony services than their mobile counterparts, the traditional approach to regulation of pricing on fixed line services and universal service obligations was called into question.

“[In] retail pricing, particularly for local pricing, pressure... is very heavy and it’s not clear that [fixed providers] are a monopoly in the same way as [they] used to be. There are mobile phones in many families, even in low income families and they’re able to budget the use of [mobile] phones to make them affordable,” says Macmillan.

“Another area is universal service obligations, where traditionally the fixed line has been seen as the natural monopoly and therefore [has] had the burden of serving the entire country. [But] the ability to finance a mobile network is much easier than financing a fixed network. That raises questions over whether we [could be] looking at [universal service obligations] with a little bit more original insight,” he continues.

The ongoing, global issue of lowering interconnection rates between mobile and fixed operators was also highlighted. Amid calls for regulators across the region to do more to bring down interconnection rates, Muna Nijem, chairman of Jordan’s Telecommunications Regulatory Commission (TRC), showcased the authority’s early work in that area.

||**||Regulation|~||~||~|

The TRC has had to oversee arguments between fixed operator, Jordan Telecom, and mobile operator, Fastlink, over interconnection rates over the past few months. However, Nijem said that the regulator has set up a steering committee to oversee negotiations between the operators, and that the programme to lay down guidelines is nearing completion. “When people speak about interconnection fees, they mainly concentrate on customers, but there are many more issues,” says Nijem.

“We’re working on having a clear and balanced, comprehensive package [covering] wireless-to-wireless, mobile-to-mobile, mobile-to-fixed, fixed-to-fixed, fixed-to-mobile, and international calls. Above that there’s [the issue] of per-second billing for interconnection. We’re talking about finalising the process [this month] and [then] it will take about three months for implementation,” she adds.

The issue was also flagged up for other authorities. “You had the argument going on in Jordan between Fastlink and Jordan Telecom and I think this is going to be a pattern... a wave across the region as operators essentially argue over market share and revenue,” adds Macmillan.

With such issues high on the agenda, Nijem also highlighted the progress the TRC had made in preparing itself to be able to manage arguments and negotiations between operators. “We are in the process of equipping ourselves to be able to accommodate disputes,” she says, adding that the authority had expanded its workforce, taken on consultants and started shadow training courses for its employees.

However, Nihem said that the TRC would charge operators for its work in that area. “There should be some fees in it because it’s time consuming,” she argues.

Elsewhere, many of the sessions focused on the migration of the region’s core networks to IP, the growth of e-initatives in the region, expanding the use of data communications in the region, and the respective heads of satellite operators Nilesat, Arabsat, Inmarsat and Thuraya presented their future strategies.

On the mobile side, MTC-Vodafone also officially signed a deal with Kai Uebach, senior vice president of sales, Middle East and Africa, Siemens, for the installation in Bahrain of what could be the first commercial 3G network in the Middle East.

Following MTC-Vodafone’s successful bid for the island’s second mobile licence in April, the operator plans to roll out limited 3G services when it launches the new operation at the end of the year.

It will also adopt both UMTS and EDGE to support the services. “Siemens will install the communication infrastructure of the 3G network plus the main switching,” says Dr. Al Barrak.

As for future plans, Faysal Abou-Zaki, deputy general manager of Al-Iktissad Wal-Aamal, the event organisers, said two forums would be set up next year, one in Beirut and one in another as-yet-undecided country. The events will also be supplemented by smaller focus groups containing regulators and operators to encourage dialogue.

Abou Zaki also hailed this year’s event as a success. “There was major progress from last year. We had CEOs from six major operators, eight [telecoms] ministers, regulators and suppliers together and this is something that hasn’t happened before,” he says.
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