Saudi Arabia LiberalizationStrategyforSaudiArabiaICTMarketE

June 21 2005
Liberalization Strategy for Saudi

Arabia’s ICT Market
I. Saudi ICT Investment Environment and Market Assessment
II. Liberalization Enablers
III. International Liberalization Experience

A. Saudi Investment Environment
B. Saudi ICT Market Assessment
I. Liberalization Enablers
II. International Liberalization Experience

Our study of the ICT investment environment in Saudi Arabia will cover three
broad topics
Review of ICT Investment Environment in Saudi Arabia
11
Current
Current investment
investment environment
environment in
in the
the ICT
ICT sector
sector
22
Investment
Investment potential
potential in
in ICT
ICT sub-sectors
sub-sectors
33
Entrepreneurial
Entrepreneurial innovation
innovation and
and startups
startups in
in ICT
ICT sector
sector
Net capital investment in the non-oil private sector has increased by 58%
since 2000
Net Change In Fixed Capital Formation By The Non-oil Private Sector

11
6,217
38
5,364
Net capital investments $US million
5,210
Oil barrel price $US

29
28
3,035 3,112
24 25
8%
=5
New
New Investment
Investment Law
Law GR
CA
1,394
18
862
13
1998 1999 2000 2001 2002 2003 2004

Source: Saudi Arabian Monetary Authority
The investment law has been changed to stimulate more foreign investments
Investment Laws in Saudi Arabia

11
1979
1979 Investment
Investment Law
Law 2000
2000 Investment
Investment Law
Law
Number
Number of
of companies
companies 1609
1609 2449
2449
Results
Results
Total
Total investment
investment (US$
(US$ billion)
billion) 50
50 16
16
Period
Period covered
covered 1979-2000
1979-2000 2000-2004
2000-2004 (Sept)
(Sept)
Law
Law favors
favors joint
joint ventures
ventures between
between Saudis
Saudis and
and
Foreign
Foreign ownership
ownership non-Saudis
100%
100%
non-Saudis
Restricted
Restricted to
to projects
projects with
with technology
technology and
and
Sectors
Sectors expertise transfer
Most
Most except
except few
few strategic
strategic including
including telecom
telecom
expertise transfer
Tax
Tax holidays
holidays of
of up
up to
to 10
10 years,
years, then
then 25-40%
25-40% tax
tax
Tax
Tax on profits
30%
30% on
on profits
profits
on profits
Changes
Changes
Only
Only to
to projects
projects with
with Saudi
Saudi ownership
ownership more
more than
than
Incentives
Incentives 25%
Same
Same incentives
incentives offered
offered to
to local
local companies
companies
25%
Real
Real estate
estate ownership
ownership Real
Real estate
estate in
in name
name of
of Saudi
Saudi partner
partner Ownership
Ownership in
in name
name of
of company
company
Capital
Capital No
No explicit
explicit restrictions
restrictions Starting
Starting with
with 22 million
million SR
SR depending
depending on
on sector
sector
Starting
Starting with
with Ministry
Ministry of
of Industry
Industry and
and with
with
Licensing
Licensing several ministries involved
One-stop
One-stop shop
shop at
at SAGIA
SAGIA
several ministries involved
Source: SAGIA (2005)
Foreign investment levels remain relatively low despite the increasing number
of permits offered by SAGIA under the new law
Foreign Direct Investments in Saudi Arabia

11
FDI Inflows FDI Inflows in 2003

(million USD) (% of GDP)
5,000 140% 129%

4289
4,000 120%
3,000 New Investment Law 100%
2,000 80% 72%

57%
1,000 60%
20 208
0 40%
26%
1998 1999 2000 2001 2002 2003 12%
-1,000 -780 20%
-615 4%
-2,000 0%
-1884 Ireland Bahrain Malaysia Egypt Saudi UAE
-3,000 Arabia
Source: UNCTAD
There are 3 public agencies that directly oversee investments in the ICT
sector
Saudi Public Agencies Overseeing Investments In The ICT Sector

11
Commission
Commission ofof Information
Information
Saudi
Saudi Arabian
Arabian General
General Investment
Investment Ministry
Ministry of
of Communication
Communication && Technology
Technology && Communication
Communication
Authority (SAGIA)
Authority (SAGIA) Information Technology (MCIT)
Information Technology (MCIT) (CITC)
(CITC)
One-stop
One-stop shop
shop for
for foreign
foreign Sponsored
Sponsored the
the Saudi
Saudi ITIT Plan,
Plan, License
License communication
communication service
service
investors
investors which
which should
should bebe the
the blue
blue print
print for
for operators
operators in Saudi Arabia, and
in Saudi Arabia, and
public
public sector
sector initiatives
initiatives in
in the
the allocate
allocate frequency
frequency
ICT
ICT is
is considered
considered aa “strategic”
“strategic” next 5 years
next 5 years
sector
sector Oversee
Oversee thethe telecom
telecom sector
sector in
in
Set
Set general
general policies,
policies, terms
terms of
of competition,
competition, pricing,
pricing, and
and
developmental
developmental plans
plans and
and other
other relevant
relevant issues
issues
programs,
programs, and
and regulations
regulations for
for the
the
telecommunication
telecommunication and
and IT
IT Stimulate
Stimulate growth
growth in
in the
the
sectors
sectors communication
communication and
and IT IT sector
sector
Coordinate
Coordinate e-government
e-government
initiative
initiative
To lead the region and develop a globally competitive ICT sector, Saudi
Arabia has to improve significantly
Ranking of Selected ICT Investment Related Indexes

11
Regional
Regional ranking
ranking of
of selected
selected ICT
ICT investment
investment related
related indexes
indexes
Intellectual
Intellectual Avail.
Avail. of
of
Gov’t
Gov’t ICT
ICT Subsidies
Subsidies VC
VC Days
Days toto Technology
Technology Overall
Overall
property
property scientists
scientists && index
priority
priority protection for
for R&D
R&D availability
availability start a firm
start a firm Engineers index index
index
protection Engineers
Qatar
Qatar 55 55 44 22 45
45 88 22 11
UAE
UAE 11 11 33 44 38
38 77 11 22
Bahrain
Bahrain 44 22 66 33 52
52 55 33 33
Oman
Oman 99 88 77 10
10 60
60 10
10 99 44
Jordan
Jordan 33 44 88 66 27
27 11 44 55
Tunisia
Tunisia 22 33 11 55 32
32 33 55 66
Saudi
Saudi Arabia
Arabia 88 99 55 77 109
109 99 66 77
Egypt
Egypt 66 66 99 99 48
48 44 77 88
Lebanon
Lebanon 10
10 10
10 10
10 88 78
78 22 88 99
Source: World Competitiveness Report (2005), Arab World Competitiveness Report (2002-3). Not all ranked countries are listed.
The National IT Plan is Saudi Arabia’s blueprint to stimulate the ICT sector,
but the development and implementation of the plan by government agencies
is taking a long time
Government Priority
11
Vision
Vision Selected
Selected Targets
Targets in
in the
the 5-year
5-year plan
plan
The
The transformation
transformation withinwithin two
two
decades into an information
decades into an information
society
society and
and thethe attainment
attainment of of aa Local
Local ITIT industry:
industry: 55 billion
billion SR
SR
digital
digital economy
economy so so as
as to
to increase
increase IT
IT sector
sector will
will employ
employ 2% 2% of of the
the
labor
labor force
force 2002
2002
productivity and provide
productivity and provide IT IT
Establishment
Establishment of of 11 Tech
Tech Free
Free Launch
Launch
services
services forfor all
all sections
sections ofof
society Zone,
Zone, 2 technology parks, 66
2 technology parks,
society inin all
all parts
parts of
of the
the country
country 2004
2004
and to build a solid information incubators
incubators
and to build a solid information Draft
Draft plan
plan is
is
industry
industry that
that becomes
becomes aa major
major Automation
Automation of of 50%
50% of of
government procedures published
published
source
source of of income
income government procedures
Construction
Construction of of 10
10 national
national
2005
2005
databases
databases
What
What is
is next?
next?
5% of
5% of university
university students
students will
will
specialize
specialize in in IT
IT majors,
majors, andand
Components
Components graduates
graduates willwill reach
reach 3750
3750

Urgent
Urgent initiatives
initiatives annually
annually

Long-term
Long-term vision
vision 30%
30% ofof educational
educational curricula
curricula will
will

5-year plan
5-year plan be
be interactive
interactive
To protect investments in ICT sector, Saudi Arabia needs to decrease its
piracy rate to levels comparable to the UAE
Intellectual Property
11
Software
Software
Copyright
Copyright Law
Law Enforcement
Enforcement Piracy
Piracy %
%
World
World average
average 35%
35%
Saudi
Saudi Arabia
Arabia has
has relatively
relatively low
low piracy
piracy rates
rates ---- the
the
second
second best
best after
after UAE.
UAE.
ME
ME &
& Africa
Africa average
average 58%
58%
However,
However,
Algeria
Algeria 83%
83%
Total
Total losses
losses from
from piracy
piracy in
in Saudi
Saudi Arabia
Arabia are
are estimated
estimated
to
to be around $125 million or 23% of total losses in
be around $125 million or 23% of total losses in the
the Egypt
Egypt 65%
65%
Arab
Arab region.
region.
Kuwait
Kuwait 68%
68%
Enforcement
Enforcement by by authorities
authorities is
is inconsistent
inconsistent as
as
suggested
suggested in many interviews. UAE was able to
in many interviews. UAE was able to Jordan
Jordan 64%
64%
reduce
reduce its
its piracy
piracy rate
rate by
by continuous
continuous crack
crack down
down on
on
pirated software since 1990s.
pirated software since 1990s.
Oman
Oman 64%
64%
Infringements
Infringements on
on copyright
copyright law
law in
in the
the public
public sector
sector
should
should be
be addressed.
addressed. Saudi
Saudi Arabia
Arabia 52%
52%
Judiciaries
Judiciaries need
need training
training in
in understanding
understanding thethe issues
issues UAE
UAE 34%
34%
relevant
relevant to
to copyright
copyright and
and how
how to
to apply
apply the
the law.
law.
Source: BSA report for the year 2005
The public sector’s role is critical in subsidizing the funding for R&D and
technology startups
vee
ssiiv
R&D Subsidies
11 een
n
ehh
pprre
mm Public-private
Public-private partnerships
partnerships in
in technology
technology
CCoo
n
n
NNoo
R&D
grants: Provide
R&D grants: Provide grants
grants to
to researchers
researchers to
to
complete
complete their
their research
research and
and produce
produce prototype
prototype
Incubators
Incubators and
and science parks: Provide
science parks: Provide subsidized
subsidized
incubation
incubation services
services to
to startups
startups
Without
Without public
public funding
funding andand support,
support,
Guaranteed
loans: Guarantee
Guaranteed loans: Guarantee all
all or
or part
part of
of the
the private
private sector
sector will
will not
not invest
invest
commercial
commercial loans
loans obtained
obtained from
from banks
banks significantly
significantly inin technology
technology and and
innovation
innovation inin aa way
way that
that will
will impact
impact
Guaranteed
business :: Offer
Guaranteed business Offer guaranteed
guaranteed
government
economic development
economic development
government purchasing
purchasing ifif technology
technology succeeds
succeeds
Commercialization
Commercialization of of R&D
R&D output
output from
from public
public
institutions : Offer R&D inventions in exchange for
institutions : Offer R&D inventions in exchange for
equity
equity in
in startups
startups
Fund
Fund of
of funds
funds for VCs :: Offer
for VCs Offer private
private sector
sector VCs
VCs
inexpensive financing and subsidies
inexpensive financing and subsidies
Athar Al Majd will be the first Venture Capital fund located in Saudi Arabia, but
many VC funds are still needed to reach international VC investment levels
Venture Capital
11
Available
Available funding
funding sources
sources for
for ICT
ICT ventures
ventures VC
VC Funds
Funds in
in similar
similar economies
economies to
to Saudi
Saudi Arabia
Arabia
Local
Local VC funds: Athar
VC funds: Athar Al
Al Majd
Majd will
will be
be the
the first
first fully
fully Number
Number of
of Funds
Funds %
%
funded
funded VC
VC fund,
fund, primarily
primarily focused
focused onon ICT.
ICT. Its
Its first
first Funds
Funds $$ million
million GDP
GDP
transaction
transaction was
was to
to invest
invest in
in Amwaj
Amwaj Technology,
Technology, aa 0.7%
Tunisia
Tunisia 39
39 187
187 0.7%
Saudi
Saudi ERP
ERP solutions
solutions company.
company.
Malaysia
Malaysia 22
22 1,053
1,053 1.0%
1.0%
Local
Local Corporate
Corporate VC funds: STC
VC funds: STC is
is planning
planning to
to setup
setup Kuwait
Kuwait 22 325
325 0.7%
0.7%
aa corporate
corporate VC
VC fund.
fund. 0.01%
KSA
KSA 11 26
26 0.01%
World
World 1954
1954 251,400
251,400 0.7%
0.7%
Cross
Cross border
border VC funds: Injazat
VC funds: Injazat Technology
Technology Fund
Fund is
is the
the
only VC fund to have publicly invested in a ICT company
only VC fund to have publicly invested in a ICT company
($5
($5 million
million in
in EJADA
EJADA )) in
in December
December 2004.
2004. Source: MVCA (2004), GVCA/Zawya (2005), Thomson Venture Economics (2003)
Angel
Angel investors
investors andand family groups: Saudi
family groups: Saudi Arabia
Arabia
family
family groups
groups and
and individuals
individuals are
are active
active investors
investors in
in
the
the ICT
ICT sector.
sector. Al
Al Malaz
Malaz Group,
Group, Jameel
Jameel Group,
Group,
Olayan
Olayan Group,
Group, Jafali
Jafali Group,
Group, Abduljawad
Abduljawad Group,
Group, and
and
others
others are
are active
active investors
investors in
in the
the sector.
sector.
Saudi Arabia has to improve the quantity and quality of its technology and
science university graduates
Human Resources
11
Global competitiveness of
university education Number of students in scientific disciplines
World rank as % of total university students
Finland 8.9 1 Korea 44%
Canada 8.0 2
Malaysia 39%
Ireland 8.0 3
Jordan 7%
USA 8.0 5
6
Tunisia 3%
Singapore 7.7
Australia 7.2 10 Saudi Arabia 2%
Malaysia 5.9 23
Egypt 2%
Saudi Arabia 4.4 37

Source: World economic development report (2003)
Source: World Bank (1998), World Development Report (2003)
The Saudi ICT market is estimated at $1.78 billion in 2003
Saudi ICT Market

22
Software
18%
Saudi
Saudi Arabia
Arabia as
as
% of global market
% of global market
Hardware &
maintenanc Hardware
Hardware 0.19%
0.19%
e
48%
Software
Software 0.12%
0.12%
IT services IT
IT services
services 0.13%
0.13%
34.0%
Compared
Compared to to Saudi
Saudi GDP,
GDP, which
which is
is 0.7%
0.7% ofof the
the
world’s total, Saudi Arabia ICT sector is below
world’s total, Saudi Arabia ICT sector is below
Spending = $1.78 billion its
its potential
potential size
size
Source: IDC (2003) Source: Digital Planet 2003, IDC (2003)
This section will focuses on the IT sector, digital content development, and unregulated value added communication services.
Regulated communication services will be covered in a separate section
Software services and digital content offer a bigger number of opportunities,
mainly due to their localized nature
Strengths and Weaknesses of Saudi ICT Industry Components

22
ICT
ICT segment
segment Strengths
Strengths Weaknesses
Weaknesses Business
Business opportunities
opportunities

High
High market
market growth
growth Lack
Lack of
of large
large anchor
anchor
PC
PC assembly
assembly

Home PC plan
Home PC plan industries
industries
Niche
Niche applications
applications
Hardware
Hardware
Hydrocarbons
Hydrocarbons industrial
industrial Relatively
Relatively high
high production
production (military,
(military, etc)
etc)
base. May require
base. May require cost
cost Customized computer
Customized computer
customized
customized hardware
hardware Limited
Limited innovation
innovation hardware
hardware
High
High market
market growth
growth Limited
Limited and
and expensive
expensive E-Government
E-Government
skilled labor pool
skilled labor pool Hydrocarbons
Hydrocarbons industry
industry
Software
Software
Limited innovation
Limited innovation specific applications
specific applications
High
High market
market growth
growth Limited
Limited labor
labor pool
pool Opportunities
Opportunities in
in public
public and
and
Well
Well established,
established, well
well private
private sectors,
sectors, large
large and
and
IT
IT Services
Services
staffed, and internationally
staffed, and internationally small
small corporations
corporations
affiliated
affiliated players
players Subcontracting
Subcontracting
Large
Large andand growing
growing retail
retail Relatively
Relatively low
low PC
PC and
and
E-learning
E-learning
market
market DSL
DSL penetration
penetration
E-entertainment
E-entertainment
Digital Major
Major government
government
Mobile
Mobile value
value added
added
Digital Content
Content initiatives
initiatives in
in e-learning
e-learning services
services
Saudi
Saudi advantage
advantage in in
religious and Arabic
religious and Arabic
Saudi firms have a slim chance to compete against international computer
hardware firms with their economies of scale and cutting edge innovation
Overview of Saudi Hardware Market

