The most competitive and the most privatized Arab Telecom markets.

July 24, 2004

New analysis and research from the Arab Advisors Group reveals that Palestine’s Jawwal faces the most intense competition in its market from the four Israeli operators that cover the West Bank and Gaza without a license. Jordan ranks as the most competitive Arab market by choice, ranking second after the Palestinian Authority’s unique situation. Palestine and Sudan are the Arab World’s most privatized telecom markets: Total Private and Foreign proportionate share of 2003 revenues stood at 100% in Palestine and 72% in Sudan. Oman and Lebanon ranked at the other extreme with 100% full state ownership of the sector. This will change markedly in Oman with the second GSM license issued to Q Tel consortium this year.

A new report, “Competition Levels in Arab Cellular Markets & Privatization levels in Arab Cellular and Fixed Markets” was released to the Arab Advisors Group’s Strategic Research Service subscribers on July 22, 2004. This report can be purchased from Arab Advisors Group for only US$ 950. The 29-pages report, which has 19 detailed exhibits, assess the intensity level of competition in the Arab World’s cellular markets and the ownership structure and revenues of all fixed line and cellular operators in the countries covered by the study. The report covered the sixteen countries of Palestine, Jordan, Morocco, Yemen, Tunisia, Algeria, Egypt, Kuwait, Lebanon, Syria, Bahrain, Saudi Arabia, Oman, Qatar, Sudan and the UAE.

Any investment in this report will count towards a Strategic Research Service subscription should the service be acquired within three months from purchasing the report.

“In order to rate and properly assess the level of competition in the MENA region’s cellular markets, the Arab Advisors Group has created the Cellular Competition Intensity Index.” Mr. Jawad Abbassi, Arab Advisors Founder and President said. “The index takes into account the number of operators, packages, and services available in each country currently covered by the Arab Advisors Group, with each category being assigned a percentage weight as determined by its importance as an indicator of competition”. Mr. Abbassi added.

More specifically, the categories (and weights) include the following:

· Number of licensed operators by 2004 – 15%
· Number of working operators by 2004 – 40%
· Market share of largest operator by yearend 2003– 10%
· Number of current prepaid plans – 7.5%
· Number of current postpaid plans – 7.5%
· Availability of corporate offers – 5%
· Availability of Closed User Groups (CUGs) – 5%
· Availability of ILD (International Long Distance) Competition - 10%

“The weights assigned by the Arab Advisors Group add up to 100%, the perfect score a country can receive in terms of cellular competition. For the number of licensed and working operators, each figure was separately divided by the highest figure of that category, and subsequently multiplied by its weight.” Mr. Yaman Al Jundi, Arab Advisors Research Analyst who co authored the report with Ms Adila Bouleghraif said. “For example, in terms of licensed operators, Jordan has the highest figure in the region with four. Thus in the case of Kuwait, the Arab Advisors Group divided its current number of licensed operators with Jordan’s figure (two divided by four), resulting in a score of 0.5, in other words 50% of the highest regional figure. This number is then multiplied by 15% and added to Kuwait’s total score. The same technique was followed for the number of postpaid and prepaid plans.” Mr. Al Jundi explained.

For the “largest market share” indicator, the Arab Advisors Group first subtracted the largest market share from 1, and subsequently multiplied by the assigned weight of 10%. This rewards cellular markets with more evenly distributed market shares, a clear sign of stronger competition. Through the same approach, monopoly markets are penalized with a score of zero. The remaining indicators of service availability were simply measured in terms of YES or NO answers. Consequently, each country received the full percentage points for “YES” answers, and no percentage points at all for “NO” answers.

The most competitive Arab Cellular market was Palestine’s (with a Cellular Competition Intensity Index score of 85%), followed by Jordan (67%), Morocco (59%), Yemen (55%), Tunisia (53%), Algeria (52%), Egypt (50%), Kuwait (44%), Lebanon (43%), Syria (42%), Bahrain (40%), Saudi Arabia (31%), Oman (23%), Qatar (20%), Sudan (19%) and the UAE (14%).

On the level of privatization front, Arab Advisors analysis is intended to shed a light on the actual level of privatization and state ownership in each country measured by the proportionate share of total revenues. It is important to note that this analysis was based on full 2003 revenues. As such, for countries where new operators entered the market late in 2003 or in 2004, the results will not reflect the current status of the market. Case in point would be the situation of Bahrain for example, or Tunisia.

Lebanon and Oman had the least privatized telecom markets, with 100% government share (ownership) of telecom revenues. Both countries scored in the bottom half of the Cellular Competition Intensity Index (see Exhibit 1). Bahrain and Saudi Arabia scored the highest share in the public sector with 10%, but also ranked eleventh and twelfth out of sixteen countries in the Cellular Competition Intensity Index. In terms of local private sector revenue share, Palestine and Kuwait scored highest with revenue shares of 100% and 55%, respectively. Finally, in terms of foreign ownership proportionate share of revenues, Jordan scored well above the rest with a 61% revenue share, followed by Morocco, Sudan, and Algeria.

The revenue proportionate share was calculated by multiplying each operator’s share of total revenues by the percentage shares owned by government, public sector institutions, local private sector and foreigners in the country. For example, if a cellular operator contributes 30% of total revenues of the sector and is 50% owned by foreign investors, then the share of these foreign investors of the total revenues would be 30% multiplied by 50%, which equals 15%. Shares traded at the local stock exchanges of each country were calculated as local private sector even though many foreigners may hold them.

“Our results show that Palestine’s telecom market is the most privatized with the private and foreign investors having a 100% proportionate share of 2003 revenues. Coming second was Sudan (72%), followed by Jordan (68%), Kuwait (55%), Bahrain (53%), Yemen (53%), Algeria (48%), Syria (46%), Morocco (41%), UAE (40%), Egypt (37%), Qatar (35%), Saudi Arabia (20%), Tunisia (12%), Oman (0%) and Lebanon (0%).” Ms. Adila Bouleghraif from Arab Advisors research department added.

The Arab Advisors Group's team of analysts in the region has already produced more than 265 reports on the Arab World's communications and media markets. The reports can be purchased individually or received through an annual subscription to Arab Advisors Group's (www.arabadvisors.com) Strategic Research Services (Media and Telecom). To date, Arab Advisors Group has served more than 160 global and regional companies by providing reliable research analysis and forecasts of Arab communications markets to these clients.