Arab Communications Markets

1. Arab Communications Markets Jawad Abbassi Jawad@arabadvisors.com ITU Private Sector Cooperation Meeting in the Arab Region – Amman October 2003

2. Outline • Communications and Internet situation in the Arab World • The effects of liberalization and privatization on infrastructure and service availability • The upcoming competitive landscape in Arab countries

3. A Regional Comparison *Figures by end of 2002 Source: Arab Advisors Group’s Reports

4. PSTN Penetration (%)

5. GSM Penetration (%)

6. Internet Accounts Penetration (%)

7. A Regional Comparison ** Figures by end of 2002 Source: Arab Advisors Group’s Reports

8. Regional GSM Subscriber Mix ** Figures by end of 2002 unless indicated otherwise Source: Arab Advisors Group’s Report “A KPI Scorecard of Arab Telecom Operators” – June 2003

9. Global PSTN Status Source: Arab Advisors Group’s Report “A KPI Scorecard of Arab Telecom Operators” – June 2003

10. Global GSM Status Source: Arab Advisors Group’s Report “A KPI Scorecard of Arab Telecom Operators” – June 2003

11. Global Internet Use Status

12. Mobiles and Mainlines • When Mobiles exceeded / will exceed PSTN lines: • Bahrain, Kuwait, Morocco and UAE in 2000 • Jordan, Lebanon, Oman and Qatar in 2001 • Saudi Arabia in 2002 • Tunisia, expected in 2003 • Algeria, expected in 2004 • Syria, expected in 2007 Source: Arab Advisors Group’s “A Comparative Analysis of the Cellular and Mainlines Markets in the Arab World” – October 2002 Source: Operators, Arab Advisors Group

13. Mainlines Market Share Index • ** Figures by end of 2002 • Index= % Share of PSTN Market/% Share of Population • Source: Arab Advisors Group’s Reports

14. Cellular Market Share Index • ** Figures by end of 2002 • Index= % Share of GSM Market/% Share of Population • Source: Arab Advisors Group’s Reports

15. Arab Advisors IVCU Index A total of 64.1 K circuits and 5.38 billion minutes * International Voice Circuits Utilization (IVCU) Index. Source: Arab Advisors - International Connectivity in the Arab World

16. Advanced Services Availability

17. Int’l Connectivity Operators • Two major international submarine fiber optic cables and three satellite operators • Arabsat • Intelsat • Inmarsat • SEA-ME-WE • FLAG

18. Regional Internet Bandwidth Capacity Index Source: ArabAdvisors Group

19. Regional Utilized Internet Bandwidth Index Source: ArabAdvisors Group

20. Competition in the Region? Source: Arab Advisors Group’s Reports

21. Why is Competition Important? • Better and more responsive service • Expanding bases of consumers of communications services • Cost-based pricing (tariff rebalancing, which could mean lower or higher rates) • Enhance global investor interest and create employment

22. Upcoming liberalization plans Bahrain • Second mobile license granted in April 2003 • Internet competition before the end of the year • Second fixed line operator (including ILD) expected by 2005 Egypt • Full competition (i.e. a third GSM operator) by 2005 • Second fixed line operator (including ILD) expected by 2006

23. Upcoming liberalization plans Jordan • iDEN operator to be launched in 2004 • A third GSM operator in 2004 • Second fixed line operator (including ILD) by 2005 Kuwait • Full competition (i.e. a third GSM operator) expected by 2005-2006 • Second fixed line operator (including ILD) expected by 2005-2006

24. Upcoming liberalization plans Algeria • A second fixed line operator (including ILD) expected in 2004 • Third GSM operator expected in 2004 Tunisia • Second fixed line operator expected in 2004

25. Upcoming liberalization plans Lebanon • A third GSM operator expected in 2004 • Second fixed line operator (including ILD) expected after 2005 Morocco • The first to introduce ILD competition in the region. Two Radio Trunking operators. • Expected to be the first to grant a second fixed line license in 2003/2004. Delays and one failed attempt

26. Upcoming liberalization plans Qatar • Second GSM operator expected by 2005 • No clear timeline for a second fixed line operator (including ILD) Saudi Arabia • STC partially privatized 30% in January 2003 • Second GSM license during the last quarter in 2004 • Second fixed line operator in 2008

27. Upcoming liberalization plans UAE • Duopoly of GSM market expected by end of 2005 • Second fixed line operator (including ILD) expected by 2005 Oman • Duopoly of GSM market expected in 2005

28. Upcoming liberalization plans Syria • No second fixed line operator, nor third mobile operator expected in the coming four years Iraq • Competition of GSM market expected by 2004 (Results of tender for 3 licenses should be issued by end of September 2003) Palestine • Jawwal’s license ends in 2003. Still no tender for a second operator. • PalTel has a 20 year license, which expires in 2015.

29. Global Telecom Operators in the MENA Region

30. Regional Operators

31. Regional Operators

32. The Lost Golden Years • The GSM license fees as cash cows for a few Arab governments • 1998-2000 were the years of massive telecom license valuations: Some Arab countries benefited (Egypt, Morocco), others lost the chance (Oman, Egypt, Lebanon, Jordan, etc.) • Markets remain growth markets and profitable. Much less hyped however!

33. Enabling Proper Competition • Policy on local loop unbundling (or infrastructure-based competition) • Tariff rebalancing • Phasing out of cross subsidization (VoIP termination example) • Transparent and strong regulators • A courageous judiciary • The possible role of GSM operators in spearheading full competition

34. Arab Advisors Group Arab Advisors Group provides reliable research, analysis and forecasts of Arab communications, media and technology markets. This presentation draws from around 180 reports published by Arab Advisors Group’s team. Arab Advisors Group consulting service has served new telecom ventures in the Arab World whose investments in Arab Telecom markets will exceed One billion US$. www.arabadvisors.com Tel: 962.6.5828849 Fax: 962.6.5828809 arabadvisors@arabadvisors.com