Cellular liberalization brings in more than US$ 4 billion in licenses to date for Arab governments

A new research note released today by Arab Advisors Group outlines and analyzes how cellular operators licensing deals have built momentum for privatization and liberalization in the region. So far, cellular licenses have brought in close to US$ 4 billion for Arab governments. Arab Advisors Group notes that while Morocco and Egypt structured winning deals, the Jordanians government has underestimated the potential value of the licenses.

Cellular operators licenses are proving to be a big cash cow for governments in the Middle East and North Africa (MENA) region, a new research released today by Arab Advisors Group, a new economy strategic research and consulting company based in Amman, Jordan.

According to the Arab Advisors Group research note, available for the company’s Strategic Research Service subscribers, with highlights released to the media today, the revenue generated by several successful MENA countries has been a major impetus for cellular liberalization in the region.

Overall, Arab Advisors Group estimates that liberalizing Arab MENA governments (such as Egypt, Morocco, Lebanon and Jordan) have cashed in close to US$4 billion since the introduction of private GSM operators in the region.

"Various countries have adopted different approaches towards granting cellular licenses to operators with varying degrees of success. Countries that are now embarking on privatization are looking with interest at these models and trying to learn from them," says Ahmed Naser, Arab Advisors Group Regional Research Manager. In the released note, Arab Advisors Group analyzes how various countries have structured monopoly and duopoly licensing deals that proved to be very profitable for both the operators and the licensees.

Arab Advisors Group also outlines the pitfalls of some governments who lost significant cash generating opportunities in their deregulation schemes.

According to Arab Advisors Group, countries that have licensed private GSM operators, like Morocco and Egypt has each created in excess of a billion dollar in direct licensing cash each, not to mention other indirect revenues that are also outlined in the note. Arab Advisors also believes that a country like Jordan has lost at least US$ 150 million of potential licensing revenue (calculated by bench marking with other countries) by bundling the second cellular license as a deal sweetener when attracting a strategic investor for the government owned national telecom provider. Two newly released research reports from Arab Advisors Group, Jordan Internet Landscape report and Jordan Projections report, give the most up to date and comprehensive analysis of the Jordanian Internet, telecommunications and IT landscapes.

Lebanon, on the other hand, is in a unique situation with all the major players in the region waiting in anticipation to see the result of the on-going negotiations between the incumbent two cellular operators, whose duopoly ends in 2002, and operating license end in 2004. "According to the Build, Operate, Transfer (BOT) agreement between the government and the two companies, Cellis and LibanCell, the government will automatically own the two networks and their subscribers in 2004, unless of course, they can reach an agreement to extend the licenses and buy their networks from the governments".

According to Arab Advisors Group, Lebanon has more than 725,000 cellular subscribers today. Overall, Arab Advisors Group estimates the total number of cellular subscribers in the Arab World to be more than 7.6 million subscribers, expected to grow to more than 15 million subscribers by 2002. Arab Advisors Group provides its customers with detailed country by country telecom, Internet, and technology projections and landscape analysis in addition to research reports outlining and analyzing the different trends in these hot industries, and periodical research notes analyzing major news and ongoing developments that affect company’s planning and strategic objectives.

Arab Advisors Group say the current suggested price for the licenses extension in Lebanon could help spur the local economy without further increasing the country’s national debt, estimated at US$ 23 billion.