GCC Insights: Bahrain embraces comprehensive liberalisation of telecom sector

Bahrain is poised to open up the entire telecom sector for competition by July. In turn, this would make Bahrain the most liberal telecom market in the region.

To be sure, liberalisation involves allowing competition in mobile, internet, fixed-line, VSAT (very small aperture terminals) satellite networks and international paging. In 2003, the government set up the Telecommunications Regulatory Authority (TRA), charged with regulating and overseeing competition in the sector.

In the first phase, TRA granted a licence for a second mobile operator to a joint venture of Mobile Telecommunications Company (MTC) of Kuwait and Vodafone of the UK. The firm began its 15-year concession starting from December competing with Bahrain Telecommunications Co (Batelco). The new operator was providing direct benefits to the economy including introducing a third generation network and promising to invest $120 million on technology and training.

Following the failure of both mobile providers to agree on terms, the TRA issued an interim directive ordering Batelco and MTC Vodafone Bahrain to interconnect their telecommunications infra-structures. The ruling stipulates that subscribers should be able to transfer from one network to another without changing their handsets.

In March, carrying out the second phase of the liberalisation, the TRA granted a 15-year Internet service provider (ISP) licence to Bahrain International Exchange. Also, Bahrain Car Racing Company was awarded the VSAT. The TRA expects to allow competition in the fixed-line service during the summer.

Privatisation of Batelco

If anything, competition has proved useful to the incumbent operator. Batelco earned a net profit of $51.5 million in the first quarter of 2004, a 25 per cent increase over the same period last year. Among others, this was attributed to a reduction in costs and greater efficiency in operations.

Likewise, consumers are generally pleased with the far-reaching liberalisation, as they see an improvement in services and lower prices. In April, Batelco launched its WiFi service that provides clients with wireless high-speed Internet access at different locations.

In another step designed to enhance private sector competition in the telecom sector, the government has revealed its intention to divest its 37 per cent stake in Batelco. The ministry of finance and national economy has commissioned HSBC to advise on the sell-off.

Complete e-government

As part of a broader appreciation of online activities, the authorities are exerting efforts to have a complete e-government infrastructure including security and payment for e-commerce in place by the end of 2004. Officials at the ministry of commerce expect to have regulations adopted in a few months. The ultimate objective of e-government concerns eliminating red tape and giving powers to government establishments to improve efficiency and to stimulate action.

In May, the General Directorate of Nationalities, Passports and Residence launched an ambitious e-visa system, under which citizens of 33 nations can apply for entry permits online. The e-visa system is an online method of applying for visas for entry from anywhere in the world at any time. Certainly, the new electronic visa does not require a stamp on the visitor's passport prior to arrival in Bahrain. The e-visa costs seven dinars ($18.50), the same fee passengers currently pay at the airport. Those eligible for the e-visa include citizens of the US, Canada, Australia, New Zealand, a number of European countries and several Asian nations including Japan and China.

Mobile and fixed-line penetration rates in Bahrain stand at around 65 and 27 per cent, respectively. The figures are the second highest in the GCC after the UAE. The communications together with transport contribute nine per cent of Bahrain's GDP. Undoubtedly, the statistics are bound to improve, as the authorities liberalise the whole telecom sector.

- The author is assistant professor, College of Business Administration, University of Bahrain