JORDAN: Pioneer for Arab telecom privatisation

04 April 1997

AS the most advanced telecoms privatisation in the Arab world, Jordan's progress towards a partial sale of its telecoms company is being monitored with interest. A full evaluation of The Jordan Telecommunications Company (JTC) by Merrill Lynch is due for completion by July and the proposed sale of 26 per cent of the company to a strategic equity partner is due to go ahead by the end of the year.

Although private operators have been allowed to provide cellular and payphone services in some regional countries, Jordan will be the first Arab country to admit private, foreign capital into the ownership of its fixed network. JTC is aiming high, looking to the likes of MCI, AT&T, British Telecom or France Telecom as the strategic investor.

The new structure has been a relatively short time in the making since the new Telecommunications Law was passed in 1995. JTC was converted from a government agency to a fully government-owned public share holding company on 1 January 1997, and is now responsible for provision of all fixed line services.

Everything else is already in the private sector. Overseeing both is the Telecommunications Regulatory Commission (TRC) which has the job of licensing new services, setting standards and providing consumer protection.

The immediate task for JTC is straightforward - to act as quickly as possible to clear a waiting list for 128,980 lines, 50 per cent of them in the Amman area, and to almost triple the supply to about 1 million lines or 20 lines per 1,000 inhabitants. This means boosting the network from its current level of 358,764 lines, 317,007 subscribers and a penetration rate of 7.3 lines per 100 inhabitants.

These goals are enshrined in the National Telecommunications Programme (NTP) and four supplementary projects. These are the Tla al-Ali project, which addresses the acute shortage of lines in the rapidly growing suburbs of Amman, and separate telecoms schemes in the Mafraq, Maan and Aqaba governorates.

The NTP will add 32 switches and 132 Remote Switch Units (RSUs) with a total capacity of 475,000 lines. The Tla al-Ali project is adding 30,000 subscriber lines, while the three regional projects will add a further total of 33,100 lines.

Projects under consideration include a new exchange for the southern coast at Aqaba with an initial capacity of 5,000 lines and the comprehensive expansion of the distribution network in the city of Aqaba. The upgrading of the Ashrafieh, Zarka and Irbid switches will raise capacity by another 57,000 lines.

Germany's Siemens and Alcatel of France have taken the major share of contracts for the expansion work. This is being funded from a mixture of sources including the European Investment Bank ($57 million), the World Bank ($20 million), the US' Export- Import Bank ($16 million), and an international bond offering of $50 million with self-financing of $50 million. JTC vice director-general for development Walid Taifour says the benefits of the new programmes should be apparent by the end of 1997.

The sooner the better

Under the new arrangements, the JTC has exclusive responsibility for the provision of fixed lines until 2002, but nothing is set in stone. If TRC director general Yousef Abu Jamous has his way, the fixed line network will be opened up to competition. Abu Jamous says he would like to see competition, and 'the sooner the better.'

Competition in the private sector is already gathering pace. Public paging was the first area opened to the private sector and services have been provided by Jordan Radio Paging Services (JRPS). The company now faces competition from a joint Saudi-Jordanian venture, United Saudi Communications Company (USC), whose Saudi partners already have experience operating a paging business in Saudi Arabia. The TRC has also received applications for licences for two public payphones services.

Jordan Mobile Telephone Services (Fastlink), operator of Jordan's first global standard for mobiles (GSM) network, is also facing competition. At present, the joint venture with the US' Motorola is scrambling to keep up with demand. Fastlink chief executive officer David Bosworth says that when the company began operations in October 1995, it expected to have 8,000 subscribers within 18 months. By March 1997, it had more than 23,000 subscribers placing an average of 200,000 calls a day. By the end of this year it expects to be catering for 45,000 subscribers.

Tinged by regret

By 1998, network coverage will extend to virtually every town and village in Jordan and all the major highways. Fastlink's pleasure at its rapid expansion is tinged by regret that the TRC is already preparing for a second GSM operator to be allowed into the market. This could happen immediately after Fastlink's four-year exclusivity period ends. Bosworth says he would welcome a second operator.

'A second service always expands the market and when competition comes in, it brings new opportunities,' he says. But he points out that Fastlink will invest JD 60 million ($85 million) on the development of infrastructure and pay a further JD 30 million ($42 million) in fees by the time its exclusive rights expire in October 1999. The company had been hoping to have a year without any competition in which to recoup some of this investment. That prospect now looks like a luxury that the TRC will not allow.

The provision of data services is already open to full competition and licences have been granted to nine companies. The first area to see direct competition is Internet services. Global One, the joint venture of Deutsche Telekom, France Telecom and the US' Sprint, has signed up 2,200 customers since it began operations in March 1996; local e-mail service provider NETS is ready to offer a full Internet service; and AT&T is coming into the market in the middle of this year under a turnkey agreement with the First Telecommunications Group (FTG), which includes provision of equipment and training. FTG is also working on Banknet, a data communications platform, for a number of Jordanian banks which are major shareholders in the company. Other companies are also planning to provide private services.

The granting of licences is a significant departure from past practice, but other factors are holding back development. Operating companies cite as impediments to faster growth the level of duty on imported equipment, the high licensing fees charged by the TRC, and the service fees charged by the JTC.

Fastlink estimates that no more than 50 per cent of the mobile phone handsets currently in use were actually purchased legally in Jordan. The other half have been hand carried into the country or purchased locally from smugglers. The price difference is substantial: a duty-paid handset retails for

JD 600-800 ($846-1,128); a smuggled set can be bought for JD 300-350 ($423-494). Recent reforms to Jordan's customs regime included a 10-15 per cent reduction in tariffs for computers, mobile phones and other equipment, but prices are still high by international standards.

The first companies into the Jordanian market have also paid a premium in terms of licensing and start-up costs. Global One general manager Imad Ayoub says his company had to pay JD 100,000 ($141,000) for its fibre optic cable. An equivalent company in Israel can get an automatic connection from national telephone operator Bezek. A 64 KB link to Washington costs $20,000 in Jordan; in Israel the same service costs $3,500.

The TRC's Abu Jamous is pushing for lower licence fees and a greater use of all new technologies. 'We want nominal fees and minimum interference in their business,' he says. 'And one of our jobs is to promote public awareness of the importance of information and new technology.' Jordan's growing number of private telecoms companies want to see such hopes translated into common practice.

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