22
Net profit Margin of Selected Hardware
Weaknesses
Weaknesses of
of Saudi
Saudi Hardware
Hardware Manufacturers
Manufacturers and Electronics Companies
Sales $B
Limited
Limited economies
economies ofof scale
scale and
and export
export potential
potential in
in an
an industry
industry
that
that has squeezed margins (e.g. HP, IBM PC division, DELL).
has squeezed margins (e.g. HP, IBM PC division, DELL).
Moreover, HP (PC division) 0.1%
Moreover, Saudi
Saudi Arabia
Arabia has
has anan unfavorable
unfavorable cost
cost structure
structure 22
compared
compared toto China,
China, which
which has
has become
become thethe manufacturing
manufacturing hubhub
for computer hardware and electronics
for computer hardware and electronics
Apple 3.3% 8.2
Industry
Industry consolidation
consolidation leaves
leaves very
very little
little room
room for
for new
new entrant.
entrant.
Manufacturers
Manufacturers inin semi-conductors,
semi-conductors, PCs,
PCs, etc etc are
are consolidating
consolidating
or
or closing
closing down
down
Acer 4.6% 4.6
No
No local
local large
large scale
scale manufacturer
manufacturer to
to support
support aa local
local industry,
industry,
as
as is
is the
the case
case in
in Korea
Korea with
with Samsung
Samsung andand LG
LG
DELL 6.4% 41
Business
Business environment
environment not
not attractive
attractive for
for multinationals
multinationals to
to
relocate to
relocate to
Samsung 19.0% 50
Limited
Limited innovation
innovation capabilities
capabilities as
as demonstrated
demonstrated by
by the
the
number
number of of US
US patents
patents registered
registered between
between 1980-2000
1980-2000 (only
(only
171)
171)
Intel 22.0% 34
Limited
Limited opportunities
opportunities in
in integrating
integrating Saudi
Saudi Arabia
Arabia to
to the
the supply
supply
chain
chain of
of multinationals
multinationals due
due toto the
the reasons
reasons stated
stated above.
above. Source: Company financial reports. HP, Acer (2003) all others (2004)
Saudi Arabia’s few examples of successful hardware/electronics
manufacturer have targeted limited local opportunities and have limited
export potential
22 Profile of Selected Hardware / Electronics Companies
Advanced
Advanced Electronics
Electronics Company
Company Saudi
Saudi Arabian
Arabian Television
Television
HP
HP Saudi
Saudi Arabia
Arabia (AEC)
(AEC) Manufacturing
Manufacturing Co
Co (Jed
(Jed Sat)
Sat)
Produces:
Produces: Assembled
Assembled PCs
PCs Produces:
Produces: military
military &
& commercial
commercial Produces:
Produces: TVs,
TVs, DVD
DVD recorders,
recorders,
electronics,
electronics, telecommunication
telecommunication mobile
mobile phones
phones
Technology
Technology partner:
partner: HP
HP systems,
systems, electronics,
electronics, logistics
logistics
systems
systems Technology:
Technology: Malaysian
Malaysian
Sales:’04
Sales:’04 est
est 150,000
150,000 PC
PC per
per yr
yr technology
technology
Technology:
Technology: Saudi,
Saudi, US
US (Boeing)
(Boeing)
Local
Local value
value added
added is
is minimal
minimal Sales:
Sales: $8
$8 million
million (2004)
(2004)
since
since all
all components
components are
are Sales:
Sales: $130
$130 million
million (2003)
(2003)
imported
imported Local
Local value
value added
added does
does not
not
High
High local
local value
value added.
added. AEC
AEC exceed
exceed 30%
30%
Prospects:
Prospects: Good
Good prospects
prospects due
due products
products have
have proprietary
proprietary
to
to high
high growth
growth in
in PC
PC market
market and
and research
research and
and itit targets
targets high
high Prospects:
Prospects: Not
Not good
good due
due to
to
the
the leadership
leadership position
position of
of HP
HP inin margin
margin product
product lines
lines intensive
intensive competition
competition from
from
the Saudi market. Export
the Saudi market. Export Prospects:
Prospects: Good
Good in in local
local market
market imports (Nokia, Samsung,
imports (Nokia, Samsung,
potential
potential beyond
beyond the
the GCC
GCC isis but
but export
export potential
potential remainremain Panasonic,
Panasonic, Toshiba,
Toshiba, etc)
etc)
limited.
limited. limited.
limited.
Source: Arab Advisors / Connexus Survey(2005), Zawya.com (2005)

Shortages in and cost of ICT professionals will hinder Saudi Arabia’s
aspiration to develop an indigenous, export-oriented software industry
22
Problems Obstructing The Growth Of Software Industry In Saudi Arabia
Typical Annual Salary of an Entry-Level Software Number of Workers in the ICT sector
Programmer (US$, latest available) (latest available)
39,000
35,000
25,497
Expats 32,370
18,000
5,112 8,117
3,000
Saudi 6,630
India Jordan KSA (Saudi) US KSA Egypt Jordan

Source: Arab Advisors / Connexus Survey(2005), India NASSCOM (2003) Source: Saudi IT Plan (2002), Egyptian Ministry of ICT (2002), Jordan Intaj (2003)
Madar research (2002)
Saudi Arabia has neither the national skilled labor nor the competitive wages to compete regionally or internationally
Large Local Corporations -- like Aramco, SABIC, banks, etc -- procure an
insignificant amount of their ICT budget to locally developed software
22
Investment Budget Sample
Investment Budget of a Large Saudi Bank
(Example)
Most
Most Large
Large Local
Local Corporations
Corporations rely
rely
on
on imported IT platforms like SAP or
imported IT platforms like SAP or
Payroll & Oracle. They are also starting
Oracle. They are also starting to to
overhead Hardware use
use Indian
Indian companies
companies toto undertake
undertake
20% 20% some
some of the development, support
of the development, support
and
and operations
operations
Local
software
0.4% Local
Local agents
agents ofof such
such platforms
platforms have
have
developed
developed local
local capabilities
capabilities to
to
customize,
customize, install
install and
and support
support these
these
Intl software sophisticated
sophisticated applications
applications
20%
Microsoft
Microsoft reported
reported that
that very
very few
few
Services software
software isis developed
developed locally
locally using
using
40% its
its platform
platform
Budget = SR 600 million
Source: Arab Advisors / Connexus Survey(2005)

Saudi Arabia has not yet developed the technological base to produce
distinctive software or hardware products that can compete globally
22
Selected Outputs Of Technological Innovation
High technology exports Number of patents registered in US Patent Office
(as a % of total manufactured exports, 2002) (1980 to 2000)
58%
16,328
32%
4% 3% 177
0% 77 15
Malaysia US Tunisia Jordan Saudi Korea Saudi Arab. Egypt Jordan

Arab.
Source: World Development Report (2005) Source: UNDP Arab Human Development Report (2003)
Without technological innovation, Saudi Arabia’s software and hardware business will be limited to niche applications
In the local market. Export market will require that Saudi Arabia can either compete on price or on innovation
IT services market is healthy in both size and growth
22 Saudi IT Services Market Landscape
Outsourcing
services Selected
Selected Revenue
Revenue
Top
Top 66 Players
Players
7% Affiliations
Affiliations ($
($ million)
million)
System
integration Customization Saudi
Saudi Business
Business IBM
IBM 112
112
33% 14% Machines
Machines
IS consulting Atos
Atos Origin
Origin Atos
Atos Origin
Origin 58
58
3%
Cisco,
Cisco, Nortel,
Nortel,
Ebttikar
Ebttikar 57
57
Microsoft
Microsoft
Microsoft,
Microsoft, Oracle,
Oracle,
IT Training Jeraisy
Jeraisy Computers
Computers 55
55
HP,
HP, Sun,
Sun, Cisco
Cisco
8% Hardware &
software Arabic
Arabic Computers
Computers Microsoft,
Microsoft, Cisco
Cisco 50
50
support & Services
Services
deploy
Alalamiah
Alalamiah Oracle,
Oracle, Cisco,
Cisco, HP
HP 43
43
IT services spending = $609 million
Growth = 8.7%
Source: IDC (2003)

The top 10 players control 75% of the IT services market, but opportunities
are still available in sub-contracting, the SME sector, and training
22 Opportunities In The IT Services Sub-sectors
Market
Market size
size 2003
2003 Market
Market size
size 2008
2008
IT
IT services
services sub-segment
sub-segment CAGR
CAGR Growth
Growth Business
Business opportunities
opportunities
($
($ million)
million) ($
($ million)
million)
SME
SME market
market
Hardware
Hardware && software
software $208
$208 $295
$295 7%
7% Subcontracting
Subcontracting from
from large
large IT
IT
support & deployment
support & deployment service providers
service providers

Niche
Niche expertise
expertise
Government
Government training
training
IT
IT training
training and
and
education $50
$50 $105
$105 16%
16% End
End customer
customer driven
driven training
training
education
Increased
Increased subcontracting
subcontracting by
by
System
System integration
integration $205
$205 $307
$307 11%
11% large
large service
service providers
providers
Lack
Lack of
of qualified
qualified IT
IT staff
staff will
will
Outsourcing
Outsourcing total
total $42
$42 $91
$91 16%
16% push large companies
push large companies and and
government
government to to outsource
outsource
CRM
CRM and
and ERP
ERP applications
applications for
for
Customization
Customization $83
$83 $141
$141 11%
11% SME
SME
Source: IDC (2003)

The SME sector has significant untapped potential
22 Saudi Companies Software Development Needs
How do you address the software requirements What type of dedicated systems
in your company ? the company has ?
Not
Administration 70.0%
Answered
13%
Financial 44.0%
Other
1% Developed Technical 22.8%
in-house
39% Marketing/
21.4%
CRM
Quality 17.4%
Off the shelf
software
33% HR 13.0%
Outsourced ERP 2.2%

by special
projects Other 0.2%
14% Opportunities
Opportunities
for
for IT
IT services
services
Source: Arab Advisors / Connexus Survey of 500 companies, 2005

E-government initiatives will be worth around $5 billion, and will be an
opportunity to develop locally some e-government platforms
22 Saudi IT Opportunities
Opportunities
Opportunities for
for Saudi
Saudi IT
IT
companies
companies
GCC
E-gov
E-gov Global
Global Budget
Budget Large
Large contracts
contracts to to leading
leading ITIT
GCC Country
Country Current
Current phase
phase Readiness
Readiness rank
rank ($
($ million)
million) service
service providers
providers
Saudi Subcontracting
Subcontracting by by leading
leading
Saudi Arabia
Arabia Phase
Phase II 105
105 5000
5000
vendors
vendors to smaller IT
to smaller IT service
service
UAE Phase providers
providers
UAE Phase IIII 38
38 1000
1000
Development
Development of of customized
customized
Kuwait
Kuwait Phase
Phase IIII 90
90 450
450
solution
solution by smaller IT
by smaller IT
companies
companies to to some
some Saudi
Saudi
Oman
Oman Phase
Phase II 98
98 250
250 government
government agencies
agencies
IT
IT training
training for
for public
public sector
sector
Qatar
Qatar Phase
Phase III
III 77
77 200
200 employees
employees (both (both large
large and
and
small
small players)
players)
Bahrain
Bahrain Phase
Phase III
III 46
46 150
150 Outsourcing
Outsourcing of of some
some
government
government functions to
functions to both
both
small
small and
and large
large players)
players)
Source: Madar Research (2004))

Existing local and foreign businesses will be the primary beneficiaries from
the dramatic growth in E-commerce, but few opportunities exist for startups
22 E-Commerce in Saudi Arabia

Opportunities
Opportunities for
for Saudi
Saudi companies
companies
Payment
Payment systems
systems
Payment
Payment systems
systems will
will be
be developed
developed toto coup
coup with
with credit
credit card
card fraud,
fraud, but
but such
such
Middle East E-transactions growth systems will be either standalone foreign platforms (eg. PayPal) or a hybrids
systems will be either standalone foreign platforms (eg. PayPal) or a hybrids
combining
combining local
local banks
banks and
and international
international credit
credit card
card companies
companies (MC(MC and
and Visa)
Visa)
Visa reports that E-transactions in the Middle Travel
Travel
East grew by more than 46% during 2003, to Travel
Travel segment
segment willwill be
be dominated
dominated by by existing
existing travel
travel companies
companies (airlines,
(airlines,
reach 854,000 transactions. The turnover of hotels)
hotels) or
or international
international travel
travel portals
portals (travelocity,
(travelocity, etc).
etc).
these transactions reached US$ 77.8 million,
However,
However, HajjHajj and
and Omra
Omra sites
sites offer
offer aa unique
unique international
international opportunity
opportunity for
for
a 60% growth in 2003 Saudi
Saudi based
based e-commerce
e-commerce companies
companies
Also according to Visa, Q1 2005 20 US$
B2C
B2C
million worth of sales made at Middle East e- Interactive
Interactive and
and informational
informational service
service will
will be
be B2C
B2C most
most attractive
attractive category:
category:
merchants internet
internet games, information, news, e-communities, dating, learning, etc
games, information, news, e-communities, dating, learning, etc
Online
Online shopping
shopping will
will be
be mostly
mostly from
from existing
existing local
local companies
companies (complementing
(complementing
85 % are UAE merchants followed by Saudi their
their physical
physical channels)
channels) or or from
from international
international websites.
websites. Standalone
Standalone local
local
Arabia, Kuwait, Qatar, and Bahrain. online
online shopping value proposition lack the convenience factor suggested
shopping value proposition lack the convenience factor suggested byby
local
local purchases
purchases from
from international
international websites
websites
B2B
B2B
B2B
B2B growth
growth will
will come
come mostly
mostly from
from large
large existing
existing industries
industries (e.g.
(e.g. Aramco)
Aramco)
moving
moving (currently
(currently at
at aa slow
slow pace)
pace) their
their purchasing
purchasing process
process toto web
web platforms
platforms
Providing Arabic content is one of the best opportunities for existing and new
Saudi companies
22 Internet Content in Saudi Arabia
Preferred Language on the Internet
Others
The
The unmet
unmet need
need What
What is
is missing
missing in
in
76% %
% stating
stating
1% 76% of
of those
those who
who prefer
prefer Arabic
Arabic Arabic content
Arabic content ??
content
content think that there is limited
think that there is limited
English Arabic
Arabic content
content on
on the
the internet
internet Entertainment
Entertainment 52%
52%
26%
Educational
Educational 39%
39%
International
International news
news 34%
34%
Religious
Religious content
content 34%
34%
Arabic
73% Local
Local news
news 30%
30%
Sports
Sports 19%
19%
Arabic websites 1.2% of total
Source: Arab Advisors / Connexus Survey of 1037 individuals, 2005

There are several business opportunities in Internet and mobile
entertainment…
22 Content Business Opportunities

e
iivve
e nnss
e
ehh
pprre
mm
CCoo Business
Business Services
Services
o n
n
NN o

Subscription
Subscription services
services in
in international
international and
and local
local games
games over
over internet
internet or
or mobile
mobile
Games
Customization
Customization and
and arabization
arabization of of international
international games
games
Games

Development
Development ofof new
new games
games for for mobile
mobile
Dating
Dating and
and Jawaz
Jawaz services
services
Personal
Personal services
services E-communities portal development
E-communities portal development and
and management
management
Music
Music downloads
downloads to to PC
PC or
or mobile
mobile
Music
Music &
& ring
ring tones
tones Ring
Ring tones
tones and
and ring
ring tone
tone mixing
mixing to
to mobile
mobile
SMS
SMS services
services (combined
(combined with
with other
other media)
media)
Interactive
Interactive media
media SMS
SMS advertising
advertising and
and customer
customer servicing
servicing
… and in e-learning
22 E-Learning Opportunities
vee Business
Business Opportunities
E-Learning in Saudi Arabia h e
ennssiiv Opportunities
prreeh for
for Saudi
Saudi Companies
Companies
o mmp
($US million) C
n C
NNoon
o
Out
Out of
of the
the box
box content
content customized
customized &
& arabized
arabized to
to KSA
KSA
Representation
Representation of
of international
international e-learning
e-learning publishing
publishing houses
houses with
with
limited
limited customization
customization ofof content
content
Locally
Locally developed
developed e-learning
e-learning content
content

Children
Children

Adults
Adults for
for continuous
continuous education
education
%

Professional
Professional education and
education and certification
certification
32
R=

Religious
Religious
G
128
CA
Content
Content developed
developed to
to educational
educational institutions
institutions and
and
government
government
Converting
Converting official
official educational
educational curricula
curricula (GCC
(GCC common
common curricula)
curricula)
Development of a complementary e-learning curricula for existing
Development of a complementary e-learning curricula for existing
educational
educational institution
institution
32
Religious
Religious university
university and
and degrees
degrees
Delivery
Delivery of
of content
content
2003 2008 Online
Online universities
universities that
that may
may be
be affiliated
affiliated internationally
internationally or
or regionally.
regionally.
Global market (2003) $20 billion Services
Services
Common
Common services
services offered
offered to
to schools
schools
Source: Madar Research (2003) Certification
Certification services
services
To sum up, several business opportunities present themselves in the Saudi
ICT sector
22 Summary of Opportunities
Business
Business Investment
Investment size*
size* Business
Business Investment
Investment size*
size*
Hardware
Hardware and
and software
software support
support && Medium
Medium Entertainment
Entertainment content
content development
development Medium
Medium
deployment
deployment
Entertainment
Entertainment service
service delivery
delivery over
over
IT
IT training
training && education
education Small
Small to
to Medium
Medium Small
Small to
to medium
medium
the web or mobile
the web or mobile
System
System integrators
integrators Small
Small to
to medium
medium E-learning
E-learning content
content Medium
Medium
Outsourced
Outsourced government
government and
and large
large Small
Small to
to medium
medium E-learning
E-learning services
services Medium
Medium
local company functions
local company functions
Omra
Omra and
and Hajj
Hajj e-travel
e-travel services
services Medium
Medium E-learning
E-learning service
service delivery
delivery platforms
platforms Medium
Medium
Investment
Investment Size
Size Legend
Legend **

Small: Less
Small: Less than
than $1
$1 million
million

Medium: $1-10 million
Medium: $1-10 million

Large: More
Large: More than
than $10
$10 million
million
Successful ICT companies are created, in most cases, by entrepreneurs, and
government policies should improve the eco-system (National Innovation
System) that fosters such entrepreneurs
33 ICT Companies and Entrepreneurship
In the US, almost all of the large players in the IT sector (Microsoft, HP, Dell, Oracle, Cisco, ebay, Amazon, Google, etc) were
started by technology entrepreneurs
In India, technology entrepreneurs were also behind the rise of leading companies like Wipro and InfoSys
Telecom services sector is more capital intensive and less reliant on innovative proprietary technology. Technology
entrepreneurs had a lesser role in the formation of companies in this sector
Most countries are putting in place an ICT policy to stimulate entrepreneurship and opportunities in the ICT sector, and hence
increase overall employment and economic growth
Jordan
Jordan ICT
ICT Plan:
Plan: REACH
REACH 3.0
3.0 e-Europe
e-Europe 2005
2005 Action
Action Plan
Plan
Regulatory framework
Regulatory
framework improvement
improvement Europe
Europe will
will have
have modern,
modern, on-line
on-line public
public services
services (e-
(e-
Government,
Government, e-learning,
e-learning, e-Health)
e-Health) and
and aa dynamic
dynamic e-e-
Enabling ICT
Enabling
ICT environment
environment and
and infrastructure
infrastructure Business
Business environment,
environment, based
based onon aa widespread
widespread availability
availability
of
of broadband
broadband access
access atat competitive
competitive prices
prices and
and aa secure
secure
Advance national
Advance
national IT
IT programs
programs information
information infrastructure
infrastructure
Policy
Policy priorities
priorities are
are for
for broadband,
broadband, e-Business,
e-Business, e-e-
Capital and
Capital
and financing
financing availability
availability for
for ICT
ICT companies
companies Government,
Government, e-Health,
e-Health, e-Inclusion,
e-Inclusion, e-Learning,
e-Learning, and
and
Security
Security
Human resources
Human
resources development
development E-Europe
E-Europe action
action plan
plan was
was supplemented
supplemented by by deregulation
deregulation
in
in telecom
telecom and
and R&D
R&D policies
policies
Saudi Arabia needs to strength key areas in funding, university education,
and supporting business environment in order to stimulate innovation in ICT
National Innovation System

33
GOVERNMENT
GOVERNMENT
Opportunity
Policies &Regulation
Capital
Business
Environment
Weak Funding New Technology

Weak Startups
Products Market
& Services
Universities &
Opportunity
Research
Capital
centers
Guidance
PRIVATE
PRIVATE SECTOR
SECTOR
The Saudi National Innovation System can be improved along the lines of
regulation and policy, infrastructure, funding and education
Selected Recommendations for the Saudi National Innovation System

