THESE are momentous times for the world telecommunications industry. With the liberalisation agreement struck at the World Trade Organisation (WTO) in Geneva in February, 69 countries have made commitments to open up their telecoms sectors to foreign service providers. The degree of openness they are prepared to admit will vary greatly from country to country. Policing the new policies to assess compliance will be complex. But the pledges are final and irrevocable. ‘Once you have made a commitment to open your market, you cannot go back,’ says a WTO spokesman in Geneva.
The signatory states account for 90 per cent of all telecoms revenue world-wide. As a result of their market access commitments, foreign firms will be granted the right to own and operate independent telecom network infrastructure. The agreement includes voice telephony, data transmission, telex, telegraph, facsimile, private leased circuit services, fixed and mobile satellite systems and services, cellular telephony, mobile data services and paging.
The US and Europe were the driving force behind the deal, but the developing world was strongly represented. The presence of Middle East and North African countries was patchy; only Israel, Morocco, Pakistan, Tunisia and Turkey signed up. Pakistan and Turkey were among the nine governments that filed exemptions.
The agreement has been greeted with glee by the liberalisers and the International Telecommunication Union (ITU) predicts that the value of trade in telecoms, worth $100,000 million in 1996, will grow even more rapidly. Competition, privatisation and liberalisation have already brought huge gains in lower tariffs, higher traffic, faster network expansion and shorter waiting lists. The new deal should spread the gains to more countries.
‘It is important that developing countries become more closely integrated into this process as it can provide them with significant benefits in terms of infrastructure construction and the development of information processing industries,’ the ITU says in its latest development report.
The ITU argues that the readiness to open markets is merely a recognition of what has happened already – governments have lost the ability to determine who can carry outgoing calls or how they are routed. With the speedy development of calling cards and call-back services, almost all markets are open to some degree of competition.
As the limited presence at the Geneva talks suggests, the Middle East and North Africa are not in the forefront of this fast evolving multilateral trading system in telecoms. Only Jordan, Pakistan and Turkey are actively planning to privatise state-owned carriers. As an initial step, Jordan and Pakistan are planning to sell 26 per cent of their telecoms companies to a strategic equity partner this year.
In Pakistan, 12 per cent of Pakistan Telecom was issued in the form of convertible vouchers in 1994 and converted on the Karachi Stock Exchange in the second half of last year. Legislation is being prepared for a sale of the next stake in the company, which could come in June. Jordan’s sale should follow soon afterwards (see pages 7-9).
In Turkey, Goldman Sachs leads a consortium that has just been appointed to assess the value of Turk-Telekom. A 15 per cent stake, expected to earn an estimated $3,500 million, could be offered in early 1998 (MEED 28:3:97).
In the Gulf, the trend has been in the opposite direction. In recent years, Oman has bought out the UK’s Cable & Wireless (C&W) to take total control of the national telecoms company; Bahrain has reduced the C&W holding in Batelco to 20 per cent, but maintains a management services agreement with the UK-registered holding company.
There is a more open attitude towards cellular services. Because of the technologies and costs involved, foreign partners have managed to make inroads in some markets. Motorola, for example, is an investor in Jordan’s cellular services, which are soon to be opened up to other providers.
Lebanon provides the most striking example of international involvement; France Telecom and Telecom Finland have equity holdings in the rival services. Lebanon’s cellular service has also been a spectacular success, offering some of the lowest tariffs in the world. The network signed up 180,000 subscribers in less than a-year-and-a-half and accounts for about one-third of all Lebanon’s subscribers.
The region needs more stories of this kind if it is to raise teledensity and service standards. In 1995, only Bahrain, Kuwait, Qatar, Turkey and the UAE had more than 20 main telephone lines per 100 inhabitants (see table). Even these rates are low by the standards of countries with comparable incomes. At 9.62 lines per 100 inhabitants, Saudi Arabia has one of the lowest teledensities among 30 upper middle income countries, according to the ITU.
Estimates by the ITU of the likely investment in new main telephone services to 2000 in the Middle East and North Africa suggest that any expansion will be slow. Developing countries that have privatised or introduced competition – from Malaysia to Peru – are expanding their phone networks much faster. In some Middle East markets, the private sector is being allowed to operate pay phones, mobiles and some other services, and this could speed up the pace of development dramatically. As the Lebanese experience demonstrates, a rapid expansion of cellular services could be the best way to get around the difficulties that have delayed the expansion of fixed networks.