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Kuwait’s on-off plan to introduce a third mobile network has surfaced again. But incumbent operators, MTC-Vodafone and Wataniya Telecom, say they’re not worried by the prospect of increased competition.

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By  Richard Agnew Published  July 4, 2004

|~||~|Dr. Barrak: There is no market for a third operator.|~|Kuwait’s plan to license a third mobile operator has been on the cards for some time. But the move appeared to take a step forward last month after the country’s Parliamentary Financial Affairs Committee approved draft legislation that would create additional competition for the two existing providers, MTC-Vodafone and Wataniya Telecom. “We have approved the legislation after consultation with the Communications Ministry, which made no objections,” Abdulwahab al-Haroun, the Committee’s chairman, told AFP. “This will create more competition in the local market for the benefit of consumers,” he added. Both incumbent operators have been quick to dampen expectations surrounding the move’s potential impact. One question they raise is whether the proposal will actually come into effect. “So far, it has only been discussed in the Commitee. It is yet to go to Parliament and must be accepted by the Government,” says Dr. Saad Al Barrak, director general, MTC Group. Opinion also seems divided on the issue of whether there is space for a new entrant in a near-saturated market. Wataniya and MTC-Vodafone have already built up a combined user base of 1.7 million out of a population of 2.5 million. Kuwait’s penetration rate stood at 74.1% at the end of 2003, a steep rise from 28% in 2000. According to Arab Advisors, this was the highest figure for any country in the Middle East, marginally ahead of the UAE at 73.6%. A recent report by the research group also pointed to the Kuwaiti mobile market as a “model for healthy competition” in the Gulf, despite the two operators’ duopoly. “There is no market [for a third operator],” says Dr. Al Barrak. “A third operator has failed in 22 countries worldwide [which have] over 50% penetration — the smallest of which is four times the size of Kuwait. We welcome any competition but I don’t see any hope that the third operator will succeed,” he adds. On the other hand, others argue that the new entrant could be viable if it is able to adapt to the limitations of the market. The government has suggested that an operator could make a splash in Kuwait by offering 3G services, which neither incumbent has yet deployed. “It depends on the way the new entrant is structured, but in terms of growth there’s potential if you look at other markets with similar gross domestic product (GDP) per capita to Kuwait and the same number of mobile operators,” adds Mohsen Malaki, programme manager, communications, at research house, IDC CEMA. Any interested investor will, therefore, be keen to study the new entrant’s eventual make-up and whether it will be nimble enough to tailor its strategy to the needs of the market. According to the Committee’s statement, 40% of the company will be allocated to the government’s pensioner institution, 40% sold to the public, 10% given to pension funds and the remainder offered to strategic investors. “It depends who has management control. If it is the government then you could kiss the investment goodbye, but if it is an international operator then it could be good value,” says Malaki. The creation of a third operator would also hasten the need for an independent regulator to be set up in the country, the incumbents argue. “If the government wants to launch a third operator then there’s not much we can do — there’s no regulatory environment,” says Ahmad Haleem, chief executive officer, Wataniya Telecom International. Kuwait’s Ministry of Communications is currently responsible for regulating the two operators as well as collecting the fees they pay for transmission and running the country’s fixed network. But the government has been in discussions with the World Bank over the creation of an independent body to oversee the sector. “We badly need a regulator in Kuwait and to evolve the telecoms laws, which right now belong to the nineteenth century” says Dr. Al Barrak. “It’s like flying without navigational support,” he adds.||**||

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