33

Simplify
Simplify company
company registration
registration process
process

Lower company capital requirements
Lower company capital requirements

Improve
Improve regulatory
regulatory framework
framework (copyright
(copyright law,
law, electronic
electronic payment
payment law)
law)
Regulation
Regulation &
& Policy
Policy
Loosen
Loosen content
content control
control

Modify
Modify commerce
commerce law law to
to accommodate
accommodate technology
technology companies
companies requirements
requirements

Monitor
Monitor the implementation of the National IT plan at the highest levels
the implementation of the National IT plan at the highest levels of
of government
government
Stimulate
Stimulate the
the adaptation
adaptation of
of DSL
DSL
Infrastructure
Infrastructure Expedite
Expedite ICT
ICT sector
sector deregulation
deregulation and
and lessen
lessen STC’s
STC’s dominant
dominant role
role in
in the
the telecom
telecom sector
sector
Increase
Increase public
public R&D
R&D spending
spending to
to comparable
comparable international
international levels
levels
Subsidize
Subsidize startup
startup cost
cost for
for technology
technology companies
companies through
through special
special funds,
funds, parks,
parks, incubators,
incubators, etc
etc
Funding
Funding
Create
Create aa Fund
Fund of
of Funds
Funds to
to invest
invest in
in emerging
emerging venture
venture capital
capital funds
funds
Explore
Explore the
the possibility
possibility of
of using
using Zakat
Zakat for
for funding
funding R&D
R&D and
and technology
technology
Increase
Increase enrolment
enrolment in
in science
science and
and engineering
engineering disciplines
disciplines
Introduce
Introduce entrepreneurial
entrepreneurial courses
courses and
and workshops
workshops in
in ICT
ICT university
university curricula
curricula
Education
Education
Simplify
Simplify and
and incentivize
incentivize the
the commercialization
commercialization of
of research
research from
from public
public research
research centers
centers and
and universities
universities
A. Saudi Investment Environment
B. Saudi ICT Market Assessment
I. Liberalization Enablers
II. International Liberalization Experience

This section looks at the fixed voice, mobile and data segments of the Saudi
telecommunications market
Saudi Market Assessment
11
Fixed
Fixed Voice
Voice
22

Penetration
Penetration and
and subscribers
subscribers

Tariffs
Tariffs
Mobile
Mobile
Revenues
Revenues

Services
Services available
available

Benchmarks
Benchmarks
33
Data
Data
٣٥
Confidential
Fixed line penetration growth in Saudi Arabia has been modest over the last
four years
STC Fixed Line Subscription and Penetration (2000 – 2004)
Fixed Line Subscribers (000s) Penetration (%)
3,502 3,695
3,232 3,317 16.25%
15.18% 15.25% 15.77%
2,964 14.22%
2000 2001 2002 2003 2004 2000 2001 2002 2003 2004
Source: STC; Arab Advisors Group
٣٦
Confidential
The fixed voice market in Saudi Arabia still has room to grow when compared
to other regional markets like Bahrain and UAE
Fixed Line Penetration (%) (2004)
58.7
55.7
46.3
29.3
27.5
25.3
20.8
18.8
16.1
13.6
12
4.3
*
t
in
t
ar
n
ce
K
AE
ia
o
*
yp
i
wa
c
sia
e
a
U
ab
at
an
oc
rd
or
Eg
hr
Ku
Q
ay
Ar
Jo
or
ap
Ba
Fr
al
M
ng
i
ud
M
Si
Sa
Source: Arab Advisors Group ; * ITU data(2004)
٣٧
Confidential
Saudi Arabia has high residential subscription and connection charges when
compared to other countries
Tariffs for Residential Fixed Line Subscription and Connection (US$)
Residential Monthly Residential Connection

Subscription charge (2005) charge (2005)
Egypt 1
Malaysia * 13.2
Bahrain 3
Singapore * 17.2
UAE 4
UAE 49
Singapore * 4.8
Jordan 51
Malaysia * 5.8
France * 51.8
Jordan 6
Bahrain 53
Oman * 7.9
Qatar * 54.9
Saudi Arabia 8
Morocco 70
Kuwait 9
Qatar * 9.1 Saudi Arabia 80
Morocco 11 Egypt 86
Hungary * 14.3 Kuwait 120
France * 14.6 Hungary * 150.5
٣٨
Confidential
Saudi Arabia’s business connection and subscription charges are below
average, but still higher than most of the regional comparators
Tariffs for Business Fixed Line Subscription and Connection (US$)
Business Monthly Business Connection

Subscription charge (2005) charge (2005)
Malaysia * 13.2
Egypt 2 Singapore * 17.2
UAE 4 UAE 49
Bahrain 6 France * 51.8
Average: 12.8 Average: 104.5
Singapore * 7.2 Bahrain 53
Saudi Arabia 8
Qatar * 54.9
Malaysia * 11.8
Morocco 70
Jordan 14
Saudi Arabia 80
France * 14.7
Jordan 101
Morocco 15
Hungary * 19.1 Egypt 173
Kuwait 20 Kuwait 257
Qatar * 32 Hungary * 334.4
٣٩
Confidential
Although the local call tariff is among the highest across regional
comparators, it is lower than in competitive markets such as Hungary,
Morocco and France
Cost of a Local 3-minute Call (2005) (US$)
0.24
0.158
0.148
0.06 0.054
0.039
0.023 0.021
0.015
0 0 0
Morocco Hungary * France * Jordan Bahrain Saudi Singapore Malaysia * Egypt UAE Qatar * Kuwait
Arabia *
٤٠
Confidential
At the same time, over the last 3 years, revenue per line has been dropping in
Saudi Arabia
Fixed Line Revenues and Revenues per Line for STC (2002 – 2004)
Revenue per Line (SR) Revenues (SR billions)
266 10.61
210 199 8.59 8.63
2002 2003 2004 2002 2003 2004
Source: ITU, Arab Advisors Group
٤١
Confidential
Fixed monthly revenue per line stands at US$71 in Saudi Arabia, which
constitutes 0.8% of GDP per capita
Estimated Fixed Monthly Revenue per Line for Selected Countries
(December 2003)
Fixed revenue per line (per
Fixed revenue per line
year) as % of GDP Per
(USD)
Capita (%)
180 171 15.0%
13.0%
11.0%
120
120
9.0%
7.0%
71
65
56 5.0%
60 46
3.0%
1.5%
0.4% 0.4% 0.8% 0.3% 2.6%
11 1.0%
0.8%
0 -1.0%
Bahrain Kuwait Qatar Saudi UAE Jordan Egypt
Source: ITU
٤٢
Confidential
In the mobile segment, both the number of subscribers and the penetration
rate have been growing
Market Indicators for STC Mobile Services 2002 – 2004
Cellular Subscribers (000s) Penetration
9,200
40%
7,238
32%
5,008 23%
2,530 12%
1,360 7%
2000 2001 2002 2003 2004 2000 2001 2002 2003 2004
Source: Arab Advisors Group
٤٣
Confidential
This has been accompanied by a -57% CAGR in the mobile connection charge
over the last 6 years
Al Jawwal Connection Charge Evolution
1,000
$933
900
800 M
Moob
biillee
ccoon
Connection charge US$
700 nnnee
ccttiio
onn c
600 chhaa
rrgge
eCCA
500 AGGR
R ==
--5577
400
%%
300
200
$133 $80
100
$13
0
1999 2000 2001 2002 2003 2004
Landline Mobile
Source: Arab Advisors Group, ITU
٤٤
Confidential
Mobile subscription charges have been reduced, but only in anticipation of
the licensing of the second mobile operator
Al Jawwal Subscription Charge Evolution

18
$16
16
Subscription charge US$
14
12
10
$8 $9
8
$8
6
Year of licensing the
second mobile operator
4
1999 2000 2001 2002 2003 2004
Source: Arab Advisors Group, ITU Landline Mobile
٤٥
Confidential
Between 2002 and 2003, Saudi Arabia recorded the highest mobile
subscriber growth rate among regional and international comparators
% Growth of Mobile Subscribers Between 2002 and 2003
40.8%
36.5%
28.5%
26.5%
17.1%
13.7% 13.7%
10.3%
7.2% 7.5%
5.7%
Jordan Singapore France Bahrain Hungary UAE Malaysia Egypt Kuwait Qatar Saudi
Arabia
Source: ITU 2004
٤٦
Confidential
However, the mobile telecommunications market in Saudi Arabia still has
room to grow when compared to other regional markets like Bahrain and UAE
Mobile Penetration (2004)

Extreme
Examples
110.0%
105.8%
91.4% 91.1%
88.2%
73.7%
71.1%
64.9%
40.0%
31.0% 29.9%
10.8%
e
n
a
t
n
an
ng
ar
t
AE
K
o
ai
yp
c
ai
bi
a
cc
U
at
an
w
rd
iw
Ko
hr
ra
Eg
U
o
Ku
Jo
Ta
Fr
Ba
iA
or
g
M
on
ud
H
Source: Arab Advisors Group; ITU 2004 (for Taiwan and Hong Kong)
Sa
٤٧
Confidential
The connection fee for STC mobile postpaid services is below the average of
US$17
Mobile Postpaid Connection Fee Benchmarking (2005) (US$)
UK 0
Jordan 6
Bahrain 7 Average = US$ 17
Morocco 12
Saudi Arabia 13
Egypt 26
UAE 34
Kuwait 37
Note : Cellular charges are based on average rates for on and off network for different offers.
٤٨
Confidential
Al Jawwal has converged the price of peak and off-peak mobile minutes for
post-paid subscribers
Price of Al Jawwal Three-Minute Call (US$)

1.40
$1.20
1.20 Mobile Peak and Off-Peak
Price of three minute local call $
prices converged into one,

thus simplifying the model
1.00 for the consumer
0.80
$0.60
0.60
0.40
$0.36
0.20
$0.04
$0.04
0.00
1999 2000 2001 2002 2003 2004
Landline Mobile peak Mobile off-peak

Source: Arab Advisors Group, ITU
٤٩
Confidential
And while the mobile postpaid minute price may seem high by regional
standards, per second billing leads to lower effective prices than many other
countries
Mobile Postpaid Minute Price Benchmarking (2005) (US$ per minute)
UAE 0.06
Bahrain 0.08
Egypt 0.08
Kuwait 0.08
Jordan 0.1
Saudi Arabia 0.12
Morocco 0.17
Note : Cellular charges are based on average prices for on and off network for different offers.
٥٠
Confidential
STC, Jawwal (Palestine) and the Jordanian mobile operators are the only
regional mobile operators that follow per-second billing from the first minute
Comparison of Mobile Billing Methods for First Minute
Postpaid
Postpaid Prepaid
Prepaid
OmanTel
OmanTel Per
Per minute
minute Per
Per minute
minute
Nawras
Nawras Per
Per minute
minute Per
Per minute
minute
Etisalat
Etisalat Per
Per minute
minute Per
Per minute
minute
Maroc
Maroc Telecom
Telecom Per
Per minute
minute Per
Per minute
minute
MediTel
MediTel Per
Per minute
minute Per
Per minute
minute
Batelco
Batelco Per
Per minute
minute Per
Per minute
minute
MobiNil
MobiNil Per
Per minute
minute Per
Per 20
20 seconds
seconds
STC
STC Per
Per second
second Per
Per second
second
MTC
MTC Kuwait
Kuwait Per
Per minute
minute Per
Per minute
minute
Note: Some operators offer per second or per 20 second billing after the first minute
٥١
Confidential
The mobile prepaid minute peak price in Saudi Arabia is 4 times higher than
the rate in UAE
Mobile Prepaid Minute Price Benchmarking (2005) (US$ per minute)
UAE 0.06
Bahrain 0.11
Kuwait 0.15
Jordan 0.19
Egypt 0.22
Saudi Arabia 0.25
Morocco 0.4
Note : Cellular charges are based on average prices for on and off network for different offers.
٥٢
Confidential
The SMS prices in Saudi Arabia are comparable to other countries in the
region
Mobile SMS Price Benchmarking (2005) (US$ per SMS)
Postpaid Prepaid
Jordan 0.04 Jordan 0.04
Egypt 0.05 UAE 0.05
UAE 0.05 Kuwait 0.07
Bahrain 0.07 Saudi Arabia 0.07
Kuwait 0.07 Bahrain 0.09
Saudi Arabia 0.07 Egypt 0.09
Morocco 0.09 Morocco 0.09
UK 0.21 UK 0.19
Note :Cellular charges are based on average prices for on and off network for different offers.
٥٣
Confidential
Although total revenues from mobile services are increasing, ARPU shows a
downward trend
Market Indicators for STC Mobile Services 2002 – 2004
ARPU (SR) Revenues (SR billions)

Al Jawwal Postpaid ARPU
(yearly average for the indicated period, in SR)
400 317
300 264 240 220 220
200
20.91
100 17.74
0
2000 2001 2002 2003 2004 12.94
Year
Al Jawwal Prepaid ARPU

(yearly average for the indicated period, in SR)
281 2002 2003 2004

300
250 197
200 171
150
100
50
0
2000 2001 2002 2003 2004
Year
Source: STC, Arab Advisors Group
٥٤
Confidential
Mobile monthly ARPU stands at US$62 in Saudi Arabia, which constitutes
0.7% of the GDP per capita
Estimated Mobile Monthly ARPU for Selected Countries
(December 2003)
80 Monthly ARPU
Mobile Mobile ARPU10%
as % of
(USD) GDP Per Capita (%)
9%
62
8%
60
7%
6%
39 39 38
40 5%
30
3.2% 28 4%
3%
20 1.7% 17
1.4% 2%
0.7%
0.4% 0.1% 0.1% 1%
0 0%
S audi A rabia B ahrain UK Hungary Jordan Oman Egypt
Source: Arab Advisors Group; World Factbook; Global Wireless Matrix, Merrill Lynch; BAH analysis
٥٥
Confidential
Al Jawwal revamped 3 packages launched in 1999 to offer better rates in the
hope of retaining subscribers
Saudi Mobile Packages
1999
1999 2001
2001 2002
2002 2004
2004
Regular
Regular plan
plan Jawwal
Jawwal 35
35
Introduced
Introduced Silver
Silver plan
plan Family
Family Al
Al Jawwal
Jawwal SAWA
SAWA (prepaid)
(prepaid) Jawwal
Jawwal 45
45
Packages
Packages
Golden
Golden plan
plan Family
Family plan
plan
In
In light
light of
of expected
expected
competition,
competition, STC STC
STC
STC introduced
introduced
STC
STC offered
offered three
three discards
discards the old
the old
Family
Family AlAl Jawwal
Jawwal
postpaid connection
postpaid connection Launch
Launch of
of prepaid
prepaid mobile
mobile packages and
packages and
Notes
Notes plans
plans (reduced
(reduced rates
rates
plans
plans (Regular,
(Regular, Silver,
Silver, “SAWA”
“SAWA” subscriptions
subscriptions introduces
introduces new new plans
plans
for
for a predefined set of
a predefined set of
Golden)
Golden) with
with reduced
reduced
numbers)
numbers) connection
connection and and rate
rate
charges
charges
٥٦
Confidential
Nonetheless, the number of packages available for mobile customers, a key
indicator to competition, still lags behind other regional mobile markets
Mobile Packages
10 10
7 7
6 6
Batelco MTC Fastlink Mobilcom Orange SFR STC
Bahrain Jordan France Saudi Arabia
٥٧
Confidential
On the other hand, in terms of mobile service availability, Saudi Arabia is on
par with the rest of the region
Comparison of Services for Mobile Services
GSM
GSM IDEN
IDEN TETRA
TETRA SMS
SMS MMS
MMS GPRS
GPRS 3G
3G EDGE
EDGE
## of
of ## of
of ## of
of
Licenses
Licenses licenses
licenses licenses
licenses
UK
UK Yes
Yes 44 Yes
Yes Private
Private 22 Yes
Yes Yes
Yes Yes
Yes Yes
Yes Yes
Yes
France
France Yes
Yes 33 Yes
Yes Yes
Yes Yes
Yes Yes
Yes Yes
Yes Yes
Yes Yes
Yes
Bahrain
Bahrain Yes
Yes 22 No
No 00 Yes
Yes 11 Yes
Yes Yes
Yes Yes
Yes No
No Yes
Yes
Egypt
Egypt Yes
Yes 22 No
No 00 No
No 00 Yes
Yes Yes
Yes Yes
Yes No
No No
No
Jordan
Jordan Yes
Yes 33 Yes
Yes 11 No
No 00 Yes
Yes Yes
Yes Yes
Yes No
No Yes
Yes
Kuwait
Kuwait Yes
Yes 22 No
No 00 Private
Private 00 Yes
Yes Yes
Yes Yes
Yes No
No Yes
Yes
Morocco
Morocco Yes
Yes 22 Soon
Soon 11 Yes
Yes 11 Yes
Yes Yes
Yes Yes
Yes No
No No
No
Saudi
Saudi Arabia
Arabia Yes
Yes 22 Soon
Soon 11 Private
Private N/A
N/A Yes
Yes Soon
Soon Yes
Yes Soon
Soon Soon
Soon
UAE
UAE Yes
Yes 11 No
No 00 Private
Private N/A
N/A Yes
Yes Yes
Yes Yes
Yes Yes
Yes Yes
Yes
٥٨
Confidential
As for the data segment, the number of subscribers has been
increasing steadily over the last three years
Number of Data Subscribers (2001-2004)
10627
9541
7841
5958
2001 2002 2003 2004
Source: STC
٥٩
Confidential
Bahrain leads the region in DSL penetration and Kuwait leads in dial-up
connections, while Saudi Arabia still has room to grow in both markets
Dial Up and ADSL Accounts Penetration % (2004)
1.2%
1.3%
2.3%
11.1% 0.0%
1.4% 0.6%
8.2%
0.2%
4.8% 4.9%
4.1% 0.04%
3.4%
0.1% 0.2% 0.1%
2.0%
1.2%
0.6% 0.4% 0.2%
Kuwait UAE Bahrain Lebanon Qatar KSA Jordan Egypt Tunisia Morocco Algeria
Dial Up ADSL
٦٠
Confidential
Saudi Arabia also has to catch up with the rest of the region in terms of PC
penetration, and the contribution of the Tawasul initiative is yet to be seen
PC Penetration % (2003)
UAE 16.83% Tawasul

