Licensing in Morocco M. ELKADIRI, Technical Director, ANRT elkadiri@anrt.ma

1. 1st REGULATORY MEETING FOR THE ARAB REGION Licensing in MoroccoM. ELKADIRI, Technical Director, ANRTelkadiri@anrt.net.ma Algiers 19-21 April 2003

2. LICENSING : A TRANSITION PHASE IN THE LIBERALIZATION PROCESS • State owned monopoly • Transition period (limited competition) • Complete deregulation (full competition) • key decisions are driven by need to deliver operator benefits to create healthy market: • Limited price reductions • No market value destruction • Operator´s viability guaranteed • Encourage development of infrastructure and of new service offerings • But, avoid any unnecessary burdens for operators and regulators • decisions are driven by focus on consumer benefits: • High price reduction • Broad range of service offerings • Strategic focus • Key regulatory moves • Tariff re-balancing towards cost • Controlled increases in number of licenses • Managing incumbent to be prepared for competition • Creating favorable regulatory environment for entry (e.g., interconnection) Arbitration of interoperator disputes

3. Legal Framework : REGIMES in the MRC TELECOM SECTOR • Licenses for public networks; • Authorizations for the independent networks; • Declaration for value added services ( such as the Internet..); • Freedom for the internal networks;

4. LICENSE STRATEGY IN THE CONTEXT OF A BROADER REGULATORY STRATEGY • Objectives • Key levers • Action plans • Regulatory objectives and constraints • Perform diagnostic of Moroccan market • Understand regulatory objectives and policy priorities • Determine external constraints and draw implications for the licensing strategy • License strategy • Industry structure, license scope • Target operator profiles • License details • Rights and obligations • Bidding process • Award criteria • Guidelines on levers • Interconnection rates and regime • Equal access terms • USO source/structure • Other regulatory levers • Support strategy using • Interconnection • Equal access • USO • Direct incumbent regulation • Consider adaptations to regulation of incumbent, e.g., quality of service requirements • Details on incumbent regulation • CdC, including any future changes

5. SHORT DIAGNOSTIC OF THE MOROCCAN MARKET An investigation into the key problems for Moroccan market • Availability of services • Prices • Customer service (QoS) • Service needs ( business and residential) • Specific markets valuation Short diagnostic of the Moroccan telecom sector Understanding of regulatory objectives and policy priorities Understanding of constraints in the transition phase

6. UNDERSTANDING OF REGULATORY OBJECTIVES AND POLICY PRIORITIES Short diagnostic of the Moroccan telecom sector • Choosing a regulatory objective scheme requires an analysis of trade-offs • Ensure harmonious development of the sector • Create benefits for existing customers • Take into account the impact on the overall economy • Evaluate impact on government finances • These objectives and priorities suggest what “success” could mean for the regulator Understanding of regulatory objectives and policy priorities Understanding of constraints in the transition phase

7. UNDERSTANDING OF CONSTRAINTS IN THE TRANSITION PHASE Short diagnostic of the Moroccan telecom sector • While the regulatory objectives define the goals of the licensing process, external political and legal constraints will limit choice in designing the licenses • limited number of new players (agreed with government) • license terms will be limited by the bounds of existing regulations • These constraints should be seen as part of a transition phase where the number of competitors may be limited to ensure investment in service offering • The regulatory objectives and external constraints lead to some key implications for industry structure in the transition phase • Beyond the transition phase, regulation will change Understanding of regulatory objectives and policy priorities Understanding of constraints in the transition phase

8. LICENSE STRUCTURE MUST MAXIMIZE VALUE TO BOTH BIDDER AND REGULATOR • attractive financial opportunity • Maximize value to bidder • Fits with overall strategy • Any license option must meet both the bidder’s and the regulator’s criteria in order to maximize the total value generated • Maximize value to bidder and regulator • Delivers success against the regulatory objectives • Maximize value to regulator

9. A BALANCED REGULATORY ENVIRONMENT • Balanced Interconnection regulation • Right to interconnect at all levels with multiple points of interconnection • Decline towards competitive cost-based rates • Credible dispute resolution mechanism • Interconnection • Pricing • Pricing freedom to the largest possible degree • No price discrimination allowed • USO • USO policy must be fair as all operators will contribute to the fund And…… preselection, unbundling, number portability…

10. Licensin in Morocco Legal Framework :The Telecom Act of ’97 • Licensing regime for new entrants • Standard Interconnection Offer • Free setting of commercial tariffs by operators • Creation of an independent regulator • Manages licensing process for new operators • Arbitrates interconnection disputes • Manages frequency spectrum and allocates frequencies to operators

11. Legal Framework : OPERATORS RIGHTS • Right to Interconnexion. • Right to access the state public and private domain • Right to access the ‘high level points’ • Right to frequencies • Freedom of prices with the exception of universal access services prices. • Right to numbering.

