Mobile growth has been so high for three reasons: strong competition; the undeveloped state of the fixed alternative; and the increased standard of living of the local population, resulting from the trickledown of huge oil revenues in the last two years.

'Algeria is a wealthy country in the context of Africa,' says Bigue Sagna, regional analyst at Pyramid Research. 'It costs an average mobile user about $25-30 to get online and at that price the bulk of the population can afford to use a mobile phone.'

The low price environment for users is the result of a highly competitive market. In 2004, existing mobile operators Algerie Telecom (AT) the state-owned incumbent and Djezzy the service provided by Egypt's Orascom Telecom since 2002 were joined by Nedjma, a subsidiary of Kuwait's Wataniya Telecom.

The entry of a third player has had a profound effect on the market. 'Nedjma's entry has been the driving force behind the expansion of the mobile market,' says Sagna. 'When Orascom entered the market, it faced an incumbent that had no incentive to be innovative, provide customer care or cater for a segmented market. It was easy for them to develop a dominant position. Djezzy only started really being competitive when Nedjma entered the market.'

The licensing of a third GSM operator has also had a dramatic impact on the performance of AT. Prior to 2004, Djezzy enjoyed a market share of about 85 per cent. But once Nedjma entered the market, this share dropped to 70 per cent, not only due to the new entrant's share still only 6 per cent at the end of 2004 but because of a resurgent state operator. By the end of 2004, it boasted almost a quarter of the market, compared with just over 10 per cent the previous year. 'The arrival of a third player made AT realise that it had to be leaner and more effective,' says Sagna. 'Before the entry of Nedjma, it didn't even have a prepay offering.'

The rejuvenated mobile operators have all benefited from a weak fixed-line offering. 'The excessively low fixed penetration rate has been a driver for mobile growth,' says Ziada. 'The quality of existing lines is not good and installation takes time and expenditure. Customer service has also been poor. Only two years ago people were saying that they had to wait a month to be connected to a fixed-line service, whereas a mobile service could be up and running the same day.'

There is competition in the fixed-line market a consortium of Orascom and Telecom Egypt was awarded the second licence in March 2005 but the entry of another player has failed to have a significant impact on the quality and reach of fixed-line infrastructure. 'A second operator normally only has an impact if there is an extensive existing network,' says Ziada.

In the context of Africa, Algeria's poor fixed-line penetration is not unusual. In fact, compared with many of its continental neighbours it is a robust performer, joining the region's strongest markets Egypt, Tunisia and South Africa in the 10-15 per cent penetration bracket according to figures from Pyramid Research.