Tawasul objectives
objectives (2004)
(2004)
Bahrain 16.76% Help

Help inin narrowing
narrowing down down thethe
social
social gaps of Saudi Arabia in
gaps of Saudi Arabia in
order
order toto enhance
enhance the the move
move
Malaysia 16.69% towards
towards the the “information
“information society”
society”
Supply the market
Supply the market with one with one
Qatar 14.67% million
million PC user –– minimum
PC user minimum –– by by
the
the end
end of of the
the initiative
initiative
Kuwait 13.99% Support
Support the the manufacturing
manufacturing and and
joining
joining activities
activities andand enhance
enhance the the
economic performance
economic performance of the IT of the IT
Saudi Arabia 8.10% industry
industry by by using
using thethe new
new
technology
technology on on demand
demand
Jordan 4.47% Multiply
Multiply thethe number
number of of internet
internet
users
users from
from thethe first
first years
years of of the
the
initiative
initiative
Oman 3.87%
Enlarge
Enlarge the the scope
scope and and the
the base
base
of e-government
of e-government activitiesactivities
Egypt 2.19% Prepare
Prepare the the work
work environment
environment at at
large and especially
large and especially for womenfor women
Morocco 1.99% Pave
Pave thethe way
way to to install
install strong
strong
computer and content
computer and content industries industries
Source: ITU, CITC
٦١
Confidential
A recent initiative in dial up connection for Saudi Arabia residents reduced the
price of the traditional Internet connectivity
Dial-up Price (minute rate in US$) (2005)
Egypt 0.004
Kuwait 0.006
UAE 0.008
Saudi
Saudi Arabia
Arabia recently
recently
launched
launched EasyNet.
EasyNet.
Jordan 0.01
Under
Under Easynet,
Easynet, 20
20 hours
hours
of
of dial
dial up
up connection
connection
Saudi Arabia 0.013 cost
cost $US
$US 16
16
Bahrain 0.019
Morocco 0.02
٦٢
Confidential
However, Saudi Arabia has the highest monthly subscription charge for ADSL
among selected comparators and one the of the highest connection charges
256kbps ADSL Charge Benchmarks in 2005 (US$)
Subscription Charge Connection Charge
Egypt 26 Egypt 0
Morocco 35
Bahrain 27
UK 36
UAE 54
Jordan 42
Morocco 58
UAE 52
Saudi
80
Arabia
Bahrain 106
Jordan 85
Kuwait 108
Saudi Arabia 120 Kuwait 137
٦٣
Confidential
most competitively priced broadband markets
Saudi Arabia has high broadband subscription prices compared to the 25
Korea
Source: ITU 2004 3.0
(Rep.)
Macao,
Note: * 2003 data 3.1
China
Japan 4.2
Data is normalized for a 256Mbits/s service speed
Comparative Broadband Prices – Monthly Subscription (US$) – July 2004

China 4.8
Germany 6.9
Jordan 7.0
Slovenia 7.4
Belarus 8.7
Hong Kong,
10.2
China
Sri Lanka 10.9
Czech
12.4
Republic
Ukraine 12.5
Confidential
13.0
٦٤
Malaysia
Estonia 13.3
Lithuania 13.6
Netherlands 13.9
Croatia 14.0
Slovak
14.8
Republic
Taiwan,
19.4
China
Australia 21.1
Cyprus 25.0
Greece 25.3
Brazil 26.1
Senegal 26.9
Saudi
94.0
Arabia *
Saudi Arabia is comparable with the rest of the region in terms of Internet
service offerings, except that it does not allow for satellite Internet (from
VSAT licensees)
Comparison of Services for Internet Services
mile
last mile
Lines
Leased Lines
Optic
Broadband
Unbundled
broadband
Fiber Optic
Broadband
Unbundled
broadband
Satellite
Internet
Satellite
Up
Internet
Dial Up
Cable
ADSL
Lines
Wi-Fi
Cable
ADSL
Lines
Wi-Fi
the last
VPN
VPN
Leased
Dial
Fiber
in the
in
UK
UK Yes
Yes Yes
Yes Yes
Yes Yes
Yes Yes
Yes Yes
Yes Partial
Partial Yes
Yes Yes
Yes Yes
Yes
France
France Yes
Yes Yes
Yes Yes
Yes Yes
Yes Yes
Yes Yes
Yes Partial
Partial Yes
Yes Yes
Yes Yes
Yes
Bahrain
Bahrain No
No Yes
Yes No
No Yes
Yes Yes
Yes Yes
Yes Partial
Partial Yes
Yes Yes
Yes Yes
Yes
Egypt
Egypt Yes
Yes Yes
Yes Soon
Soon Yes
Yes Yes
Yes Yes
Yes Partial
Partial Yes
Yes Yes
Yes Yes
Yes
Jordan
Jordan No
No Yes
Yes Soon
Soon Yes
Yes Yes
Yes Yes
Yes No
No No
No Yes
Yes Yes
Yes
Kuwait
Kuwait No
No Yes
Yes No
No Yes
Yes Yes
Yes Yes
Yes Partial
Partial Yes
Yes Yes
Yes Yes
Yes
Morocco
Morocco No
No Yes
Yes No
No Yes
Yes Yes
Yes Yes
Yes Partial
Partial Yes
Yes Yes
Yes Yes
Yes
Saudi
Saudi Arabia
Arabia No
No Yes
Yes No
No Yes
Yes Yes
Yes Yes
Yes Partial
Partial No
No Yes
Yes Yes
Yes
UAE
UAE No
No Yes
Yes No
No Yes
Yes Yes
Yes Yes
Yes Partial
Partial Yes
Yes Yes
Yes Yes
Yes
Source: Arab Advisors Group/Connexus Analysis

٦٥
Confidential
Saudi Arabia is also comparable with the rest of the region in terms of data
service offerings
Comparison of Services for Data SPs
Datacomm
Datacomm Frame
Frame VoIP
VoIP
X25
X25 ATM
ATM VSAT
VSAT
Licensees
Licensees Relay
Relay (legal)
(legal)
## of
of VSAT
VSAT
Licenses
Licenses
UK
UK Many
Many Yes
Yes Yes
Yes Yes
Yes Yes
Yes 40
40 Yes
Yes
France
France Many
Many Yes
Yes Yes
Yes Yes
Yes Yes
Yes Many
Many Yes
Yes
Bahrain
Bahrain 11 Yes
Yes Yes
Yes Yes
Yes Yes
Yes 44 Planned
Planned
Egypt
Egypt 44 Yes
Yes Yes
Yes Yes
Yes Yes
Yes 22 Yes
Yes
Jordan
Jordan 20
20 Yes
Yes Yes
Yes Yes
Yes Yes
Yes 22 Planned
Planned
Kuwait
Kuwait 44 Yes
Yes Yes
Yes Yes
Yes Yes
Yes 11 No
No
Morocco
Morocco 11 Yes
Yes Yes
Yes Yes
Yes Yes
Yes 33 Yes
Yes
Saudi
Saudi Arabia
Arabia 33 Yes
Yes Yes
Yes Yes
Yes Yes
Yes 55 No
No
UAE
UAE 22 Yes
Yes Yes
Yes Yes
Yes Yes
Yes 22 No
No
Source: Arab Advisors Group/Connexus Analysis

٦٦
Confidential
The Saudi telecom market is characterized by a stagnant fixed services
segment, a dynamic mobile segment and an underdeveloped data segment
Summary of Market Status

Strengths Weaknesses
11
Regionally
Regionally competitive
competitive monthly
monthly subscription
subscription
Low
Low penetration
penetration rate
rate
Fixed
Fixed Voice
Voice charge
charge Stagnant growth
Stagnant growth
Regionally
Regionally competitive
competitive local
local charge/min
charge/min
22
High Lag
Lag behind
behind in
in terms
terms of of new
new services
services (e.g.
(e.g.

High growth
growth in in number
number of of subscribers
subscribers MMS, EDGE)
Growth MMS, EDGE)

Growth inin mobile
mobile revenues
revenues
High
High connection
connection and and subscription
subscription charges
charges
Mobile
Mobile
High
High usage
usage andand high
high ARPU
ARPU
High
High per
per minute
minute prices
prices

Per
Per second
second billing
billing
Drop Penetration
Penetration isis still
still relatively
relatively low
low

Drop in
in prices
prices inin recent
recent years
years
Limited choice in mobile packages
Limited choice in mobile packages
33

Low
Low dial-up
dial-up and
and ADSL
ADSL penetration
penetration

Low
Low PC
PC penetration
penetration rate
rate
Recent
Recent introduction
introduction of
of competition
competition by by ISPs

ISPs are
are getting
getting aa small
small share
share out
out of
of ADSL
ADSL
Data
Data increasing
increasing the
the number
number ofof licensed
licensed data
data SPs
SPs revenues
revenues
to 3
to 3
Untested
Untested ability
ability of
of new
new entrants
entrants to
to compete
compete
with STC
with STC
٦٧
Confidential
I. Saudi ICT Market Assessment

Liberalization of telecommunications sectors worldwide has been enabled by
the development and strengthening of key regulatory levers
Key Regulatory Levers
Interconnection/Access
Interconnection/Access
Levers
General
Levers
General
License
License fees
fees
Sector Resale
Resale
Mobile
Mobile Number
Number Portability
Mobile Sector
Portability
Levers
Specific Levers
National
National Roaming
Roaming
Mobile
Mobile Virtual Network Operator (MVNO)

Sector Specific
Carrier
Carrier Selection
Sector
Selection
Fixed Sector
Sector
Local
Local Loop
Loop Unbundling
Unbundling
Fixed
Voice
Voice over
over IP
IP
Source: Connexus Analysis

Interconnection enables competition and interoperability among operators,
and protection of consumer interests
Key Interconnection Objectives

Allow
Allow entrance
entrance ofof competitors
competitors into
into telecom
telecom markets
markets

Avoid
Avoid unnecessary
unnecessary costscosts to
to new
new entrants
entrants

Promote
Promote efficient
efficient infrastructure
infrastructure development
development
Competition
Competition
Establish
Establish wide
wide range
range of of competitive
competitive services
services

Allow
Allow sustainable
sustainable competition
competition (ITU
(ITU survey
survey in
in 2001
2001 considered
considered interconnection
interconnection as
as
most important factor in creating and fostering competition)
most important factor in creating and fostering competition)

Enhance
Enhance network
network value
value by
by providing
providing access
access toto more
more individuals
individuals
Interoperability
Interoperability
Ensure
Ensure compatibility
compatibility of
of equipment,
equipment, services
services and
and technologies
technologies of
of different
different operators
operators

Promote efficient connectivity of operators to incumbent’s services
Promote efficient connectivity of operators to incumbent’s services
Allow
Allow customers
customers toto communicate
communicate with with each
each other
other
Allow
Allow customers
customers toto connect
connect to
to critical
critical services
services such
such as
as operator
operator assistance,
assistance, directory
directory
assistance, and emergency services
assistance, and emergency services
Consumer
Consumer
Benefit
Benefit consumers
consumers through
through growth
growth and and innovation
innovation in
in telecom
telecom market
market
Interests
Interests Improve
Improve convenience
convenience andand utility
utility of
of telecom
telecom services
services
Promote
Promote deployment
deployment and
and availability
availability of of new
new services,
services, e.g.,
e.g., direct
direct international
international dialing,
dialing,
internet-delivered services, automated teller machines and
internet-delivered services, automated teller machines and e-commercee-commerce

Interconnection has been a priority for regulators
International Experience in Interconnection
International
International Trends
Trends
Interconnection Obligations by Region
(2000) (Total = 97)
37
The
The international
international trendtrend shows
shows thatthat regulators
regulators areare
more
more and
and more
more involved
involved in in guiding
guiding thethe
interconnection
interconnection agreements
agreements between between incumbent
incumbent
operators and new
operators and new entrants:entrants:
While
While incumbent
incumbent operators
operators may may have
have some
some
incentive
incentive to facilitate the interconnection of
to facilitate the interconnection of 23
new
new entrants,
entrants, they they have
have even
even greater
greater
incentives
incentives not not to to provide
provide interconnection
interconnection
Interconnection
Interconnection affects affects thethe general
general public
public 16 16
since
since itit ensures
ensures “Any-to-Any”
“Any-to-Any” connectivity
connectivity
Without
Without efficient interconnection, many
efficient interconnection, many
telecommunications
telecommunications based based services
services would
would not
not
be possible (direct international
be possible (direct international dialling; dialling;
automated
automated teller teller machines;
machines; e-commerce;
e-commerce; 5
etc…)
etc…)
Between 1995
Between 1995 and and 2000,
2000, thethe number
number of of countries
countries
who
who applied
applied some
some kind kind of
of obligation
obligation onon
interconnection
interconnection jumped
jumped from from 46 46 to
to 97
97 Arab States Americas Asia Pacific Africa Europe
Source: ITU World Telecommunication Regulatory Database 2000

Interconnection regulations are structured along three dimensions:
Procedural, Commercial, and Technical and Operational
International Regulation Dimensions
Procedural
Procedural Commercial
Commercial Technical
Technical and
and Operational
Operational
Interconnection
Interconnection regulations
regulations and
and Network
Network facilities
facilities and
and services
services Selection
Selection of
of Points
Points of
of
guidelines
guidelines Interconnection
Interconnection (POI’s)
(POI’s)
Pricing
Pricing of
of interconnection
interconnection
Dispute
Dispute resolution
resolution mechanism
mechanism Broad
Broad technical
technical compatibility
compatibility
Costing
Costing of
of interconnection
interconnection prices
prices
Access
Access toto signaling
signaling networks
networks and
and
Payment
Payment for for network
network modifications
modifications
intelligent
intelligent data
data bases
bases
to facilitate interconnection
to facilitate interconnection
Access
Access to
to billing
billing systems
systems and
and
Universal
Universal service
service and
and access
access deficit
deficit
operations
operations support
support systems
systems
charge policies
charge policies
Access
Access to
to unbundled
unbundled network
network
elements
elements (including
(including local
local loop)
loop)
Equal
Equal customer
customer access
access to
to
competitor
competitor networks
networks
Access
Access to to numbers
numbers and
and number
number
portability
portability
Co-location
Co-location and
and infrastructure
infrastructure
sharing
sharing
Maintenance
Maintenance ofof adequate
adequate quality
quality of
of
interconnection
interconnection services
services
Interconnection pricing is critical, and is usually cost-based in order to ensure
the financial viability of new entrants
Objectives of Cost-based Interconnection Pricing
11
Develop
Develop competition
competition
The
The Reference
Reference Paper
Paper for
for the
the WTO’s
WTO’s Agreement
Agreement on
on Basic
Basic
Telecommunications
Telecommunications andand the
the European
European Union’s
Union’s
Interconnection
Interconnection Directive
Directive require
require interconnection
interconnection to
to be
be cost
cost
based
based 22
Without
Without aa cost
cost based
based approach,
approach, the the dominant
dominant incumbent
incumbent
could Avoid
Avoid situations
situations where
where thethe end
end customer
customer
could charge excessive prices for terminating calls on
charge excessive prices for terminating calls on its
its
network pays the price for high interconnection
pays the price for high interconnection
network andand would
would have
have little
little incentive
incentive to
to pay
pay aa reasonable
reasonable
price tariffs
tariffs
price for
for terminating
terminating calls
calls onon new
new entrants’
entrants’ networks
networks
In
In situations
situations where
where regulatory
regulatory intervention
intervention is
is not
not efficient
efficient or
or
even non-existent, interconnection prices that are not
even non-existent, interconnection prices that are not costcost-
based
based can
can be
be inflated
inflated by
by incumbents
incumbents 33
Prevent
Prevent incumbents
incumbents from
from subsidizing
subsidizing
losses
losses from
from other
other services
services through
through
interconnection charges
interconnection charges

As the Saudi telecom market moves towards competition, there will be an
increasing role for CITC to ensure fair and timely interconnection and
access
Saudi Market Liberalization and Interconnection/Access
Current
Current Situation
Situation Future
Future Considerations
Considerations
After
After much
much delay,
delay, STC
STC submitted
submitted aa draft
draft As
As the
the Saudi
Saudi market
market becomes
becomes more
more
Reference
Reference Interconnection
Interconnection Offer
Offer (RIO)
(RIO) to
to competitive,
competitive, the
the demands
demands for
for CITC
CITC to
to
CITC for review and approval
CITC for review and approval become
become more involved in interconnection will
more involved in interconnection will
increase
increase exponentially
exponentially
CITC
CITC and
and STC
STC exchanged
exchanged comments
comments on
on the
the
draft RIO
draft RIO STC
STC should
should be
be mandated
mandated to
to offer
offer unbundled
unbundled
network
network elements
elements
STC
STC and
and Ettihad
Ettihad Etisalat
Etisalat have
have negotiated
negotiated an
an
interconnection agreement, but it has not yet
interconnection agreement, but it has not yet CITC
CITC is
is likely
likely to
to become
become more
more engaged
engaged inin
been
been approved
approved byby CITC
CITC designing
designing aa costing
costing model
model for
for STC
STC to
to price
price
interconnection
interconnection
Following
Following the
the STC
STC and
and Ettihad
Ettihad Etisalat
Etisalat
agreement,
agreement, CITC
CITC pushed
pushed STC
STC to
to finalize
finalize RIO
RIO CITC
CITC is
is likely
likely to
to be
be called
called upon
upon to
to intervene
intervene
more
more frequently in interconnection disputes
frequently in interconnection disputes
Following
Following revisions
revisions from
from STC,
STC, CITC
CITC approved
approved
the
the STC
STC RIO
RIO but
but indicated
indicated dissatisfaction
dissatisfaction with
with STC
STC will
will most
most likely
likely need
need to
to adjust
adjust its
its RIO
RIO to
to
the rates
the rates provide interconnection to new entrants
provide interconnection to new entrants
Government liberalization objectives influence the licensing mechanism,
and hence license fees, with varying market impact
Liberalization Objectives, Licensing Mechanism and Market Impact
Government
Government Objective
Objective Licensing
Licensing Mechanism
Mechanism Market
Market Impact
Impact
Low
Low license
license fees
fees lowers
lowers
barriers to entry
barriers to entry andand
Regulators
Regulators generally
generally select
select aa stimulates
stimulates competition
competition
comparative evaluation
comparative evaluation
Spur
Spur competition
competition Operators
Operators will
will invest
invest more
more in
in
process where
process where the
the license
license fee
fee
Promote
Promote universal
universal access
access infrastructure
infrastructure and
and new
new
is pre-set, and tends to be at aa
is pre-set, and tends to be at
technologies
Make
Make services
services more
more relatively technologies
relatively low
low or
or reasonable
reasonable
affordable
affordable Consumers
Consumers willwill bebe benefit
benefit
price to
price to encourage
encourage new new market
market
entrants from lower service charges
from lower service charges
entrants
and
and increased
increased service
service
offering
offering
Regulators
Regulators oftenoften opt
opt for
for an
an Higher
Higher license
license fees
fees raise
raise
auction where the
auction where the highesthighest barriers
barriers to entry and deter
to entry and deter
bidder tends
bidder tends toto be
be awarded
awarded the
the some
some entrants
entrants from
from bidding
bidding
license. If auctions are
license. If auctions are not not
Less
Less competition
competition translates
translates
Maximize
Maximize government
government properly
properly designed,
designed, they
they tend
tend to
to into
revenues result into higher
higher prices
prices to
to the
the
revenues result in
in anti-competitive
anti-competitive consumer
behavior consumer
behavior and and high
high license
license fees
fees
as
as incumbents
incumbents raiseraise bids
bids on
on Paying
Paying high
high license
license fees
fees
next results
results in lower investment in
in lower investment in
next generation
generation services
services toto
deter new market entry infrastructure
infrastructure andand services
services
deter new market entry
Source: ITU, Trends in Telecommunication Reform 2004/2005, Connexus Analysis