12. LEGAL FRAMEWORK : LICENSING PROCEDURE • Set and exploitation of telecommunication networks • Prescriptions • Drafted by ANRT • Approved by the administration • Licenses instruction : ANRT Call for bid License • Attribution decree

13. LEGAL FRAMEWORK: LICENSES INSTRUCTION • SELECTION PROCEDURE Choice and Weighting of the different criteria Criteria Definition Diminishing the uncertainties Depend on the license objectives • Decomposition of the criteria (to be measured) • Minimization of subjective factors • Beforehand communication of the rules related to call for bid defining the procedures and the criteria

14. License elements GSM 2 in MOROCCO • Discussions beforehand for the definition of the elements • Call for interest • Pre-qualification • A true complete license : • Authorization to establish its own infrastructure • Dedicated GSM bands • Dedicated numbering • Free tariffing • Own international gateway (2002) • Defined interconnexion scheme • BUT • No negotiations afterward • Strict deadline

15. 2nd GSM LICENSEPREDICTABILITY OF LICENSE TERMS Terms of license = tender documents + bids + = (coverage, fees, QoS,…)

16. 2nd GSM LICENSEEVALUATION CRITERIA

17. 2nd GSM LICENSEEVALUATION RESULTS

18. 2nd GSM LICENSEA SUCCESS STORY The record license fee reflects investors perception of a low regulatory risk and a clear and transparent licensing process

19. RESULTS OF THE MOBILE LIBERALIZATION: Tariffs going down Evolution of Mobile Communication tariffs (Incumbent post payed tariffs) 97 Telecom Act Tariffs(Dh)/min ( VAT excluded) GSM2 license Fixed long distance tariffs have been readjusted Prix de la minute (en Dh hors taxes) Tariffs(Dh)/min ( VAT excluded) GSM2 license

20. RESULTS OF THE MOBILE LIBERALIZATION COVERAGE OF THE INCUMBENT’S NETWORK -> 61.0 - 68.0 -61.0 - 75.0 -68.0 - 80.0 -75.0 - 80.0 -86.0 - 110.0 -86.0 - <- 110

21. 2nd GSM LICENSE:Some Lessons • Clear regulatory framework (interconnection regime, dispute settlements, frequency allocation process…) • Independent regulatory agency • Transparent licensing process • Huge market potential

22. Awarded LICENSES Selection Criteria • Bidder capabilities • Human ressources • Financial ressources • Parteners GMPCS GSM • 60% Licence fees • 20% Coverag and QoS • 15% Tariffs • 05% Coherence of the bid Licence: 1.1 B $ VSAT • 50% Licence fees • 25% Technical Coherence • 25% Tariffs Licence: 10 M $ • Bidder capabilities • Human ressources • Financial ressources • Parteners Trunk Systems

23. Moroccan Teleco Market Overview Opérateurs Opérateurs de Opérateurs Opérateurs Autres sociétés principaux licences VSAT GMPCS 3 RP Orbcom Maghreb Global Star, SpaceCom Inquam Tesam Maroc Médi . Services Internet Telecom Télécom Télécom European (ISP) Telenor . Distributeurs DataComm Gulfsat Moratel . Conseil en Maghreb Maghreb télécommunication Services offerts : Soremar . Téléphonie fixe, Equipementiers Thuraya Téléphonie mobile . Telex , fax, videotext Maghreb . Transmission de données Services offerts : . Téléconférence Services offerts : . Téléphonie . Internet . Vidéoconférence , Services offerts : . Radiomessagerie . Téléconférence . Fax C Réseaux . Transmission télévision . Intranet radioélectriques . Messagerie vocale . Internet . Echange à ressources . MARNIS . Services et de messages partagées (services numériques) solutions ( iDen et Tetra ) . Data Intégration de réseaux “avancés”

24. CONCLUSION • Licensing process should fit the actual environment, as well as the development objectives of the sectors. • It should be tailored to take into consideration • The exact needs of the operators, the regulator and the state, • With a view of maximizing their profits, and those of the end users.

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