Libya is a hugely promising future telecoms market and potential investors are already queuing up. But the route from opportunity to implementation remains uncertain.

Even before the overthrow of the Gaddafi regime, there were plans for initial public offerings (IPOs) to bring private capital into the telecoms sector. However, in March, the government halted the tender process for a contract to manage national network owner Libyan Post, Telecommunication and Information Technology Company (LPTIC) – a deal for which the UAE’s Etisalat had been a prime contender.

Investor interest

The reasons for the move are unclear, but investors remain enthusiastic about Libya: Qatar’s Ooredoo (formerly Qtel) and Kuwait’s Zain have shown an interest, while industry observers believe India’s Bharti Airtel, France’s Orange (formerly France Telecom), the UK’s Vodafone, and Russia’s Vimpelcom and its Egyptian partner Orascom Telecom could also be tempted.

The government has yet to confirm how it intends to move ahead with the development of the sector, following the decision to suspend the LPTIC tender. But the attractions of the Libyan market are clear. Although the population numbers only about 6 million, average per capita income is among the highest in the Arab world outside the Gulf – far above the levels in neighbouring North African states.

Moreover, the overthrow of the authoritarian Gaddafi regime, which kept a tight rein on the media and telecoms sectors, has opened up opportunities for more services.

Recent history has already provided evidence of the scope for growth. As a quasi-socialist economy, Gaddafi-era Libya was slow to allow competition in the telecoms sector. Until 2004, the only mobile operator was Al-Madar (now Al-Madar al-Jadid), a LPTIC subsidiary. That year, LPTIC created a second and rival mobile offshoot, Libyana. This hugely stimulated the take-up of mobile services. Within just two years, mobile market penetration – the number of mobile customer accounts as a percentage of the population – rose from one of the lowest in Africa to one of the highest, passing 100 per cent in 2008. By 2011, it was at 156 per cent because many people possess several SIM cards.

The infrastructure that could support a major upgrade of consumer services is already largely in place in Libya

This shows a thirst for telecoms services that could now lead to a rapid growth in demand for broadband. Less than 20 per cent of Libyan households have fixed-line telephones and only 17 per cent have internet access. The infrastructure that could support a major upgrade of consumer services is already largely in place, even though the 2011 civil war destroyed a fifth of the cellphone network.

The fixed-line teledensity is already relatively high because the Gaddafi regime invested heavily in communications systems in its final years. From 2006 onwards, it poured resources into the development of CDMA-2000 wireless local loop technology and the creation of a national fibre-optic backbone network, ADSL and WiMax broadband, improved international fibre connections and fibre connections to private homes. That does not mean future growth will be problem-free. The sector requires a major drive to improve the standard of services, which is widely regarded as poor; there is even an “I hate Libya Telecom and Technology (LTT)” Facebook page.

Political stability poses risks for investors as the situation in Libya is still fragile. There are major regulatory and policy issues to be confronted as well. Even while the LPTIC tender process was under way, it remained unclear whether the government was seeking a partner to invest only in the fixed-line network or whether the potential investor would also have the chance to take over either or both of its mobile arms, Libyana and Al-Madar al-Jadid.

The surprise decision to suspend the tender may suggest the government came to realise how much interest there was from potential foreign investors and so decided to rethink the future structure of the industry. At present, it remains unclear whether the authorities envisage LPTIC remaining a shareholder in both mobile operators or whether these would be entirely sold off to foreign investors, or in part to local private interests, by way of IPOs.

Regulatory framework

Industry analysts have argued that Libya needs a clear framework for the regulation of the telecoms sector to create a fair competitive environment, which would help the country attract the broadest range of investors.

With several big international names interested in the market, it makes sense to create an environment that could persuade them to strengthen their interest and make attractive investment proposals. It will be interesting to see the sort of offers that Libya attracts. Due to its booming hydrocarbons income, the country is under less financial pressure than many others.

The government in Tripoli has the luxury of choosing whether to make revenue generation its priority or whether to reinforce the priority that it gives to technical or service issues as key criteria in any tender process.