License fees typically involve a one time fee and a recurring fee
designed to cover the cost of regulating the telecommunications market
License Fee Structure

Rationale Structure
Market
Market Set
Set Fees
Fees This
This method
method isis used
used in
in comparative
comparative evaluations
evaluations (i.e.
(i.e. “beauty
“beauty
contests”)
contests”) where
where thethe license
license fee
fee is
is pre-set
pre-set using
using common
common valuation
valuation techniques
techniques
Government
Government Revenue
Revenue Generation
Generation Price
Price Floors
Floors andand Minimum
Minimum Bids Bids This
This method
method isis used
used inin auctions
auctions where
where aa
One-time
One-time Spectrum Evacuation Cost
Spectrum Evacuation Cost “floor”
“floor” price is set to ensure that the starting point for bids is in line with
price is set to ensure that the starting point for bids is in line with
Fees
Fees government
government expectations
expectations
Spectrum
Spectrum Evacuation
Evacuation Fees Fees This
This method
method isis used
used in
in spectrum
spectrum licensing
licensing where
where
the fees are set by estimating the cost of relocating certain entities
the fees are set by estimating the cost of relocating certain entities to other to other
frequency
frequency bands
bands
Revenue
Revenue basedbased annual fees usually
annual fees usually set
set at
at aa %
% of
of annual
annual gross
gross revenues
revenues (most
(most
Government
Government Revenue
Revenue Generation
Generation widely
widely used)
used)
Regulatory Authority Administrative
Regulatory Authority Administrative Annual
Annual fixed
fixed fee
fee oror annually
annually adjusted
adjusted fee fee (non
(non revenue
revenue based)
based)
Cost
Cost Spectrum
Spectrum usage fees to
usage fees to recover
recover the
the cost
cost of
of creating
creating andand administering
administering
Annual
Annual or
or
Recurring Spectrum
Spectrum Administration
Administration and
and frequency
frequency allocation.
allocation. Many
Many EU EU countries
countries are
are adopting
adopting the the approach
approach of of charging
charging
Recurring Management Cost aa small flat fee or small % of gross revenues (perhaps 0.5% to 1.5%)
Management Cost small flat fee or small % of gross revenues (perhaps 0.5% to 1.5%)
Fees
Fees Universal
Universal Access
Access Cost
Cost Additional
contributions can
Additional contributions can include
include aa tax
tax that
that might
might be be levied
levied by
by ministries
ministries
Funding
Funding of
of National
National Research
Research other
other than
than the
the telecom
telecom ministry,
ministry, oror they
they can
can take
take the
the form
form ofof aa small
small %% of
of gross
gross
Programs
Programs billed revenues to fund national research programs or to support
billed revenues to fund national research programs or to support a universal a universal
service
service fund
fund
License fees should be set at a reasonable level to promote the entry of
new market players and maintain the financial viability of investments
License Fee Level

Guiding Principles Impact of Competition
ItIt is
is important
important toto set
set the
the initial
initial one
one time
time license
license fee
fee at
at aa relatively
relatively
reasonable
reasonable level level to
to promote
promote the the entry
entry of
of new
new market
market players
players andand Initial
Initial one
one time
time license
license feesfees tend
tend to
to
to leave room for investment in infrastructure
to leave room for investment in infrastructure and new and new decrease
decrease
technologies
technologies Profit
Profit margins
margins willwill likely
likely be
be reduced
reduced
One-time Allowing
Allowing installment
installment license
license payments
payments alsoalso encourages
encourages entry entry by
by New
New entrants
entrants willwill bebe less
less predisposed
predisposed to to
One-time new operators pay high license fees
Fees new operators pay high license fees
Fees
As
As the the market
market moves
moves to to full
full competition
competition and and with
with profits
profits shrinking,
shrinking, In
In the
the long
long run,
run, one
one timetime fees
fees tend
tend to
to reach
reach
one-time
one-time license fees for licenses that do not involve the use
license fees for licenses that do not involve the use of
of the level of cost recovery
the level of cost recovery such as such as
scarce
scarce resources
resources (for(for example:
example: fixed-line
fixed-line networks)
networks) can
can be be spectrum
spectrum evacuation
evacuation cost cost (in
(in case
case ofof
eliminated
eliminated and and an
an application
application processing
processing fee fee can
can bebe charged
charged spectrum
spectrum licensing)
licensing)
instead
instead
Recurring
Recurring fees
fees are
are widely
widely set
set as
as aa % % of
of gross
gross revenues
revenues
Annual fees are set at a relatively low level during the
Annual fees are set at a relatively low level during the early
early years
years
of
of the license as new market entrants need to invest heavily in
the license as new market entrants need to invest heavily in Recurring
Recurring fees
fees tend
tend to
to decrease
decrease to to reach
reach
infrastructure
infrastructure early
early on
on the
the level
level of
of cost
cost recovery
recovery for
for cost
cost elements
elements
Annual
Annual or
or
Recurring Recurring
Recurring license
license fees
fees must
must remain
remain stable
stable during
during the
the initial
initial years
years such
such asas regulatory
regulatory authority
authority administrative
administrative
Recurring of
Fees of market
market development:
development: cost,
cost, spectrum
spectrum administration
administration and
and
Fees Raising

Raising fees
fees can
can be
be disruptive
disruptive andand threaten
threaten the
the universal access cost and national
universal access cost and national
financial viability of operators
financial viability of operators research
research programs
programs funding
funding

Makes
Makes itit more
more difficult
difficult to
to access
access international
international capital
capital
markets to finance network
markets to finance network rollout rollout
One-time fees have been high in the mobile segment, particularly for 3G,
and lower in fixed voice segments
Global Trends for One-time License Fees

Rapidly
Rapidly changing
changing expectations
expectations for for 3G
3G wireless
wireless technologies,
technologies, the the popping
popping of
of
the “bubble” in global capital markets and the array of various
the “bubble” in global capital markets and the array of various licensing licensing
approaches
approaches have
have resulted
resulted in in large
large deviations
deviations inin license
license feesfees

The
The biggest
biggest volume
volume of of license
license awards
awards hashas gone
gone to to wireless
wireless operators,
operators, while
while
Mobile fixed
fixed operators
operators are
are increasingly
increasingly operating
operating under
under general
general authorizations
authorizations or
or
Mobile
class
class licenses
licenses

The
The most
most common
common methods
methods usedused forfor setting
setting the
the initial
initial license
license fee
fee have
have been
been
auctions
auctions and
and beauty
beauty contests
contests

Interest
Interest in
in fixed-line
fixed-line licensing
licensing has
has declined
declined over
over the
the last
last five
five years.
years. First,
First, most
most
of these licenses have included mandates for operators
of these licenses have included mandates for operators to build their ownto build their own
networks,
networks, incurring
incurring considerable
considerable time
time and
and costs.
costs. Secondly,
Secondly, fixed
fixed to
to mobile
mobile
substitutions
substitutions havehave accelerated,
accelerated, making
making itit harder
harder toto justify
justify major
major new
new
Fixed investments
investments in in fixed-line
fixed-line networks
networks
Fixed

Trend
Trend has
has been
been to to require
require modest
modest license
license fees
fees for
for fixed
fixed networks
networks in in order
order to
to
attract
attract and
and encourage
encourage new new market
market entrants
entrants

AA growing
growing number
number of of regulators
regulators has
has eliminated
eliminated large
large one-time
one-time fees
fees and
and
required
required payment
payment of of only
only aa small
small application
application fee
fee
Mobile license one-time fees have varied across countries in the last five years
Mobile License One-time Fees (in USD/Population)
143.8
38.7 39 39.7
24.2
Median =
16.5
USD 11.7/person
13
10.5
7 8
1.8 2.3 2.7
Kenya Nigeria Czech Peru Egypt Mauritania Algeria Bulgaria Algeria Turkey Oman Morocco Saudi
Republic 2 licenses 3rd license 2nd license Arabia
Licensing
Year 1999 2001 1999 2000 1998 2000 2003 2000 2001 2000 2004 1999 2004
Source: Various Press Releases and Ministries, Connexus Analysis

Many countries have lowered the recurring fees to promote competition and
favor the growth of the sector
Global Trends for Recurring License Fees
Recurring
Recurring Fees
Fees Trends
Trends Examples
Examples
The
The most
most widely
widely used
used approach
approach to to set
set recurring
recurring fees
fees is
is Subject
Subject of of MOF
MOF approval,
approval, India
India intends
intends
to base them on a % of the licensee’s
to base them on a % of the licensee’s gross turnover gross turnover to
to lower
lower revenue-sharing
revenue-sharing from
from 66 -10
-10 %
%
(revenue
(revenue share)
share) to
to aa level
level designed
designed solely
solely to
to cover
cover
When
When annual
annual fees
fees were
were first
first introduced,
introduced, the the percentage
percentage administrative costs
administrative costs
contributed
contributed to to the
the government
government was was often
often quite
quite high
high
Many
Many regulatory
regulatory authorities
authorities havehave subsequently
subsequently Venezuela
Venezuela has
has successfully
successfully
recognized
recognized that an excessively high revenue-sharing
that an excessively high revenue-sharing implemented
implemented aa gradual
gradual reduction
reduction inin
percentage
percentage may may be be aa barrier
barrier to to entry
entry and
and anan impediment
impediment revenue-sharing
revenue-sharing from
from 10%
10% toto the
the current
current
to
to the
the healthy
healthy growth
growth of of the
the sector.
sector. As As aa result,
result, rate of 5.3%
rate of 5.3%
regulators
regulators have
have tried
tried to
to reduce
reduce fees fees
Tendency
Tendency in in the
the EU
EU to
to determine
determine fees fees onon an
an Recently
Recently implemented
implemented revenue
revenue sharing
sharing
administrative
administrative cost-recovery basis for licenses that
cost-recovery basis for licenses that do
do schemes
schemes usually
usually impose
impose lower
lower rates,
rates,
not involve the use of scarce
not involve the use of scarce resources resources ranging
ranging from
from 0.2
0.2 per
per cent
cent to
to 22 per
per cent
cent
Source: ITU, Trends in Telecommunication Reform 2004/2005

In the Arab world, Jordan, Oman and KSA have imposed much higher
revenue sharing fees than European countries
Annual Recurring License Fees (Non Spectrum Related Fees)
European Countries Arab Countries
+JD 100,000
16.00%
12.00%
10.00%
9.00%
1.00% 1.00%
0.20% 0.50% 0.20% 0.20% 0.20% 0.08%
Austria (All France (3G Greece (All Ireland (Fixed Luxembourg Spain (Fixed & UK (All Bahrain Jordan Oman (Mobile) KSA (Mobile) KSA (Data)
licenses) Mobile) licenses) & Mobile) (Mobile) Mobile) licenses) (Mobile) (Mobile)
Note: In Jordan, Oman, and KSA, service providers pay a share of revenues as royalty to the treasury, which is equivalent to a
license fee. Some countries have set recurring fees on a flat fee basis or as a combination of flat fee and % of turnover. For
example in Italy, the annual license fee for a 3G mobile license is at a flat fee of EUR 38 million. Australia, for example, has
implemented a flat fee of US$ 10,000 plus a variable amount to recover administrative costs. In 2002, the variable amount was at
0.116% of eligible revenues
Source: ITU, Regulators’ websites, and Connexus analysis
The high license fees, including the high revenue sharing royalty
payments, will need to be lowered to allow for greater competition
Saudi Market Liberalization and License Fees

Current
Current Situation
Situation Future
Considerations
CITC
CITC hashas lowered
lowered the
the “fee
“fee for
for commercial
commercial The
The “fee
“fee for
for commercial
commercial provision
provision ofof service,”
service,”
provision
provision ofof services”
services” -revenue
-revenue sharing-
sharing- for
for as
as in
in other
other liberalizing
liberalizing countries,
countries, will
will need
need to
to
the
the second mobile service provider to 5% the
second mobile service provider to 5% the be reduced so as to make investments
be reduced so as to make investments in the in the
first
first year,
year, 10%
10% the
the second
second year,
year, and
and 15%
15% forfor sector
sector more
more attractive
attractive for
for new
new entrants
entrants and
and to
to
subsequent years
subsequent years pass on some of the savings to
pass on some of the savings to consumersconsumers
STC
STC pays
pays aa flat
flat 15%
15% of
of revenues
revenues The
The “license
“license fee”
fee” will
will need
need to
to be
be lowered
lowered to
to
simply cover the reasonable cost of regulating
simply cover the reasonable cost of regulating
DSPs
DSPs pay
pay aa flat
flat 8%
8% of
of revenues
revenues (4%
(4% the
the first
first the
year, the sector
sector
year, 6%
6% the
the second,
second, and
and 8%
8% thereafter)
thereafter)
In
In addition,
addition, all
all service
service providers
providers pay
pay 1%
1% of
of
revenues
revenues asas “license
“license fee”
fee”
The
The “fee
“fee for
for commercial
commercial provision
provision of
of service”
service”
is
is less
less aa regulatory
regulatory instrument
instrument and
and more
more ofof aa
revenue-generation
revenue-generation fee fee
The
The “license
“license fee”
fee” -which,
-which, in
in other
other countries
countries isis
intended to cover the costs of regulating
intended to cover the costs of regulating the the
sector-
sector- alone
alone generates
generates more
more revenues
revenues than
than
what
what is
is needed
needed to
to regulate
regulate the
the sector
sector in
in much
much
larger
larger telecom
telecom markets
markets
Resale enables service-based competition, and resellers typically operate
under a class licensing regime
Resale Principles and International Experience
Definition
Definition and
and Principles
Principles International
International Experience
Experience

The
The reseller
reseller can
can buy buy the
the service
service from
from another
another service
service provider
provider atat aa
International
International experience
experience suggests
suggests that
that resale
resale of of services
services typically
typically falls
falls
discount from the retail tariff and then re-brand the service
discount from the retail tariff and then re-brand the service commercialize commercialize under
under a class license or general authorization. CRTC, for example,
a class license or general authorization. CRTC, for example,
it.
it. requires
requires registration
registration

Competition
Competition occurs
occurs in in the
the marketing
marketing and and distribution
distribution of of services
services although
although
In
In many
many countries,
countries, datadata telecommunications
telecommunications service service resale
resale isis not
not regulated
regulated
product differentiation remains
product differentiation remains limited limited at all and no licensing is
at all and no licensing is requiredrequired

The
The reseller
reseller relies
relies on on other
other service
service providers’
providers’ network
network for for providing
providing
In
In Singapore,
Singapore, service
service based
based operators
operators are are either
either individually
individually or or class
class
services
services and is restricted by their choices in terms of prices, services
and is restricted by their choices in terms of prices, services and
and licensed
licensed by IDA. For example, operators which lease international capacity
by IDA. For example, operators which lease international capacity
technology
technology for
for the
the provision
provision of of services
services are
are licensed
licensed individually,
individually, whilewhile resale
resale of of Public
Public

CRTC
CRTC defines
defines aa “reseller”
“reseller” ofof telecom
telecom services
services asas aa service
service provider
provider oror aa Switched
Switched Telecommunication
Telecommunication services,services, International
International Calling
Calling Card
Card Services
Services
company
company engaged in the subsequent sale or lease on a commercial basis,
engaged in the subsequent sale or lease on a commercial basis, and
and Internet
Internet based
based services
services are
are class
class licensed
licensed
with
with or
or without
without adding
adding value,
value, ofof aa telecom
telecom service
service provided
provided by by aa Canadian
Canadian
In
In the US, ILECs are mandated to offer
the US, ILECs are mandated to offer for
for wholesale
wholesale any any retail
retail service
service
carrier
carrier on
on aa wholesale
wholesale basis basis they provide
they provide

The
The Resale market is
Resale market is typically
typically characterized
characterized by by aa relatively
relatively large
large number
number of of
EU
EU Interconnection
Interconnection and and Access
Access directive
directive requires
requires incumbents
incumbents to to make
make theirtheir
players since it has a lower barrier
players since it has a lower barrier to entry to entry facilities available for resale and unbundling
facilities available for resale and unbundling

Resellers
Resellers typically
typically differentiate
differentiate themselves
themselves on on discount
discount pricing
pricing or
or on
on value
value
In
In EU,
EU, wholesale
wholesale competition
competition is is less
less mature
mature thanthan inin the
the US,
US, where
where itit started
started
where they provide managed services such as
where they provide managed services such as managed VPN services,managed VPN services, much sooner
much sooner
managed
managed security
security services
services etc..
etc..
In
In the
the UK,
UK, BT’s
BT’s fixed
fixed line
line wholesale
wholesale revenues
revenues represented
represented 18% 18% of of its
its total
total

In
In mature wholesale markets,
mature wholesale markets, wholesale
wholesale offerings
offerings can can potentially
potentially span
span all
all fixed line revenues
fixed line revenues in 2002 in 2002
services
services offered to retail customers including data, voice (local, LD, ILD),
offered to retail customers including data, voice (local, LD, ILD),
In
In France,
France, FT’sFT’s fixed
fixed wholesale
wholesale revenues
revenues represented
represented only only 8%
8% of of total
total fixed
fixed
mobile
mobile and
and IPIP services
services line revenues in
line revenues in 2002 2002

