Maghreb telecoms privatisation plans stall

22 August 2008
Algeria and Tunisia have been slow to open up their national operators to private investors while Morocco is suffering from a lack of competition.

Algeria’s longstanding plans to privatise its state-owned telecoms operator are becoming an increasing embarrassment. On 9 August, it fell further behind its regional counterparts when Tehran floated a 5 per cent stake in its monopoly fixed-line operator, Telecommunications Company of Iran (TCI), on the Tehran Stock Exchange. A larger stake in the company will be offered to a foreign investor, or group of investors, early in 2009.

TCI’s investor relations still leave a lot to be desired. The unaudited accounts it published ahead of the sale were the first in its 37-year history. At best they are incomplete, and at worst they are misleading. But TCI’s listing is a giant step forward for the secretive state-owned operator, and it highlights Algiers’ inability to follow its North African neighbours, Morocco and Tunisia, in selling off a stake in its state-run telecoms operator.

Private limitations

The government originally planned to sell a stake in Algerie Telecom in autumn 2006 as part of its much-vaunted programme to privatise more than 1,000 companies.

Officially, the sale is to go ahead this autumn, but international operators interested in Algerie Telecom have been repeatedly frustrated by the lack of progress with the sale.

France Telecom, Kuwaiti operator Zain and Qatar’s Qtel have all expressed an interest in buying a stake in the company, but have been given little encouragement by Algiers in recent months. “Our last information, at the start of the year, suggested that the privatisation was still with the prime minister,” said Jamal al-Jarwan, chief executive officer (CEO) of the UAE’s Etisalat International, in an interview with MEED in May.

Private sector involvement in the telecoms sector in neighbouring Tunisia is also limited. Tunisie Telecom remains state-controlled despite the sale of a 35 per cent strategic stake in the company to Tecom, a UAE infrastructure company, for $2.3bn in July 2006. Tunis has also held back from inviting a foreign company to bid for a third licence in the country. This is perhaps less of an issue for a country whose population is less than one-third of the size of those in Morocco and Algeria. But the idea has not been abandoned completely.

“I do not think the third operator will come before 2009 or 2010,” said Ali Ghodbani, president of Tunisia’s telecoms regulator, Instance Nationale de Telecommunications, last November. “By then, it will be difficult for a third operator, but there is some room.”

Morocco’s government has been more willing to privatise its state operator than its neighbours. Rabat sold a 53 per cent controlling stake in Maroc Telecom to Vivendi, a French media conglomerate, in 2005, and a further 17 per cent is owned by private investors through the company’s cross-listing on the Bourse de Casablanca and Bourse de Paris. However, the government has not issued a new mobile phone licence since 1999 when it awarded the country’s second licence to Meditel, in which Spain’s Telefonica and Portugal Telecom each have a 32 per cent stake, for $1.1bn.

With a population of more than 30 million, Morocco is the only sizeable Arab country that still has just two mobile phone operators.

Of the Maghreb markets, Algeria has been by far the most competitive in recent years. Its telecoms regulator, the Autorite de Regulation des Postes & Telecommunications, has already issued three licences and has invited expressions of interest for a fourth.

Its three existing operators have licences to offer mobile services using second generation (2G) technology, while its upcoming fourth licence is for a third generation (3G) network.

The launch of a 3G network in Algeria is significant. The technology will enable the eventual licence holder to offer mobile internet and mobile email services in a country where access to high-speed internet connections is restricted by the cost of the service and the sheer expanse of the Algerian desert.

Currently, anyone outside the major cities who wants high-speed internet access has to use a satellite connection, offered by companies such as France Telecom Mobile Satellite Communications.

Penetrating markets

The three existing mobile phone licence holders have made good use of their 2G networks. The number of mobile phone customers in Algeria increased to 28.5 million in 2008, from 1.9 million in March 2004 .

Djezzy, a subsidiary of Egypt’s Orascom Telecom, now has 13.8 million customers, Algerie Telecom’s mobile operator Mobilis has 9.9 million, and Nedjma, owned by Kuwait’s Wataniya, has 4.8 million.

The rapid increase in mobile penetration is partly explained by a price war started by Orascom to protect its market share from rival operators.

Morocco’s mobile market has been uncompetitive in comparison. Maroc Telecom continues to enjoy a 66 per cent market share even though Meditel launched its mobile phone services eight years ago. The market share of the two companies has remained almost unchanged since the first quarter of 2004.

Meditel cannot argue that it has sacrificed market share for a larger proportion of the country’s highest-spending mobile phone users. In the first three months of 2008, Maroc Telecom generated $569m of revenues from its mobile business while Meditel managed just $160m.

Both companies increased their revenues at roughly the same rate: Maroc Telecom registered a 16 per cent year-on-year rise, compared with Meditel’s 15 per cent.

The fixed-line market in Morocco is a different story. Since the launch of its only rival in spring 2007, Maroc Telecom’s share of the market has collapsed to 48 per cent. Wana, a subsidiary of local private conglomerate ONA, increased its number of customers to 1.4 million by the end of June 2008 from 450,000 in the same month in 2007, a staggering 211 per cent increase.

Maroc Telecom still enjoyed growth in net profits of 15 per cent in the first half of 2008. The incumbent operator generated MD4.5bn ($605m) of net profits in the first six months of the year, compared with MD3.9bn the year before, exceeding the expectations of the senior management team.

“The revenues and profits during the first half of 2008 showed strong growth, which was above our expectations, despite increased competitive pressure and the increased price of food and fuel,” says Abdeslam Ahizoune, CEO of Maroc Telecom. Nonetheless, Ahizoune expects full-year revenues for 2008 to be just 8 per cent, a slow growth rate compared with its peers in the GCC markets.

Driving change

The competition between the two operators in the Tunisian mobile phone market has had a different outcome. Incumbent operator Tunisie Telecom, still 65 per cent owned by the Tunisian government, has lost ground to its private sector rival Tunisiana since the latter won its mobile phone licence in 2002. When the two companies reported their latest figures at the end of March, Tunisie Telecom had 4.4 million customers and Tunisiana 3.8 million.

Tunisiana has built its share of the market up to 46 per cent and its revenues are averaging $60m a quarter. How the financial performance of these two rivals compares is difficult to assess, because the government-controlled telecoms operator does not disclose its financial results. But Tunisiana has clearly been successful, despite a long-running dispute between its joint owners in which Orascom Telecom took Wataniya to court alleging that the Kuwaitis had broken the shareholder agreement that founded the company.

Late last year, the International Court of Arbitration in Paris ruled that Wataniya had breached its shareholder agreement, but not to the extent that it had to surrender its 50 per cent shareholding to Orascom. Both companies have now agreed to let an independent management team get on with the job of overtaking Tunisie Telecom.

If the regulator goes ahead with plans to issue a third licence, Tunisie Telecom’s task will be even more difficult. Perhaps then the government will decide to follow the Maroc Telecom precedent by selling a majority stake to private investors.

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