GCC Insights: Telecom liberalisation makes cautious progress
The WTO regulations require member countries to open up their telecommunications sector by 2005. Of all the GCC countries, only Saudi Arabia has yet to be admitted to the WTO, which anyway is expected by 2004. Thus far, competition exists in mobile service in Kuwait, which should be followed by Bahrain by year-end and possibly Oman and Saudi Arabia next year.
Kuwait was the first GCC country to end its monopoly of telecom services. Two firms, Mobile Tele-communications Co (MTC) and National Mobile Telecommunications Co. (Wataniya) provide mobile services.
Now that private firms are providing the GSM service with no apparent undue costs to the consumers, the authorities are contemplating granting a third licence.
Liberalisation of the telecom sector is in full swing in Bahrain. The government has set up the Telecommunications Regulatory Authority (TRA) to oversee the liberalisation process. In April, the TRA granted licence for a second mobile operator to a joint venture of MTC of Kuwait and Vodafone of the UK.
MTC Vodafone Bahrain has a 15-year concession to offer GSM services for local and international calls. Signalling its commitment to Bahrain, the company has decided to exercise the option to develop the third generation (3G) technology.
The firm has disclosed plans to invest some $120 million in Bahrain. In order to ensure fair rivalry, the TRA has warned of consequences for anti-competitive behaviour, notably price-fixing between the incumbent Bahrain Telecommunications Company (Batelco) and MTC Vodafone Bahrain.
In Oman, the authorities had adopted numerous measures towards opening up the telecom industry.
Licence
Oman Telecommunications Regulatory Authority was formed as an independent regulatory body; it is planning to issue a second GSM licence by the end of this year. Also, 20 per cent of state-owned Oman Telecommunications Co. (Omantel) will be offered for sale in an initial public offer within the next few months.
Originally the government intended to keep 51 per cent of Omantel and offer 40 per cent to a strategic partner and 9 per cent to institutional investors. The change reflects absence of investor interest in the company.
In Saudi Arabia, the authorities had taken steps towards privatising the telecom sector.
In late December, some 20 per cent of Saudi Telecommunications Co. was offered for sale, a move that generated about $4 billion.
The next plan calls for allowing entry of foreign operators in the mobile line by next year. Another proposal calls for two GSM licences, one next year and a second in 2006.
In the UAE, the telecom sector has yet to witness competition. Ironically, it is suggested that profitability at Emirates Telecommunications Corp (Etisalat) has served to reinforce its monopoly.
As such, Etisalat has used its revenues to invest in state of the art technology. Like the UAE, Qatar has not indicated plans to allow a competitor to Qatar Telecom (Q-Tel). Thanks to investments by Etisalat, the UAE leads the Gulf countries in terms of mobile statistics.
According to International Telecommunications Union as of 2002, the UAE commanded 76 subscribers per 100 inhabitants for the GSM versus penetration rates of 58 for Bahrain, 43 in Qatar, 39 in Kuwait, 12 in Oman and 11 in Saudi Arabia.
The mobile service represents a substantial of the total telephone subscribers in the GCC, specifically 69 per cent in the UAE and Bahrain, 65 per cent in Kuwait, 60 per cent in Qatar and Oman and 44 per cent for Saudi Arabia.
Comprehensive liberalisation of the mobile industry remains an ambitious goal in the GCC.
However, there is growing interest in deregulation of the GSM network in the Gulf.
Jasim Ali is assistant professor, College of Business Administration, University of Bahrain
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