Generally,
Generally, no no limitations
limitations exist exist on
on the
the number
number of of telecom
telecom resale
resale
Starting
Starting January
January 2005,
2005, Jordan
Jordan Telecom
Telecom is is required
required to to provide
provide international
international
licenses
licenses call
call transit service to competing operators at cost based rates
transit service to competing operators at cost based rates
Source: Marc Bourreau & Pinar Dogan, Service-based vs Facility-based Competition June 2003
Dominant providers are required to provide access to their network for
wholesale services, on a fair, cost-based and transparent basis
Wholesale Regulatory Best Practice
Dominant
Dominant service
service providers
providers (DSPs)
(DSPs) are
are required
required to
to provide
provide wholesale
wholesale services
services in
in aa timely
timely fashion
fashion to
to reasonable
reasonable requests
requests for
for
wholesale
wholesale services
services
Mandatory
Mandatory
DSPs
DSPs are
are required
required to
to make
make their
their retail
retail services
services available
available for
for wholesale
wholesale
provision
provision
DSPs
DSPs areare tempted
tempted to
to charge
charge competing
competing providers
providers more
more for
for wholesale
wholesale services
services than
than the
the amount
amount charged
charged to
to their
their own
own downstream
downstream
activities, thereby disadvantaging their competitors
activities, thereby disadvantaging their competitors
Fairness
Fairness DSPs
DSPs are
are required
required not
not to
to discriminate
discriminate in
in price
price nor
nor in
in quality
quality in
in the
the services
services they
they provide
provide to
to downstream
downstream resellers
resellers
In
In aa market
market where
where competition
competition is is weak
weak oror non
non existent,
existent, itit is
is appropriate
appropriate to to regulate
regulate the
the prices
prices that
that DSPs
DSPs charge
charge for
for the
the supply
supply of
of
wholesale
wholesale services
services
Cost-based Common
Common wholesale
wholesale pricing
pricing methods
methods are:are: retail
retail minus
minus andand long
long run
run incremental
incremental cost
cost plus
plus (LRIC+)
(LRIC+)
Cost-based Where
Where competition
competition is
is absent
absent like
like in
in Saudi,
Saudi, LRIC+
LRIC+ is is preferred
preferred since
since retail
retail prices
prices are
are typically
typically excessive
excessive and
and profits
profits abnormal,
abnormal, hence
hence aa
pricing
pricing cost based method is for setting prices is more likely to promote
cost based method is for setting prices is more likely to promote competition competition
DSPs
DSPs are
are required
required to
to publish
publish aa reference
reference wholesale
wholesale offer
offer (RO)
(RO) toto contain
contain such
such matters
matters butbut not
not be
be limited
limited to:
to: aa clear
clear description
description of
of the
the
services
services offered,
offered, terms
terms and
and conditions
conditions including
including charges,
charges, ordering,
ordering, provisioning,
provisioning, billing
billing and
and dispute
dispute resolution
resolution procedures,
procedures, technical
technical
information,
information, and
and service
service quality
quality conditions
conditions etc..
etc..
Transparency
Transparency DSPs should provide advanced notification regarding
DSPs should provide advanced notification regarding changes
changes to to wholesale
wholesale prices
prices and
and service
service conditions
conditions
DSPs
DSPs should
should provide
provide advanced
advanced notification
notification of
of changes
changes in in technical
technical information,
information, such
such asas changes
changes inin network
network configuration
configuration and
and in
in
service
service performance,
performance, andand are
are required
required to to publish
publish data
data relating
relating to
to quality
quality of
of service
service
Source: Connexus Analysis, various regulators’ websites

CITC will have to mandate STC –and other dominant service providers later
on- to develop a long distance and international wholesale service offering
Saudi Market Liberalization and Resale
Current
Current Situation
Situation Future
Considerations
STC
STC has
has aa monopoly
monopoly overover fixed
fixed line
line In
In its
its effort
effort toto liberalize
liberalize fixed
fixed line
line services,
services,
services
services CITC
CITC may may consider
consider opening
opening up up the
the fixed
fixed
The
The liberalization
liberalization of
of fixed
fixed line
line services
services is
is services market
services market to resale to resale
planned for 2006
planned for 2006 In
In the
the long
long run,
run, CITC
CITC maymay mandate
mandate STC STC to to
offer
offer all
all of
of its
its retail
retail services
services in in wholesale.
wholesale.
However,
However, in in the
the immediate
immediate term,term, CITC
CITC may may
mandate STC to provide international
mandate STC to provide international and and
long
long distance
distance voice voice services
services in in wholesale
wholesale
CITC
CITC should
should play play anan important
important role role in
in
ensuring
ensuring that that wholesale
wholesale prices
prices areare cost
cost
based
based and and that
that STCSTC does
does notnot discriminate
discriminate
in
in quality nor in price for a service that
quality nor in price for a service that itit
provides
provides to to its
its downstream
downstream activities
activities andand to to
resellers
resellers
Resale
Resale should
should be be offered
offered under
under aa class
class
license
license with no limitation to the
with no limitation to the number
number of of
resellers
resellers (Class
(Class License,
License, Type
Type B) B)
CITC
CITC should
should mandate
mandate STC STC to to develop
develop aa
reference
reference offer to ensure transparency and
offer to ensure transparency and
certainty
certainty to to the
the terms
terms and
and conditions
conditions on on
which
which STCSTC will will offer
offer wholesale
wholesale services
services
Mobile Number Portability (MNP) reduces the barriers to switching across
different mobile service providers
Mobile Number Portability Description and Benefits
Description
Description Key
Key Benefits
Benefits

Mobile
Mobile number
number portability
portability (MNP)
(MNP) ensures
ensures that
that
From
From the
the customer’s
customer’s perspective,
perspective, MNP
MNP reduces
reduces
mobile
mobile telephone
telephone customers
customers can
can keep
keep their
their the
the cost
cost of
of changing
changing service
service providers:
providers: no
no need
need
current
current mobile
mobile number,
number, when
when switching
switching from
from one
one to
to pay
pay for
for new
new business
business cards,
cards, letterheads,
letterheads, or
or
service provider to another
service provider to another advertising
advertising

Number
Number portability
portability offers
offers aa great
great advantage
advantage in
in
MNP
MNP establishes
establishes market
market conditions
conditions that
that provide
provide
giving
giving users
users the
the ability
ability to
to switch
switch mobile
mobile networks
networks maximum
maximum choice
choice for
for consumers,
consumers, where
where they
they can
can
without
without the
the inconvenience
inconvenience and and costs
costs of
of changing
changing switch service providers without
switch service providers without any any
their
their telephone
telephone number
number inconvenience
inconvenience in in order
order to
to take
take advantage
advantage ofof
attractive
attractive service
service offerings
offerings

MNP
MNP enhances
enhances competition
competition among
among network
network
operators, encourages innovation, creates
operators, encourages innovation, creates
downward
downward pressure
pressure on
on prices,
prices, and
and facilitates
facilitates
participation
participation by new market entrants by
by new market entrants by lowering
lowering
barriers
barriers to
to entry
entry

MNP
MNP motivates
motivates incumbents
incumbents to
to become
become more
more
efficient
efficient

MNP
MNP optimizes
optimizes use
use of
of the
the national
national numbering
numbering
plan
plan
The regulator plays an active role in mandating MNP, setting timelines
and supervising the technical and operational implementation
Mobile Number Portability Regulatory Principles

The
The regulatory
authority mandates
mandates MNP MNP capability
capability from
from mobile
mobile network
network operators
operators
Mandate
Mandate the
the
provision
The
The regulator
regulator sets
sets the
the timeline
timeline for
for MNP
MNP implementation
implementation
provision ofof MNP
MNP
and set
and set
The
The regulator
regulator defines
defines the
the scope
scope of
of mobile
mobile services
services that
that will
will be
be portable.
portable. For
For example
example in
in Hong
Hong Kong,
Kong, numbers
numbers
implementation
implementation ported
ported include
include mobile
mobile voice
voice numbers,
numbers, mobile
mobile fax/data
fax/data numbers,
numbers, voice/fax
voice/fax mailbox
mailbox numbers,
numbers, SMS
SMS numbers,
numbers,
timeline
timeline and
and pre-paid
pre-paid SIM
SIM numbers
numbers

The
The regulatory
authority shall
shall play
play aa supervisory
supervisory role
role in
in the
the development
development of of the
the technical
technical solution
solution of
of MNP
MNP

Through
Through the formation of an Industry Forum (a platform that groups all operators involved), the regulator shall
the formation of an Industry Forum (a platform that groups all operators involved), the regulator shall
Supervise
Supervise the
the oversee
oversee the
the technical
technical solution
solution development
development process
process and
and resolve
resolve any
any disputes
disputes oror issues
issues that
that might
might arise
arise
development
development of of
Technical
Technical solution
solution shall
shall deliver
deliver anan equivalent
equivalent quality
quality of
of service
service to
to aa ported
ported number
number in in terms
terms of
of post
post dialing
dialing
technical
technical solution
solution delay, call failure, services and features, and end to end connectivity
delay, call failure, services and features, and end to end connectivity

The
The authority
authority shall
shall supervise
supervise thethe establishment
establishment of of operational
operational processes
processes addressing
addressing such
such issues
issues as
as
authentication, refusal to port, time to port and bulk
authentication, refusal to port, time to port and bulk porting porting
Supervise
Supervise the
the
An
An authentication
authentication procedure
procedure is is required
required toto ensure
ensure that
that the
the person
person requesting
requesting that
that aa number
number be be ported
ported is
is
establishment
establishment ofof aa authorized
authorized to
to do
do so
so
porting process
porting process
Mobile
Mobile operators
operators shall
shall have
have “barrier
“barrier free”
free” porting
porting process
process andand shall
shall not
not refuse
refuse aa valid
valid porting
porting request.
request. TheThe
regulator shall mandate an adequate time to complete porting. Throughout the porting
regulator shall mandate an adequate time to complete porting. Throughout the porting period, the donor period, the donor
network
network shall
shall ensure
ensure continuity
continuity of of service
service
Source: Ofcom, TRC, CITC, Connexus Analysis

The regulator also ensures tariff transparency, and establishes guidelines
regarding cost recovery and cost allocation
Mobile Number Portability Regulatory Principles (continued)

MNP
MNP maymay reduce
reduce tariff
tariff transparency
transparency (i.e. (i.e. the
the ability
ability toto determine
determine the the price
price of
of individual
individual calls
calls
accurately and easily in advance of making them) for mobile users
accurately and easily in advance of making them) for mobile users because of the tariff because of the tariff
difference
difference between
between on-net
on-net and
and off-net
off-net calls
calls from
from mobile
mobile networks
networks

The
The regulator will need to determine an approach that best reduces
regulator will need to determine an approach that best reduces the the tariff
tariff transparency
transparency
Ensure
Ensure tariff
tariff problem
problem forfor mobile
mobile users
users
transparency
transparency
Some
Some countries
countries have
have addressed
addressed thisthis problem
problem by by providing
providing an an audible
audible warning
warning message
message at at the
the
beginning
beginning of a call indicating that it will be charged at an off-net rate and giving the option to the
of a call indicating that it will be charged at an off-net rate and giving the option to the
caller
caller of
of abandoning
abandoning the the call
call

Another
Another approach
approach to to address
address tariff
tariff transparency
transparency is is to
to restrict
restrict the
the tariffs
tariffs charged
charged

Regulators
Regulators shall
shall establish
establish some
some guiding
guiding principles
principles in
in the
the recovery
recovery of
of costs
costs by
by the
the operators
operators

Commonly
Commonly used used cost
cost recovery
recovery principles
principles are:
are: cost
cost causation;
causation; distribution
distribution of
of benefits;
benefits; effective
effective
Determine
Determine cost
cost competition;
competition; cost
cost minimization,
minimization, reciprocity,
reciprocity, practicability
practicability and
and relevant
relevant cost
cost (incremental
(incremental cost
cost
recovery approach
recovery approach attributed
attributed to
to MNP)
MNP)
and
and cost
cost
Regulators
generally propose
propose the
the following
following cost
cost categories
categories for
for MNP
MNP toto best
best address
address costcost
allocation
allocation
recovery:
recovery: system
system set-up
set-up costs,
costs, additional
additional conveyance
conveyance costs
costs (costs
(costs related
related to
to the
the conveyance
conveyance of of
an
an individual
individual call
call to
to aa ported
ported number),
number), andand administrative
administrative costs
costs (costs
(costs incurred
incurred inin the
the porting
porting of
of
an
an individual
individual number)
number)
Source: Ofcom, TRC, CITC, Connexus Analysis

MNP was first introduced in 1997 in Singapore, and has since been introduced
in 27 countries and being planned or considered in many more
MNP Launch Dates
Greece,
Greece,
Belgium,
Belgium, Lithuania,
Lithuania, South
South
Spain,
Spain, Germany,
Germany, Korea,
Korea, Austria,
Austria, Brazil,
Brazil,
Singapore
Singapore Jordan,
Switzerland
Switzerland Italy,
Italy, Jordan, Latvia,
Latvia, Japan
Japan
Portugal Luxembourg,
Luxembourg,
Portugal
New
New Zealand
Zealand
1997 2002 2004 2006

2000
1999 2001 2003 2005
Australia, Finland, Croatia,

Croatia, Czech
Czech
Hong Australia, Finland, France
France
Hong Kong,
Kong, Denmark, Ireland, Republic,
Republic, Peru,
Peru,
Denmark, Ireland, Puerto
Puerto South
Netherlands,
Netherlands, Norway, Rico, South Africa,
Africa,
United
United Kingdom
Kingdom Norway, Rico, Taiwan,
Taiwan, Saudi
Saudi
Sweden
Sweden USA
USA Arabia
Arabia
To be rolled out
Source: INTUG (International Telecommunications Users Group)

The European Commission preceded the United States in mandating MNP
Mobile Number Portability – International Experience
European
European Commission
Commission United
United States
States

The
The European
European Community
Community Directive
Directive 2002/22/EC
2002/22/EC on on
FCC
FCC mandate
mandate on on MNP
MNP states:
states: ”We
”We require
require all
all cellular,
cellular,
Universal Service and Users’ Rights
Universal Service and Users’ Rights states that: states that: broadband
broadband PCS, and covered Specialized Mobile Radio
PCS, and covered Specialized Mobile Radio
“Member
“Member StatesStates shall
shall ensure
ensure thatthat all
all subscribers
subscribers of of (SMR)
(SMR) providers
providers toto have
have the
the capability
capability ofof delivering
delivering
publicly available telephone services, including
publicly available telephone services, including mobile mobile calls
calls from
from their
their networks
networks to to ported
ported numbers
numbers anywhere
anywhere
services,
services, whowho so so request
request cancan retain
retain their
their number(s)
number(s) in the country … and to offer service
in the country … and to offer service provider provider
independently
independently of of the
the undertaking
undertaking providing
providing the the service:
service: portability,
portability, including
including the
the ability
ability to
to support
support roaming,
roaming,
(a) in the case of geographic numbers,
(a) in the case of geographic numbers, at a specific at a specific throughout their networks…”.
throughout their networks…”.
location;
location; andand (b)
(b) in
in the
the case
case ofof non-geographic
non-geographic
Although
Although initial
initial deadlines
deadlines were
were extended,
extended, MNPMNP in in the
the
numbers, at any location.”
numbers, at any location.” United States became effective November
United States became effective November 24, 2003. 24, 2003.

MNP
MNP became
became compulsory
compulsory in in the
the EU
EU with
with the
the entry
entry into
into
By
By the
the end
end of
of October
October 2004,
2004, FCC
FCC hadhad reported
reported that that 88
force
force of
of the
the new
new regulatory
framework on on 25
25 July
July 2003.
2003. million
million cellular
cellular service
service users
users have
have switched
switched operators
operators

Many
Many EU EU Member
Member StatesStates recognized
recognized the the benefits
benefits of of but
but kept their old telephone numbers. Verizon Wireless
kept their old telephone numbers. Verizon Wireless
MNP
MNP andand introduced
introduced itit early.
early. MNP
MNP waswas introduced
introduced in in saw
saw its
its subscriber
subscriber base
base jump
jump from
from 3636 million
million just
just before
before
the UK in 1999 and has been, or in
the UK in 1999 and has been, or in the process of the process of MNP
MNP became effective to more than 42 million by end
became effective to more than 42 million by end
being,
being, introduced
introduced in in all
all European
European markets.
markets. of September
of September 2004.2004.

In
In 2003,
2003, EC EC hadhad reported
reported thatthat asas many
many as as 11%
11% of of
T-Mobile,
T-Mobile, added
added 4.24.2 million
million subscribers
subscribers during
during thethe 1212
mobile numbers were ported in Denmark
mobile numbers were ported in Denmark (MNP since (MNP since months ended September 30, 2004, growing
months ended September 30, 2004, growing from 12.1 from 12.1
2001),
2001), andand 5%5% ofof mobile
mobile numbers
numbers in in the
the Netherlands
Netherlands to
to 16.3
16.3 million
million subscribers.
subscribers.
(MNP
(MNP since 1999), Sweden (MNP since 2001), and
since 1999), Sweden (MNP since 2001), and the
the
UK
UK (MNP
(MNP since
since 1999).
1999).
Source: EC and FCC Websites

MNP has also spread in the region, including in Saudi Arabia
Mobile Number Portability – Regional Experience

The
The Telecommunications
Telecommunications Act Act requires
requires number
number portability
portability

The
The process
process for
for introducing
introducing number
number portability
portability is
is detailed
detailed in
in the
the Telecommunications
Telecommunications BylawBylaw
Saudi
Saudi Arabia
Arabia CITC

CITC initiated a public consultation on MNP, the deadline to submit replies was July 5, 2004
initiated a public consultation on MNP, the deadline to submit replies was July 5, 2004

CITC
CITC target implementation schedule is within 11 months from the licensing of 2nd mobile operator
target implementation schedule is within 11 months from the licensing of 2nd mobile operator

Number
Number portability
portability is
is required
required in
in the
the Telecommunications
Telecommunications Law Law

TRA completed public consultation on MNP in the
TRA completed public consultation on MNP in the fall 2003 fall 2003
Bahrain
Bahrain Implementation

Implementation ofof MNP
MNP was was delayed
delayed because
because of of changes
changes to to the
the national
national numbering
numbering plan
plan

The licenses of the two mobile operators allow for the introduction of number
The licenses of the two mobile operators allow for the introduction of number portability portability

TRC
TRC launched
launched aa consultation
consultation on
on MNP
MNP in in December
December 20032003

In
In January
January 2005,
2005, TRC
TRC issued
issued instructions
instructions for
for the
the implementation
implementation ofof MNP
MNP
Jordan
Jordan TRC

TRC will work with the operators through an industry forum to determine appropriate
will work with the operators through an industry forum to determine appropriate solution.
solution. TRC
TRC
target
target implementation
implementation schedule
schedule is
is within
within 12
12 to
to 18
18 months
months from
from the
the issuance
issuance of
of the
the instructions
instructions

Telecommunication
Telecommunication executive
executive regulations
regulations contain
contain provisions
provisions for
for number
number portability
portability

The
The mobile license granted to Omantel contains also provisions for number portability
mobile license granted to Omantel contains also provisions for number portability
Oman
Oman
Source: NRA’s websites

