The head of the Libyan Stock Exchange Suliman Al-Shahomy caused a stir of excitement in April, when he announced the government’s plan to sell its 40 per cent stake in the two state-owned mobile operators Libyana and Al-Madar Al-Jadeed.

The move is intended to attract foreign investment to the country and increase competition in the telecoms sector.

The privatisation of the operators, which are controlled by the General Post and Telecommunications Company (GPTC) is expected by the end of this year, once the Privatisation and Investment Board completes its financial assessment. The government will begin by selling off 5 per cent of the two firms in an initial public offering.

But what many failed to realise was Saif al-Islam Gaddafi, son of Libyan leader Muammar Gaddafi, had made the same announcement back in February 2007. The two companies, he said, would go private “within days”.

In early 2009, the government also announced it would issue a third licence for fixed and mobile services before the end of the year. Despite Dubai-based Etisalat and Turkey’s Turkcell offering their bids, believed to be worth around $1bn, nothing has come of it.

It also granted Al-Jeel Al-Jadeed and state company Libya Telecoms and Technology (LTT) a mobile virtual network operator (MVNO) licence. But neither company has launched such a service.

But despite the lack of progress in these areas, Libya’s telecoms industry is developing rapidly. It was the first country in Africa to break the 100 per cent mobile penetration barrier in 2008. The country now has one of the highest penetration rates in the region at 161.9 per cent.

The mobile sector is currently a duopoly, with Libyana having 72 per cent of the market share and Al-Madar Al-Jadeed with 28 per cent. There are about 10 million mobile subscribers in Libya.

The government has prioritised investment in telecoms, setting aside $10bn for the sector as part of its 20-year plan for 2005-2020.

As Obaidah Elmahquibi, Libya country director for Finland’s Nokia Siemens Networks says: “There is now a massive boost in telecoms infrastructure, and big advances like broadband will bring economic benefits.”

The government has invested heavily in a next generation national fibre-optic backbone network. It is constructing and developing ADSL and WiMax broadband services and has expanded the third generation (3G) sector in partnership with international suppliers including France’s Alcatel, Sweden’s Ericsson, Nokia Siemens Networks, and Chinese telecoms firms ZTE and Huawei.

“The industry in Libya is booming,” says Leif Edwall, Libya country manager for Ericsson. “Our business is growing and developing in Libya every day. We recently signed a deal with LTT for the entire Janzur resort to enable residents access to broadband connectivity reaching 1 GB per second.”

Back in March, UK-based Vodafone signed a non-equity cooperation deal with Al-Madar Al-Jadeed to offer Vodafone-branded services in the country.

“Libyan markets are opening up,” says Vodafone spokesman Simon Gordon. “This is a way for us to expand our presence without physically being in Libya.

“The telecoms industry is effectively a state-owned monopoly, that is very tightly controlled by the government.”

The GPTC owns Libyana and Al-Madar Al-Jadeed and controls the fixed line and data services. The country’s internet services, meanwhile, are operated by LTT, which controls the international gateway connectivity.

At the centre of the Libyan telecoms industry is Libyan leader Mohamed Gaddafi, Saif al-Islam’s half brother. He is chairman of the GPTC, Libyana and LTT and also serves as general secretary of the General Telecommunications Authority (GTA), the industry regulator.

Regulation

Said Irfan, research manager at International Data Corporation says: “Once the shares in the two companies are sold, a new operator launches and the licensed MVNOs operate, the General Telecommunications Authority (GTA) should find itself in a more active role in regulating the market.”

So far no company has announced an interest in buying shares in the two mobile operators. Whenever the privatisation gets under way it will be a slow process with 5 per cent chunks being listed until the government’s 40 per cent of stake is sold. Al-Shahomy says the sale will triple the market value of the companies on the exchange to more than $7.8bn.

The government is keen to offer the shares to local investors, but also hopes to attract foreign investment. Companies such as Egypt’s Orascom, Kuwait’s Zain and Qatar’s Qtel are expected to take an interest.

But the legal framework to protect investment in Libya is inadequate; there is no independent industry regulator and no check on the Gaddafis’ control over the economy, and this may deter foreign investors.

Some fear partial privatisation will provide a boost to the stock exchange rather than the liberalisation of the economy. But once the plans go ahead Libya will benefit from a stronger telecoms market. It will be progress, when it happens.