The prevailing wisdom is that Qatar will not begin to see the full fruits of its huge investments in liquefied natural gas (LNG) until early in the next century. But for some, the financial benefits of the multi-billion dollar programme have arrived rather sooner. At the state-owned Qatar Public Telecommunications Corporation (Q-Tel), the upsurge in project and investment activity has been the catalyst for unprecedented demand for its services and strong growth in its balance sheet.
‘We are reaping the dividends of a combination of factors,’ says Q-Tel general manager Izzat al-Rashid. ‘The economy is growing, the population is increasing, there has been a reduction in tariffs and we are offering better services.’ Q-Tel’s recent performance makes impressive reading. In the past five years, turnover has doubled to an estimated QR 1,000 million ($275 million), while profits have surged by almost 150 per cent, hitting QR 370 million ($102 million) in 1996. This year’s financial results should be even better: net profits are forecast to reach QR 430 million ($118 million) on estimated turnover of QR 1,200 million ($330 million).
The strong showing has been achieved amid record demand. In the public network, Q-Tel is having to cope with annual growth of 10-12 per cent, against a historic rate of 8 per cent. For its global standard for mobiles (GSM) service, the number of subscribers rose by 11,000 to 25,000 in 1996 alone, while demand for pagers increased by 30 per cent to 60,000.
Staying ahead of demand
Staying ahead of customer demand is Q-Tel’s main challenge. Although its public network has a design capacity of 350,000 lines – more than sufficient to meet the needs of its 150,000 subscribers – plans are already in place to build new exchanges to deal with surging demand in Doha and the Al-Khor/Ras Laffan area. Steps are also being taken to expand the GSM network. The US’ Motorola is expected to complete a major expansion by the end of the year, which will double capacity to 60,000 lines.
Q-Tel’s second goal is to reduce further its tariffs. Since 1995, the company has embarked on an ambitious programme, aimed at bringing its tariffs into line with the lowest offered anywhere in the Gulf. Charges on international calls have been slashed by at least 50 per cent. Calls to the US now cost QR 8 a minute, compared with QR 13-14 a minute two years ago. GSM charges will also be cut by 25 per cent once the expansion programme is complete.
The tariff reductions are not only aimed at giving customers better value for money. ‘The high charges were not helping us to popularise our services, particularly on the international side,’ Al-Rashid explains. ‘When we first cut our international charges in 1995, we saw demand rise by 22 per cent, compared with the previous year’s 7-8 per cent. Following the recent cut in charges, we expect volumes to increase by 30 per cent in 1997.’
The ongoing revolution in the global telecommunications market is leading Q-Tel to expand its horizons. Establishing regional and international alliances has become a priority. ‘We recognise that in five years time, the existing communications frontiers will no longer be there. We are therefore going flat out to get access to satellite telephone services,’ Al-Rashid says. Q-Tel is a founder shareholder, with a 10 per cent stake, in the Thurayya satellite programme, under development by a consortium headed by the Emirates Telecommunications Corporation (Etisalat). It has also recently raised its stake to 100,000 shares from 10,000 shares in ICO Global Communications (Holdings), a private international company established in 1995 to provide global mobile satellite-based communications.
Q-Tel’s high profits and its commercial viability make it an obvious candidate for privatisation. Al-Rashid acknowledges that two years ago, when the government first declared a commitment to privatisation, Q-Tel was high on the list of prospective candidates. However, he says the plan has now been delayed.
Al-Rashid’s personal view is that Q-Tel would be an ideal choice to start a privatisation programme. Having said that, he also wonders what benefits consumers would derive from a sell-off. ‘Although we are government-owned, Q-Tel is very efficiently run by a professional staff on a commercial basis. I don’t think privatisation in itself would much improve the services on offer. However, it would allow the public to have a say in the running of the organisation. That in turn could lead to the discontinuation of certain services. I am sure that there would be some private shareholders who would not agree to providing subsidised services to rural, low-income families, as we do at present.’
Consequently, Al-Rashid argues consumer interests would be better served if the Qatari telecommunications market was first liberalised. ‘My feeling is that rather than privatising Q-Tel, we should first have competition,’ he contends. ‘In that way, there would be benefits to all. We have already opened the door to international companies in the oil and gas sector. Why don’t we do it in telecommunications, where the potential for growth is tremendous.’
A further incentive to liberalise comes from membership of the World Trade Organisation (WTO), which will oblige Qatar to implement the liberalisation measures laid down in the General Agreements on Tariffs & Trade (GATT), including those relating to telecommunications. ‘Whether we like it or not, we have to prepare for greater competition,’ Al-Rashid foresees. ‘It is something that will happen and not go away.’