CITC has to play a key role in supervising the timely implementation of MNP
in order to prepare for a more competitive mobile market
Saudi Market Liberalization and MNP
Current
Current Situation
Situation Future
Considerations
CITC
CITC has
has recently
recently licensed
licensed aa 2nd
2nd mobile
mobile In
In its
its effort
effort to
to liberalize
liberalize mobile
mobile market
market and
and to
to
operator
operator (Mobily
(Mobily formerly
formerly Etihad
Etihad Etisalat)
Etisalat) promote
promote aa level
level playing
playing field
field between
between STC
STC
and
and Mobily,
Mobily, itit is
is essential
essential that
that CITC
CITC plays
plays an
an
An
An MNP
MNP consultation
consultation process
process was
was initiated
initiated in
in active
2004 active role
role in
in ensuring
ensuring thethe timely
timely
2004 implementation
implementation of of MNP
MNP
The
The MNP
MNP consultation
consultation document
document mentions
mentions anan
11-months CITC
CITC will
will have
have to
to determine
determine the the scope
scope ofof
11-months implementation
implementation schedule
schedule from
from the
the portable
licensing portable services.
services. Its
Its first
first priority
priority shall
shall be
be
licensing of
of the
the 2nd
2nd mobile
mobile operator
operator mobile telephone number portability
mobile telephone number portability
The
The deadline
deadline for
for the
the agreement
agreement on
on MNP
MNP has
has
just recently lapsed without any agreement CITC
CITC will
will have
have to
to play
play aa supervisory
supervisory role
role in
in
just recently lapsed without any agreement the
the development of the technical solution and
development of the technical solution and
No
No progress
progress has
has been
been made
made so
so far
far towards
towards of
of operational
operational procedures
procedures
an
an agreement between STC and Mobily on
agreement between STC and Mobily on
MNP STC
STC may
may deliberately
deliberately stall
stall the
the MNP
MNP
MNP implementation
implementation process.
process. CITC
CITC maymay want
want to
to
use its powers to prevent and punish delaying
use its powers to prevent and punish delaying
tactics
tactics
CITC
CITC will
will have
have to
to play
play anan active
active role
role in
in
defining
defining the
the best
best cost
cost recovery
recovery and
and cost
cost
allocation
allocation approach
approach
Roaming permits mobile customers to use a visited network to access services
when traveling outside the geographical coverage area of the home network
Roaming Definitions
The
The Finnish
Finnish communication
communication act
act offers
offers aa basic
basic
definition
definition for
for roaming
roaming Takes
Takes placeplace when
when aa subscriber
subscriber
accesses
accesses services in their home
services in their home
“Roaming
“Roaming means
means mobile
mobile network
network access
access rights
rights country outside the network coverage
country outside the network coverage
National
National
provided of
of their
their home
home mobile
mobile operator
operator through
through
provided by
by one
one network
network operator
operator toto another
another Roaming
Roaming aa roaming
roaming agreement between their
agreement between their
network
network operator
operator in
in aa geographical
geographical area
area in
in which
which (Intra-country
(Intra-country operator
operator and
and other
other operators
operators that
that cover
cover
both network operators have a license”
both network operators have a license” Roaming)
Roaming) areas
areas of of the
the country
country their
their operator
operator
does not
does not
The
The GSM
GSM Association
Association offers
offers the
the following
following
comprehensive
comprehensive definition
definition for
for roaming
roaming and
and national
national
roaming:
roaming:
“Roaming
“Roaming is is defined
defined as as the
the ability
ability for
for aa cellular
cellular
customer
customer to to automatically
automatically makemake && receive
receive voice
voice International
International roaming
roaming takes
takes place
place when
when
calls, International
International aa subscriber
subscriber is in a foreign country and
is in a foreign country and
calls, send
send && receive
receive data,
data, or
or access
access otherother
Roaming
Roaming accesses
accesses services
services through
through aa roaming
roaming
services
services when
when traveling
traveling outside
outside the
the geographical
geographical agreement
(Inter-country
(Inter-country agreement between
between their
their home
home
coverage
coverage area
area ofof the
the home
home network,
network, by by means
means of of Roaming)
Roaming) network
network mobile
mobile operator
operator and
and aa network
network
using
using aa visited
visited network.
network. IfIf the
the visited
visited network
network is is in
in operator in the foreign country
operator in the foreign country
the
the same
same country
country as as the
the home
home network,
network, thisthis is
is
known
known asas National
National Roaming”
Roaming”
National Roaming (NR) allows a new mobile operator to offer national service
coverage while its network is still being deployed
National Roaming Description and Key Benefits
Description
Description Key
Key Benefits
Benefits
Within
Within the
the context
context of
of market
market liberalization,
liberalization, National
National NR
NR lowers
lowers infrastructure
infrastructure costs
costs in
in the
the short
short to
to
Roaming (NR) is a form of infrastructure sharing
Roaming (NR) is a form of infrastructure sharing medium
medium term as it allows a new mobile operator to
term as it allows a new mobile operator to
that
that allows
allows aa new
new mobile
mobile operator:
operator: deploy its network gradually, especially in
deploy its network gradually, especially in ruralrural
areas
areas
to
to provide
provide national
national service
service coverage
coverage while
while its
its
network
network is still being deployed by means of sharing
is still being deployed by means of sharing NR
NR accelerates
accelerates competition
competition as as itit allows
allows aa new
new
the incumbent’s network in specific non-covered
the incumbent’s network in specific non-covered mobile operator to provide coverage
mobile operator to provide coverage in areas in areas
areas,
areas, in
in which
which case
case NR
NR is
is an
an interim
interim measure
measure where
where itit has
has not
not yet
yet rolled
rolled out
out its
its network
network
to
to provide
provide national
national service
service coverage
coverage ifif itit chooses
chooses NR
NR allows
allows aa new
new mobile
mobile operator
operator to
to develop
develop aa
not
not to cover the whole territory, in which case NR
to cover the whole territory, in which case NR is
is nationwide
nationwide customer base during the roll-out
customer base during the roll-out of
of its
its
aa permanent measure
permanent measure network
network
The obligation to provide NR is not imposed on all market players, but only on
dominant providers
Governing Principles for Mandatory NR
Principles
Principles Examples
Examples
Regulators
Regulators offer
offer new
new entrants
entrants the
the possibility
possibility of
of National
National Roaming
Roaming in in Finland
Finland andand Ireland
Ireland
national
national roaming
roaming onon an
an available
available licensed
licensed network
network The
The Finnish Communication Act clearly stipulates that
Finnish Communication Act clearly stipulates that only
only aa network
network
operator
operator with
with significant
significant market
market power
power and and aa license
license for
for aa GSM
GSM
In
In some
some cases,
cases, national
national roaming
roaming is
is only
only allowed
allowed mobile
mobile network has an obligation to negotiate on roaming with aa
network has an obligation to negotiate on roaming with
with
with dominant or SMP operators, and the new
dominant or SMP operators, and the new network
network operator
operator that
that has
has aa license
license for
for aa third
third generation
generation mobile
mobile
entrant
entrant may
may be
be allowed
allowed to
to have
have national
national roaming
roaming network
network
agreements
agreements with
with several
several dominant
dominant oror SMP
SMP On
On the
the other
other hand,
hand, aa directive
directive from
from the
the Irish
Irish Ministry
Ministry of of Communication
Communication
operators simultaneously
operators simultaneously also
also stipulates
stipulates that
that operators
operators classified
classified as as having
having SMPSMP by by either
either the
the
European Commission or ComReg (Irish Telecommunication
European Commission or ComReg (Irish Telecommunication
Licensed
Licensed operators
operators have
have the
the right
right to
to negotiate
negotiate
Regulator)
Regulator) shall
shall be
be mandated
mandated to to offer
offer national
national roaming
roaming
national
national roaming
roaming agreements,
agreements, with with the
the assumption
assumption
that
that they
they will
will arrive
arrive at
at aa commercially
commercially negotiated
negotiated
solution
solution
National
National Roaming
Roaming in in Australia
Australia
Regulators
Regulators may
may set
set time
time limits
limits within
within which
which The
The Australian regulator did mandate national roaming
Australian regulator did mandate national roaming because
because the
the
negotiations
negotiations of
of NR
NR agreements
agreements must must be
be completed
completed market was competitive, and assumed that the operators
market was competitive, and assumed that the operators would would
enter
enter freely
freely into
into agreements.
agreements.
IfIf agreement
agreement isis not
not reached,
reached, and
and after
after ascertaining
ascertaining The
that The assumption proved right since currently most
assumption proved right since currently most Australian
Australian operators
operators
that negotiations have taken place in good faith,
negotiations have taken place in good faith, have
have national
national roaming
roaming agreements
agreements enabling
enabling them
them toto provide
provide
regulators
regulators may
may intervene
intervene and
and impose
impose aa charge
charge nationwide
nationwide coverage,
coverage, without
without the
the obligation
obligation to
to do
do so
so
where
where necessary
necessary
Source: NRA’s websites

Mandatory NR must be limited to a certain timeframe
Governing Principles of NR Timeframe

Principles
Principles Examples
Examples
The
The regulator
regulator may
may mandate
mandate national
national roaming
roaming from
from the
the National
National Roaming
Roaming in in Italy
Italy
incumbent as soon as the new entrant meets a minimum
incumbent as soon as the new entrant meets a minimum The
The ministry of Communications in Italy mandated TIM
ministry of Communications in Italy mandated TIM (the
(the incumbent)
incumbent)
network
network deployment
deployment threshold
threshold (e.g.,
(e.g., 20%
20% of
of the
the population)
population)
to
to offer Omnitel (the 2nd entrant) national roaming for a period of
offer Omnitel (the 2nd entrant) national roaming for a period of two
two
In
In case
case of
of dispute,
dispute, the
the regulator
regulator determines
determines whether
whether the
the years,
years, and
and itit also
also fixed
fixed the
the prices.
prices. Omnitel
Omnitel had
had to
to ensure
ensure aa 40%
40% build
build
minimum
minimum roll-out
roll-out requirement
requirement has
has been
been met
met by
by the
the new
new of
of the
the network
network to to benefit
benefit from
from national
national roaming.
roaming. Later,
Later, Wind
Wind (the
(the 3rd
3rd
entrant
entrant entrant)
entrant) also
also benefited
benefited from
from national
national roaming
roaming on on both
both existing
existing
The
The incumbent
incumbent isis not
not obligated
obligated toto offer
offer roaming
roaming services
services networks
networks butbut forfor only
only 18
18 months.
months. However,
However, this
this time,
time, access
access prices
prices
where
where the
the new
new entrant
entrant has
has built
built out
out aa network,
network, since
since thethe were commercially negotiated.
were commercially negotiated.
objective of roaming is not for the new entrant to
objective of roaming is not for the new entrant to use the use the
incumbent
incumbent network
network as
as aa safety
safety net
net in
in the
the event
event that
that its
its own
own
network
network cannot support its customers, but to use it to offer
cannot support its customers, but to use it to offer
nationwide
nationwide coverage
coverage
The
The provision
provision of
of national
national roaming
roaming isis meant
meant toto be
be aa temporary
temporary National
National Roaming
Roaming in in The
The UK
UK
mechanism,
mechanism, offsetting disadvantages that the new entrant
offsetting disadvantages that the new entrant The
will
The national
national roaming
roaming condition
condition applied
applied by by Ofcom
Ofcom for
for roll-out
roll-out of
of 3G
3G
will face
face when
when competing
competing with
with established
established incumbents
incumbents networks in the UK anticipates a 10 year condition under which
networks in the UK anticipates a 10 year condition under which
Mandatory
Mandatory national
national roaming
roaming has
has aa “sunset
“sunset clause”
clause” that
that incumbents
incumbents mustmust offer
offer national
national roaming.
roaming. Where
Where commercial
commercial
terminates national roaming after a certain period
terminates national roaming after a certain period agreement
agreement between the operators is reached, shorter horizons
between the operators is reached, shorter horizons are
are
Initially,
Initially, the
the regulator
regulator expects
expects that
that the
the new
new entrant
entrant would
would not
not acceptable.
acceptable. TheThe condition
condition also
also stresses
stresses that
that where
where the
the new
new entrant
entrant
be
be able to offer national coverage. National roaming allows
able to offer national coverage. National roaming allows has
has rolled
rolled out
out aa network,
network, the
the incumbent
incumbent cancan withdraw
withdraw roaming
roaming
the
the new
new entrant
entrant to
to sell
sell services
services to
to subscribers
subscribers in
in areas
areas other
other coverage
coverage
than those where its network
than those where its network is built is built
However,
However, the
the regulator
regulator assumes
assumes that
that the
the new
new entrant
entrant would
would
market
market services to customers primarily within its coverage
services to customers primarily within its coverage
area
area
Regulators usually require incumbents to provide NR in a non-discriminatory
manner
Governing Principles for Non-Discrimination
Principles
Principles Examples
Examples
The
The newnew entrant
entrant should
should receive
receive aa service
service technically
technically equivalent
equivalent to to that
that
offered to the incumbent’s
offered to the incumbent’s customers customers
The
The commercial
commercial agreement
agreement between
between operators
operators should
should contain
contain safeguards
safeguards
concerning
concerning non-disclosure of information, and other safeguards that
non-disclosure of information, and other safeguards that limit
limit
the National
National Roaming
Roaming in in Finland
Finland
the incumbent’s
incumbent’s abilityability to
to target
target the
the new
new entrants’
entrants’ customers
customers
Regulatory
Regulatory intervention was necessary
intervention was necessary in in
The
The incumbent
incumbent should should provide
provide roaming
roaming services
services in in aa manner
manner that that would
would
enable Finland
Finland after
after Sonera
Sonera and and Radiolinja
Radiolinja
enable it to make an adequate return on investment, at least equal to
it to make an adequate return on investment, at least equal to its
its
cost offered
offered abusive
abusive national
national roaming
roaming prices
prices
cost of of capital,
capital, without
without forcing
forcing new
new entrants
entrants toto exit
exit the
the market
market
to
to Telia.
Telia. The
The prices
prices offered
offered were were higher
higher
Incumbents
Incumbents should should offer
offer roaming
roaming services
services onon aa non-discriminatory
non-discriminatory basis basis
and than
than the
the prices
prices offered
offered by by the
the two
two
and thethe commercial
commercial agreement
agreement should
should contain
contain specific
specific arrangements
arrangements
designed dominant
dominant operators to their own retail
operators to their own retail
designed to to manage
manage the the capacity
capacity problems
problems caused
caused by by new
new entrant’s
entrant’s traffic
traffic
customers.
customers. To To solve
solve the the need
need forfor
Incumbents should not restrict access to their networks on the grounds of
Incumbents should not restrict access to their networks on the grounds of
capacity national
national roaming Telia resorted to
roaming Telia resorted to
capacity constraints.
constraints. Capacity
Capacity problems
problems can can bebe addressed
addressed via via receipt
receipt of of
timely “mobile
“mobile wash”,
wash”, i.e.,
i.e., itit using
using the
the
timely information
information from from the
the new
new entrant
entrant toto facilitate
facilitate network
network planning
planning and and
provision Swisscom
Swisscom network
network internationally
internationally in in
provision of of capacity
capacity
Switzerland
Switzerland to access the networks of
to access the networks of
IfIf additional
additional investments
investments are are required,
required, these
these costs
costs may
may be be taken
taken into
into
account in the price of providing roaming services both
both Sonera
Sonera and and Radiolinja
Radiolinja nationally
nationally
account in the price of providing roaming services
The
The newnew entrant
entrant must
must provide
provide the
the incumbent
incumbent withwith sufficient
sufficient and
and timely
timely
information to facilitate network planning and provision
information to facilitate network planning and provision of capacity of capacity
Regulators leave NR pricing and charging structures to commercial
negotiations, but may become involved when negotiations fail
Governing Principles for NR Charges
Principles
Principles Examples
Examples
The
The regulator
regulator considers
considers that
that operators
operators of
of mobile
mobile services
services
shall agree freely to the terms and conditions of national
shall agree freely to the terms and conditions of national
roaming
roaming and
and expects
expects that
that all
all pricing
pricing and
and charging
charging structures
structures
would
would result
result out
out of
of commercial
commercial negotiations
negotiations
However,
However, inin order
order to
to provide
provide certainty
certainty to
to new
new entrants
entrants that
that in
in
the National
National Roaming
Roaming in in Italy,
Italy, UK,
UK, Jordan
Jordan andand Denmark
Denmark
the event
event of
of aa dispute
dispute they
they would
would obtain
obtain NRNR at
at aa price
price that
that
would enable them to compete with incumbent operators, When
When issuing
issuing the
the 3rd
3rd mobile
mobile license
license in
in Italy
Italy the
the Italian
Italian
would enable them to compete with incumbent operators,
the regulator
regulator mandated
mandated thatthat national
national roaming
roaming be be negotiated
negotiated
the regulator
regulator shall
shall set
set an
an approach
approach toto price
price determination
determination
on a cost basis.
on a cost basis.
Commonly
Commonly used
used NR
NR pricing
pricing methods
methods are:
are: retail-minus
retail-minus and
and Alternatively,
Alternatively, the
the UK
UK and
and Jordanian
Jordanian regulators
regulators favor
favor aa retail-
retail-
cost-plus
cost-plus minus system.
minus system.
Other
Other regulators,
regulators, such
such as
as the
the Danish,
Danish, do
do not
not toto regulate
regulate NRNR
In
In competitive
competitive markets,
markets, retail-minus
retail-minus is
is the
the preferred
preferred method
method
charges
charges
Where
Where competition
competition is
is absent
absent oror weak
weak like
like in
in Saudi,
Saudi, cost-plus
cost-plus
is
is preferred since retail prices are typically excessive and
preferred since retail prices are typically excessive and
profits
profits abnormal,
abnormal, hence
hence aa cost
cost based
based method
method is is aa better
better
reference
reference for
for setting
setting prices
prices
CITC should require STC and Mobily to provide the third licensed mobile
service provider with national roaming as long as it meets its minimum roll-
out requirements
Saudi Market Liberalization and National Roaming
Current
Current Situation
Situation Future
Considerations
CITC
CITC has
has recently
recently licensed
licensed aa 2nd
2nd mobile
mobile In
In its
its effort
effort to
to accelerate
accelerate competition
competition in in the
the mobile
mobile
operator
operator (Ettihad
(Ettihad Etisalat,
Etisalat, or
or “Mobily”)
“Mobily”) market
market and to promote a level playing field, STC
and to promote a level playing field, STC
and
and Mobily
Mobily should
should be be mandated
mandated to to provide
provide NR NR
AA consultation
consultation process
process was
was initiated
initiated on
on upon
upon request
request by by the
the new
new entrant
entrant
national
national roaming
roaming in
in 2003
2003 as
as part
part of
of the
the public
public National roaming will allow the
National roaming will allow the new
new entrant
entrant to to
notice on “Licensing of Cellular Mobile
notice on “Licensing of Cellular Mobile provide
provide national service coverage while itit is
national service coverage while is still
still
Services”
Services” deploying
deploying its its network
network
In
In order
order toto promote
promote infrastructure
infrastructure based based
STC
STC and
and Mobily
Mobily have
have reached
reached agreement
agreement on
on competition
competition in the long run,
in the long run, CITC
CITC should
should set set out
out aa
national
national roaming,
roaming, albeit
albeit at
at high
high rates
rates sunset
sunset clause
clause in in STC
STC and and Mobily’s
Mobily’s mandate
mandate to to
provide NR and impose minimum
provide NR and impose minimum build out build out
Mobily
Mobily has
has stepped
stepped up
up its
its roll-out
roll-out schedule
schedule to
to requirements
reduce requirements on on the
the third
third licensed
licensed service
service
reduce its
its dependence
dependence onon national
national roaming
roaming provider
provider
CITC
CITC can can leave
leave itit up
up toto the
the service
service providers
providers to to
negotiate the terms and conditions
negotiate the terms and conditions of roaming, of roaming,
and
and should
should intervene
intervene ifif negotiations
negotiations fail fail oror reach
reach aa
stalemate
stalemate
CITC
CITC should
should play
play an an active
active rolerole in
in ensuring
ensuring that that
national
national roaming
roaming service
service performance
performance and and
charges
charges are are non-discriminatory.
non-discriminatory. Since Since mobile
mobile
competition is in its early stages,
competition is in its early stages, a cost-based a cost-based
pricing
pricing approach
approach for for NR
NR is is preferred
preferred
A Mobile Virtual Network Operators (MVNO) buys transport capacity from a
Mobile Network Operator (MNO), and resells it under a different brand
MVNO Definition
An MVNO does not own spectrum, it leases it from a network operator with whom it has a relationship.
An MVNO supplies the SIM card and has full control over its subscribers and handles its own billing.
An MVNO buys network capacity, usually as close to the base level as possible, and invests in a service infrastructure of its own.
An MVNO can own all infrastructure and network components, except for the spectrum, base stations, and base station
controllers
The MVNO thereby establishes a more independent position and is able to compete directly with other mobile network operators
in the market by offering advanced services.
“An
“An organization
organization operating
operating aa physical
physical network
network infrastructure
infrastructure comprising,
comprising, as
as aa minimum,
minimum, anan
Irish
Irish Regulator
Regulator MSC, HLR and authentication center, having its own unique mobile network code, and
MSC, HLR and authentication center, having its own unique mobile network code, and issuing issuing
(ODTR)
(ODTR) definition
definition its
its own
own branded
branded SIM
SIM cards,
cards, but
but without
without aa mobile
mobile radio
radio access
access network”
network”
MVNOs focus mainly on value added services as differentiators from their
host network
MVNO Services
Basic
Basic communication
communication services
services Net
Net access
access services
services
Voice
Voice Information
Information Services
Services
Multimedia
Multimedia (Picture,
(Picture, Audio,
Audio, Video)
Video) Location
Location Based
Based Services
Services
Messaging
Messaging (SMS,
(SMS, Chat,
Chat, Email)
Email) M-Commerce
M-Commerce
Telematics
Telematics M-Entertainment
M-Entertainment
Machine
Machine to
to Machine
Machine Personal
Personal Information
Information Management
Management
Man
Man to
to Machine
Machine Other
Other internet
internet access
access
Low MVNO High MVNO

