Cordless revolution grows apace

22 April 1994

THE worldwide revolution in telecoms is continuing apace as the speed of technical innovation shows no signs of slowing. In the industrialised countries, there is an explosion of services offered on conventional networks and a surge in the use of cellular phones.

Advances in mobile telephony and the sharp reduction in its cost is of equal significance to the developing world, as it can leapfrog the inadequacies of existing networks. Company executives and state officials gathering in Cairo from 25-29 April for Africa Telecom will be debating strategies and promoting their products at a time of extraordinary change in the industry.

The future of telecoms seems set to be dominated by the advances in cordless communications. Rapid increases in the capacity of microchips and software have slashed the cost and size of handsets. The widespread adoption of digital transmission and the abandonment of the old analogue systems is also on the verge of creating new opportunities. It will enable greater information to be communicated clearly further and faster than ever before.

Practical action is already being taken on the leading edge of the new technology. The Iridium project, led by the US' Motorola but combining the financial and technical muscle of many multinational corporations, hopes to have a string of satellites ringing the world by the end of the century, which will make mobile telephony truly global. In theory, your handset will work from wherever you are in the world. In Europe, France's Alcatel is heading a group of companies that are promoting a similar scheme known as Global Star.

Such advances have huge implications for national telephone authorities and the governments that control them. There are already an estimated 30 million cellular phones in use worldwide. In China, 3 million pagers keep people in touch where there is a chronic shortage of conventional lines.

In the industrialised world, deregulation, privatisation and competition have stimulated the proliferation of telecoms services. Governments are retiring to the role of regulators, allowing the private sector to take the commercial risks of choosing the future technologies to favour.

In parts of the developing world, governments are less disposed to free such a sensitive sector from tight state controls. In the Middle East one exception is Kuwait where the Mobile Telephone Systems Company (MTSC) is mostly a private-sector concern, run commercially. Jordan is also trying to tempt private capital into its mobile telephone project.

GSM standard

The Gulf is not leading the way for structural advances in the industry but it does have a well-developed appetite for advanced technology. In the rapidly expanding mobile sector, the global system for mobiles (GSM) is the standard for the six GCC states and users will soon be able to use their handsets almost anywhere.

In February, Motorola won a $32 million contract for a 30,000-subscriber GSM system to be supplied to MTSC in Kuwait. The system will have the capacity to be expanded to 50,000 subscribers. MTSC's existing 50,000- line mobile network is already being enlarged by Sweden's Ericsson to 66,000 lines.

But in the absence of significant economic growth in Kuwait, the demand for mobile phones defies conventional logic. The service is not cheap either. In contrast to conventional calls, which are free, a mobile caller can be charged up to $1.30 a minute for a peak time call by MTSC.

Bahrain Telecommunications Company (Batelco) has awarded its GSM contract to Ericsson. During the tender process, the scope of the project was expanded to 15,000 lines from 10,000 lines which is a good indication of how rapidly demand is growing.

Batelco has already digitised its domestic network and broadened the scope of its services to include voice mail, video conferencing, conference calls and other options. Batelco, managed under contract and 20 per cent owned by the UK's Cable & Wireless, is a rarity in the Gulf, having a private shareholder which is also foreign.

Oman should be the next GCC state to invite tenders for a GSM system. Analysts expect a bid invitation to go out this summer. In the UAE, a 30,000-subscriber GSM system is being installed by the US' AT&T and is due for completion by July. Emirates Telecommunications Corporation (Etisalat) of the UAE has plans to expand the GSM system for another 70,000 subscribers very soon. Qatar was the first GCC state to adopt GSM and a system installed by AT&T and Siemens of Germany provides 35,000 lines.

Saudi Arabia's plans for implementing its GSM plans are more opaque. Bids for a 100,000-subscriber system were submitted last October but its future is uncertain in the light of the kingdom's budgetary squeeze. The bids were complex but AT&T appears to have offered a low price of $50 million after a series of discounts. The original specification for the system includes a provision for it to be doubled to 200,000 lines.

A private GSM system with 10,000 lines supplied by Siemens is understood to have been installed but access to the system is restricted. The existing national mobile system is grossly inadequate and there is huge pent-up demand. Mobile lines are reported to change hands at exorbitant rates.


The bigger prize in Saudi Arabia will be the contract to install 500,000 new conventional lines in the largest expansion of the system in more than a decade. Bids for this scheme were submitted last September and the lowest offer, from Ericsson and Japan's NEC, came in at $1,670 million after discounts. Siemens is already working on an earlier 190,000-line expansion.

Bids for the next expansion ranged up to nearly $3,000 million and the bargaining process to obtain further discounts and concessions is likely to be intense. After its success in winning the order to re-equip national airline Saudia, the US is expected to lobby hard for AT&T. Recent soundings suggest that the contract, because of its size, may eventually be divided among at least two separate suppliers.

The urgent expansion and upgrading of national networks is not confined to the Gulf states. Lebanon is speeding ahead with a countrywide programme secured at a very competitive price and will soon award a franchise for GSM (see box). In Syria, Siemens is working on a 700,000-line scheme and talks are under way about a further enlargement of the network. A subsea fibre-optic link to Cyprus is also being installed. Egypt has no major projects in hand but is expected to make a GSM award soon.

One of the biggest regional contracts of recent years is nearing completion in Iran, where Alcatel-SEL and Siemens are installing 1.2 million new lines. Bids for another 6 million lines were invited for the end of February.

The region is in the midst of a major investment in communications technology and the contract opportunities are being pursued by all the major suppliers. Any parallel moves to loosen the tight grip of the state on national telephone companies, through privatisation or the licensing of rival operators, would be sure to stimulate a further burst of activity.

Despite their taste for modern technology, few Middle East states are yet ready to adopt such modern ideas about telecoms management.

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