Deregulation payback

The deregulation of telecommunications sector will not only change the dynamics of business in Jordan, but also of every Middle Eastern nation that is bringing in competition. The move may be challenging, however the benefits will be enormous.

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By  Sarah Gain Published  May 26, 2005

|~|Nijem-Photo1-BODY.jpg|~|"Established licensees have prepared for competition by offering improved services and lower prices," says H.E Muna Nijem of TRC. |~|The liberalisation of Jordan’s information communication technology (ICT) sector will drive the growth of the nation’s telecommunications market in excess of US$1 billion dollars annually, according to the Telecommunications Regulatory Commission (TRC). In addition, deregulation will make Jordan a competitive and dynamic marketplace, attracting new investments and innovative services to its shores not only from the regional players, but also from global investors.

“Market liberalisation has already proven to be a stimulus to demand for telecommunications services in the Kingdom. Established licensees have prepared for competition by offering improved services and lower prices,” says H.E Muna Nijem, CEO of TRC.

The telecommunications sector in the Middle East and North Africa (MENA) region has undergone enormous change over the last five years, with all regional nations opening up their telecommunications markets and establishing independent regulatory bodies. Global research firm IDC, which predicts sustained spending growth in the Middle East, says the region is moving in the right direction.

“There will be a lot of potential growth in the Levant countries such as Jordan and this will steadily increase, especially when the Iraqi market starts to open up and further liberalisation efforts start to materialise. “Our estimate for Jordanian IT spending alone in 2005 is US$141.7 million, which is an increase of 12% over 2004,” says Heini Booysen, software program manager for IDC Middle East and Africa.

Bahrain has awarded two mobile licenses to MTC-Vodafone and the incumbent operator, Batelco. Following the liberalisation, IDC predicted the Kingdom would prove to be an attractive prospect for major regional and global investors for providing international services to enterprise customers. Providers are now able to create network access points (NAPs) in the Kingdom, offering a cheaper transit alternative for international traffic.

The UEA is another Middle Eastern nation that is eager to attract investors by deregulating its telecommunications sector. Ahmed Bin Byat, director general of Dubai Technology and Media Free Zone, says the Emirate could see the emergence of competition in this sector by the end of the year. “The Telecoms Regulatory Authority (TRA) is working on draft licensing terms and I would expect to see some progress in licensing as early as the year end. The UAE [telecoms] market is very competitive by nature, despite having only one operator. It relates to customers and suppliers in a competitive manner and Etisalat is supportive of the liberalisation process,” Bin Byat says.

Etisalat is already taking a supportive role as part of the operator’s move to position itself as a strong regional player and diversify its reliance on the domestic market when market diversification becomes a reality across the Middle East. Etisalat is extending its investments in the MENA region with equity positions in the Kingdom of Saudi Arabia (KSA), Sudan and Zanzibar.

In March, the company established a global business unit, Etisalat International, which will spearhead its drive to capture foreign markets. Given the establishment of a strong incumbent operator and the effects of globalisation, Bin Byat believes the operator will have little problem in expanding: “Perhaps looking forward five or ten years, the UAE market will only be one of many in which Etisalat operates,” he says.

In KSA, Saudi Telecoms Company (STC) has started addressing its service-oriented systems ahead of Etisalat’s arrival in 2006. The telco has invested in a Tibco-based real time payment system (RTPS), from MENA eSolutions, which facilitates integration with the Al Rajhi bank’s 378 branches and 770 ATM machines, in order to strengthen its customer service. Telecom Egypt is also ramping up its customer services ahead of market liberalisation. It is working with Logic Tree to implement the region’s largest national automated directory assistance service. The project will be complete next year.

Against this backdrop, Jordan, which is already one of the region’s most competitive cellular markets, is starting to see market diversification power demand for telecommunications services. Jordan began the liberalisation of its fixed lines and international services in January, and since then the government and operators have been working together on improving the ICT infrastructure.||**|||~||~||~|Following the end of Jordan Telecom’s monopoly in the fixed sub-sector of the market in December 2004, the TRC has received a significant number of applications for licenses under the commission’s new integrated regime of licensing and regulation.

The regime is a key mechanism for the establishment of a fair competitive environment, which means the benefits of low costs and improved service that consumers have been enjoying will be supplemented by a greater choice of providers and service options, enhanced customer service and further overall reduction in prices.

In 1995, telecommunications sector accounted for 4% of the Jordanian GDP, however under the regulatory supervision of TRC, it increased to 6% by 2004. The regulatory body has now initiated processes for the transitioning of existing licensees to the integrated regime, in accordance with due process as specified under the Kingdom’s Telecommunication Law.

“It is understandable that existing licensees would have concerns about the future, having enjoyed privileges and market power under the old regime. We have initiatives in place now, however, that are designed to allay fears that the TRC will act in anything other than a fully transparent and consultative manner and in accordance with the Telecommunications Law,” says Nijem. “With the integrated regime, the TRC will fulfill its obligations to create a fair and competitive environment and remove anomalies and distortions from the market.”

The regulatory body is committed to the provisioning of new opportunities in Jordan in order to create a vibrant and fast-growing market. It also plans to continue to assure citizens that they will continue to reap the benefits of the liberalisation process, and make certain that businesses and entrepreneurs can effectively capitalise on the economic benefits and prospects afforded by the opening up of the market.

In one such initiative, the Ministry of ICT, Jordan Telecom, Intel and the Jordanian Technology Association have joined forces to address the country’s low computer and internet penetration rate. The Jordanian Minister of ICT, HE Dr. Fawaz H. Zu’bi believes the partnership will help to support the Kingdom’s diversification scheme. “We must focus on implementing innovative and effective approaches to leverage investments and broaden Jordan’s competitiveness in all sectors,” he adds.

Bin Byat identifies the crusade to improve the technology solutions and services market in the Middle East, and the exertion of commercial and external pressures for the region to fall in line with the international regulatory environment, as the impetus behind the liberalisation process, encouraging the deregulation of telecom markets in the entire MENA region.

This means that all new players and incumbent operators need to ensure they are attracting and retaining customers, and in the ICT business, where technology is not a key differentiating factor, the price, service quality and overall customer experience that companies are able to offer is critical. According to Bin Byat, “There’s an international move in a direction towards reform and companies in countries large and smaller and [emerging] nations will have to cope with these changes.”||**||

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