Algeria's issues

Andy Kitson, senior analyst with Juniper Research, tells CommsMEA about challenges facing the Algerian telecoms market.

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By  Administrator Published  December 30, 2008

Andy Kitson, senior analyst with Juniper Research, tells CommsMEA about challenges facing the Algerian telecoms market.

What is happening with the privitisation of Algerie Telecom?

It remains a sticky issue. The Algerian government has been trying to sell a significant stake in the company for more than a decade, but the issue continues to be undermined by political opposition to an outright sale to foreign investors, disagreements over the size of the stake to be sold, uncertainty over how much control the government will retain over the company and continued influence over the regulator.

Fixed and mobile subscribers are turning to fixed and nomadic wireless broadband platforms for their high-speed communications needs.

At the present time, the sale remains no nearer to completion, although the state plans to offload a stake of between 49-51% as soon as the company can demonstrate that it is competitive at the domestic and international levels.

Observers believe that regional telecoms powerhouses such as Etisalat, Zain, Saudi Oger, and MTN, as well as international players such as Orange are likely to bid for the stake when it becomes available, which now seems unlikely to occur for at least another two to three years.

What is causing the delay?

The problem is that Algerie Telecom remains the dominant operator in Algeria through its sheer size and ability to leverage its access to virtually all of the country's 3.1 million fixed-line telephony subscribers - a penetration rate of around 9%- by offering internet access and mobile telephony services, too.

The country's low rate of economic growth counts against a rapid take-up of new services, even those provided at low cost by Algerie Telecom itself.

This has discouraged privately-owned operators from entering the market. Algerie Telecom's fixed-line telephony monopoly was broken in 2005 when Orascom Telecom-owned Lacom was licensed to operate the country's first competitive fixed network.

However, Lacom has struggled to make an impact and turn a profit and, in recent months, Orascom has been mulling the closure of the business, which it operates in partnership with Telecom Egypt. Lacom has a limited customer base in the major cities and business centres, such as Algiers, and has virtually no presence beyond these areas.

Lacom has also accused the regulator of doing little to prevent Algerie Telecom from dominating the market - this may be a little unfair as it is the government rather than the regulator that ultimately dictates the regulatory regime and has a vested interest in preventing Algerie Telecom from losing too much market share.

What is the state of the mobile market in Algeria?

The mobile market is much healthier, with more than 28 million customers reported at the end of 2007, representing a penetration rate of nearly 85%. Here, the market leader is Orascom Telecom-owned Djezzy, which served 13.4 million subscribers at the end of 2007, a 27% rise, year-on-year.

Algerie Telecom's Mobilis subsidiary was serving almost 10.3 million subscribers at that time and was followed, at a distance, by Wataniya Telecom, with 4.5 million customers, up by 52% year-on-year.

However, all three networks are based on GSM technology, which has only sparingly been upgraded with next-generation solutions such as GPRS. This means that bandwidth-intensive multimedia services and applications cannot be run over these networks and the market is waiting on the licensing of 3G services.

When will 3G licenses be issued?

A 3G licence tender was said to have been planned for Q208, but this has failed to materialise. Operators are looking at the potential of 3G with greater interest than has been expressed in the potential privatisation of the incumbent.

Etisalat, Zain, Batelco, MTN, Orascom, and Qatar Telecom are all known to be interested in bidding, as is France's Orange. It seems likely that bids for the Algerian 3G licences could well match the US$590 million paid by operators in neighbouring Egypt for their 3G concessions.

In the meantime, Algerie Telecom has already contracted Huawei Technologies to supply it with CDMA2000 1x EV-DO equipment, a clear signal that the incumbent wants to lead the rollout of 3G services as soon as it is able to do so.

In the meantime, fixed and mobile subscribers are turning to fixed and nomadic wireless broadband platforms for their high-speed communications needs.

An unknown number of independent operators have acquired spectrum from the state to offer WiMAX-based services in Algeria.

Among these are Icosnet, which is deploying Aperto Networks' PacketMAX equipment in selected areas of the country. Galaxia Telecom is also deploying WiMAX services, as is Algerie Telecom.

3543 days ago
Nasreddine Mana

Indeed, companies that have shown interest in buying a stake in Algerie Telecom have to be patient. According to the CEO of Algerie Telecom, Moussa Belhamadi, Algerie Telecom is facing delays in expanding its network and equipement following the government's decision to stop financial support to the company. Unpaid invoices of up to US$904 million due to Algerie Telecom and owed by public bodies and ministries have badly affected the comapany's financial situation, according to Mr Belhamadi. In a recent statement, he said that his company had a three-year strategy to improve its competitiveness and that the government would not sell a stake in the operator before the end of this period. The privatization of Algerie Telecom would have a positive impact by bringing investment from international and well established operators such as Zain, Etisalat, Saudi Telecom or France Telecom, all of whom have shown interest in the Algerian market. Indeed, Etisalat has shown that it is usually ready to bid very high for investment opportunities in big markets. But for the moment, partnerships with existing operators - Orascom and Wataniya - might be the only way for investors to enter the market.

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