focus focus
MVNOs
MVNOs mainly
mainly focus
focus on
on value
value added
added services
services allowing
allowing them
them toto position
position themselves
themselves differently
differently from
from their
their host
host
and
and attract
attract niche
niche market
market consumers
consumers
MVNOs
MVNOs cannot
cannot compete
compete onon basic
basic communications
communications services
services like
like voice
voice
MVNOs can be grouped in three main categories, light, medium and heavy
Types of MVNOs
Light MVNO Medium MVNO Heavy MVNO
Access The MVNO fully depends on the host for network The MVNO issues its own SIM cards that give it control The MVNO has its own network elements and switches
access and SIM-card issuance over on-screen branding and SIM-based that give it call control. The host only provides
services radio spectrum and coverage
Radio Spectrum E E E
Network switching E E H
Network components E E H
Sim Cards E H H
Services The MVNO depends on the host for roaming, Although the host handles roaming, the MVNO The MVNO has full control over all services and
provisioning, and billing but offers its own value- provides provisioning, billing, customer care, negotiates its own interconnect and roaming
added services. The host provides customer and value-added services including SIM-based agreements with other operators
care for network issues, the MVNO for other services. Network services come from the host
issues network
Roaming/ interconnect E E H
Provisioning E H H
Billing E H H
Customer care r H H
Value-added services R H H
Customer The MVNO brands and packages the subscription and The MVNO has the same control over customer With its resources spread across access, services, and
engagement displays its brand through the phone screen. engagement as in the light approach, but it customers, the MVNO faces a bigger challenge
The MVNO sets the tariffs and sends out the depends more on services than on customer to give equal attention to the customer as the
bill. All emphasis lies on the customer and care for differentiation brand MVNO can
brand experience
Branding H H H
Pricing H H H
Distribution H H H
Source: OMSYC 2003

R Shared ownership/control between MVNO and host
E Owned/controlled by host network

H Owned/controlled by MVNO
Heavy MVNOs are able to differentiate themselves the most from their host
network
Potential MVNO Differentiation
Description
Description of
of Distinctive
Distinctive Elements
Elements Licensing
Licensing Requirements
Requirements
MVNO
MVNO can
can route
route his
his own
own calls
calls
Core
Core Network
Network MVNO
MVNO can
can generate
generate revenue
revenue from
from interconnection
interconnection Individual
Individual License
License
Elements
Elements MVNO
MVNO has
has aa greater
greater flexibility
flexibility and
and control
control over
over its
its
network
network
MVNO
MVNO can
can develop
develop his
his own
own value
value added
added services
services
Intelligent
Intelligent
Network MVNO
MVNO can
can fully
fully control
control his
his prepaid
prepaid subscribers
subscribers Class
Class License
License
Network andand
VAS platforms
VAS platforms Dependency
Dependency onon host
host network
network for
for VAS
VAS is
is substantially
substantially
reduced
reduced
Own
Own Network
Network Develop
Develop SIM
SIM applications
applications exclusive
exclusive to
to MVNO
MVNO clients
clients
Code
Code and
and SIM
SIM Class
Class License
License
cards
cards Sign
Sign direct
direct roaming
roaming agreements
agreements with
with foreign
foreign operators
operators

Handle
Handle completely
completely the the relation
relation with
with the
the end-user
end-user
Billing
Billing ––

Greater
Greater flexibility
flexibility in
in the
the billing
billing mechanism
mechanism allow
allow different
different Class
Class License
License
Provision
Provision
tariff plans
tariff plans
MNOs need to balance the network yield management with the cannibalization
impact of MVNOs
MNO Benefits from MVNOs
MNO
MNO will
will benefit
benefit from
from MVNO
MVNO to to partially
partially cover
cover part
part fixed
fixed overheads
overheads and
and improve
improve their
their return
return on
on
investment
investment and
and internal
internal rate
rate of
of return
return
MNO
MNO have
have excess
excess capacity
capacity inin some
some urban
urban areas
areas and
and in
in most
most rural
rural areas
areas therefore
therefore selling
selling the
the excess
excess
capacity
capacity to
to MVNO
MVNO will
will surely
surely be
be profitable
profitable to
to the
the MNO
MNO
MNO
MNO usually
usually bill
bill MVNO’s
MVNO’s atat retail
retail minus
minus (unless
(unless stated
stated otherwise
otherwise by
by the
the regulator)
regulator) which
which provides
provides
them
them with
with high
high profit
profit margin
margin on
on sold
sold capacity
capacity
MNO
MNO may
may not
not benefit
benefit much
much ifif the
the risk
risk of
of MVNO
MVNO cannibalization
cannibalization is
is high
high
MNO
MNO will
will have
have to
to assess
assess the
the cannibalization
cannibalization risk
risk before
before firming
firming up
up the
the agreement
agreement with
with an
an MVNO
MVNO
The
The risk
risk in
in minimized
minimized ifif the
the MVNO
MVNO is is charged
charged aa price
price close
close to
to the
the wholesale
wholesale price
price of
of the
the operator
operator
(Assuming
(Assuming thethe operator
operator is is offering
offering wholesale)
wholesale)
Most European regulators have opted for minimal intervention in MVNOs
Regulatory Positions on MVNOs
Oftel
Oftel (now
(now Ofcom)
Ofcom) allows
allows networks
networks toto reach
reach voluntary
voluntary commercial
commercial agreements
agreements with
with MVNOs,
MVNOs, subject
subject to
to much
much less
less
regulation
regulation than
than before
before
UK
UK Networks
Networks will
will not
not have
have toto deal
deal with
with MVNOs
MVNOs on on aa non-discriminatory
non-discriminatory basis
basis
Oftel
Oftel has
has made
made no no requirements
requirements that
that networks
networks –– either
either 2G
2G or
or 3G
3G –– make
make any
any provisions
provisions for
for MVNOs
MVNOs
Oftel
Oftel has
has given
given little
little indication
indication as
as to
to how
how itit will
will distinguish
distinguish MVNOs
MVNOs from
from SPs
SPs
SWEDEN PTS,
PTS, the
the Swedish
Swedish regulator,
regulator, requires
requires that
that 3G
3G networks
networks host
host MVNOs,
MVNOs, but
but has
has not
not been
been as
as prescriptive
prescriptive in
in its
its definition
definition as
as
SWEDEN OFTA. Its overall strategy is amongst the most pro-MVNO
OFTA. Its overall strategy is amongst the most pro-MVNO

MVNOs
MVNOs havehave the
the right
right to
to their
their own
own numbering
numbering ranges
ranges and
and MNCs,
MNCs, thethe right
right to
to issue
issue SIMs,
SIMs, to
to interconnect
interconnect with
with other
other

telecom networks and to provide content and services, as if they were actual mobile
telecom networks and to provide content and services, as if they were actual mobile operators operators
SPAIN
SPAIN MVNOs

MVNOs willwill have
have toto be
be able
able to
to use
use subscriber
subscriber management
management as as well
well as
as transmission
transmission and and switching
switching systems
systems

On the other hand, MVNOs will not be obliged to have minimum coverage or service
On the other hand, MVNOs will not be obliged to have minimum coverage or service requirements requirements
The
The Italian
Italian regulator
regulator will
will not
not permit
permit the
the operation
operation of
of 2G
2G MVNOs,
MVNOs, and
and has
has indicated
indicated that
that aa moratorium,
moratorium, lasting
lasting until
until 2009
2009
will apply to 3G MVNOs
will apply to 3G MVNOs
ITALY
ITALY
Regulation
Regulation from
from the
the EU
EU on
on the
the subject
subject has
has been
been based
based on
on the
the concept
concept of
of networks
networks with
with significant
significant market
market power
power (SMP),
(SMP),
EU
EU which
which the
the EU
EU suggests
suggests is
is any
any network
network with
with more
more than
than 25%
25% market
market share.
share. Networks
Networks deemed
deemed to to have
have SMP
SMP must
must provide
provide
access
access toto smaller
smaller network
network providers
providers
Source: Analysys 2002

OFTA in Hong Kong intervened heavily in regulating MVNOs prior to its
licensing process
OFTA Regulatory Position on MVNO
What is an MVNO?
A Mobile Virtual Network Operator (MVNO) provides mobile telecommunications services to customers through interconnection with and
access to the radio communications infrastructure of a Mobile Network Operator (MNO)
The concept behind having the MVNO is to allow companies to participate in the business of supplying mobile services without having to hold a
full MNO license
MVNOs can focus on services and application levels, providing a vast variety of products to users OFTA
OFTA diddid not
not define
define capacity,
capacity, which
which
Is an MVNO only permitted to share and interconnect with the infrastructure of a 3G operator? undermined
undermined MVNOs since they
MVNOs since they were
were
No. MVNOs can share and interconnect with the infrastructure of 2G or 3G operators left
left at
at the
the mercy
mercy ofof MNOs
MNOs
MVNOs wishing to access 2G networks have to conduct negotiations with such on commercial basis
Under the licensing conditions for 3G network operators, 30% of their network capacity is to be opened to other service providers, including
MVNOs
What kind of infrastructure is needed?
An MVNO can operate its own infrastructure, e.g. switching, billing, IN systems etc; however, an MVNO has no right to the radio spectrum. It
therefore has to access and interconnect with an MNO to make use of the latter’s radio communications infrastructure (e.g. base station, base
station controller) to deliver services. Please refer to the diagram for an example of MVNO and MNO interconnection
What kind of licenses does an MVNO need to hold?
A Public Non-Exclusive Telecommunications Network Services (PNETS) license is needed. There are no pre-set limits for the number of
PNETS licenses to be issued for MVNOs, and the licensing procedure is simple. The PNETS license is subject to a renewable annual fee
(currently HK$750 per year)
What are the rights of an MVNO licensee?
An MVNO that meets certain criteria will be allocated its own number under the telecommunications numbering plan
An MVNO may be allocated with a Mobile Network Code
An MVNO satisfying certain requirements may also seek TA’s intervention in access to a 3G network
What are the obligations of an MVNO?
An MVNO has to conform to the telecommunications numbering plan issued by the Telecommunications Authority (TA)
facilitate mobile number portability
provide emergency services to its customers
pay the same interconnection charges as an MNO for direct interconnection with fixed networks
Source: OFTA 2002

Regulators are more biased towards network operators and offer a varied
level of MVNO regulation
Regulators Positioning on MVNOs
In Sweden and Ireland regulators have Network biased regulators favor network
been favorable to MVNO deployment operators and give little incentives to
PTS, the Swedish regulator issued MVNOs
extensive regulation on MVNO allowing Even OFTA is considered more network
them to develop and compete fairly Level of MVNO
biased despite the high level of MVNO
regulation regulation since it did not define network
capacity leaving it to the network licensees
to do so
OFTA
(Hong Kong)
PTS CMT
(Sweden) (Spain)
ODTR Ofcom
(Ireland) (UK)
ART
(France)
MVNO FCC Network

Biased (USA) Biased
Neutral
Source: Analysys 2002
Regulatory conditions are influencing tariff models of operators,
‘Retail minus’ is preferred by the operator and ‘Costs plus’ by the regulator
MVNO Tariff Models
Low
Low potential
potential for
for
Tariff
Tariff model
model margin of MVNO
margin of MVNO
Determined
Determined by
by "Retail minus"
"Retail minus"
Operator
Operator Negotiated
Negotiated Prices
Prices Profit
Profit margin
margin averages
averages
30%
30% ofof ARPU
ARPU inin most
most
cases
cases
High
High potential
potential for
for
Tariff
Tariff model
model margin
margin of
of MVNO
MVNO
Determined
Determined by
by "Cost
"Cost plus"
plus"
Regulator
Regulator Network
Network Profit
Profit margin
margin can
can reach
reach
Operating
Operating Costs
Costs up
up to
to 50%
50% or
or ARPU
ARPU in
in
plus Margin
plus Margin some cases
some cases
In most of the European cases surveyed, MVNO introduction took place in
2000 when penetration was above 50% and the number of MNOs was 3
Timing of First MVNO in Europe
Introduction
Introduction Penetration
Penetration at
at ## MNOs
MNOs at
at Introduction
Penetration at
at ## MNOs
MNOs at
at
Date
Date Introduction
Introduction Introduction
Introduction Date
Date Introduction
Introduction
H2
H2 1999
1999 40%
40% 44 H1
H1 2000
2000 64%
64% 33
Norway
UK
Finland Introduction Penetration

Introduction
Penetration at
at ## MNOs
MNOs at
at Introduction Penetration at
at ## MNOs
MNOs at
at
Date
Date Introduction
Introduction Date
Date Introduction
Introduction
Sweden
H1
H1 2000
2000 48%
48% 22 H2
H2 1999
1999 58%
58% 33
Ireland
Introduction
Penetration at
at ## MNOs
MNOs at
at Germany Introduction
Penetration at
at ## MNOs
MNOs at
at
Date
Date Introduction
Introduction Date
Date Introduction
Introduction
H2
H2 2001
2001 67%
67% 33 France Denmark H2
H2 1999
1999 64%
64% 33
Introduction
Penetration at
at ## MNOs
MNOs at
at Introduction Penetration
Introduction Penetration at
at ## MNOs
MNOs at
at
Date
Date Introduction
Introduction Date Introduction Introduction
Date Introduction Introduction
H2
H2 2000
2000 43%
43% 33 H1
H1 2000
2000 58%
58% 44
The introduction of MVNOs drives ARPU down for a limited period before it re-
stabilizes at previous levels
MVNO Impact on ARPU
ARPU in countries where MVNO were introduced

between 1999 and 2000 (in USD)
MVNO introduction phase
50 for selected countries
45
40
35
30
25
20
1999 2000 2001 2002 2003 Q3 2004
UK France Finland Denmark Sweden Norway

Source: Merrill Lynch
Global MVNO subscribers accounted for 4.4% of total subscribers in 2004,
and Denmark provides an exceptional example
MVNO Market Share
Total MVNO Subscribers and Percentage of Total MVNO Market Share in

Mobile Subscribers (in Million) (in%) Denmark (in%)
110 110 5.0% MVNOs 23%
4.4% 5000 Market Share
100 4.5%
4000
90 4.0%
3000
80
3.5%
2000
70 MNOs 77% Market
2.7% 3.0% 1000 Share
60
2.5% 0
50 H1 H2 H1 H2 H1 H2 H1 H2
2.0% 00 00 01 01 02 02 03 03
40 1.5% 33 Tele2 the Danish MVNOs
1.5%
30 started operation in 2000
20 1.0% MVNO market share in
15
0.4% Denmark was 23% by the end
10 0.5% of 2003
3
0 0.0%
2001 2002 2003 2004
MVNO subs % of total subs
Source: Arc Group Danske Equities, Starnd Report
Where three MNOs exist, an MVNO will typically acquire the largest market
share from the two largest MNOs
MVNO Market Share Acquisition

E
TIIVVE
AAT
S TTRR
UUS
IILLLL
Three MNOs without MVNO Three MNOs with MVNO
Assumption:
Assumption: New New
MVNO
MVNO willwill take
take on
on
average
average equal
equal
market
market share
share from
from
all
all existing
existing
50% competitors
competitors
47.5%
40%
38.0%
10% 9.5%
5%
Operator A Operator B Operator C Operator A Operator B Operator C MVNO
Source: Arthur D. Little (2002)

CITC should prepare the legal and regulatory framework to license MVNOs
Saudi Market Liberalization and MVNOs
Current
Current Situation
Situation Future
Considerations
No
No MVNOs
MVNOs in
in KSA
KSA CITC
CITC needs
needs to to clarify
clarify whether
whether MVNOs,
MVNOs, in in
KSA
KSA context,
context, are are considered
considered providers
providers of of
mobile
mobile services
services and, and, therefore,
therefore, require
require an an
individual
individual license
license which
which needs
needs toto bebe approved
approved
by
by the
the Council
Council of of Ministers
Ministers
CITC Bylaws need to
CITC Bylaws need to clarify
clarify the
the type
type of
of
license
license needed
needed for for the
the different
different types
types of of
MVNOs
MVNOs
CITC
CITC maymay have have toto mandate
mandate STC STC –and–and
Mobily,
Mobily, ifif itit becomes
becomes aa dominant
dominant service
service
provider- to provide a reference
provider- to provide a reference wholesale wholesale
offer
offer to
to MVNOs
MVNOs
It is not advisable to
It is not advisable to license
license MVNOs
MVNOs beforebefore
the
the third
third MNO
MNO has has been
been licensed
licensed and and been
been
given an opportunity to establish
given an opportunity to establish a presence a presence
on
on the
the market
market
Carrier Selection is a tool that promotes competition in fixed voice telephony
Carrier Selection Definition and Rationale

Carrier
Carrier Selection
Selection maymay take
take one
one of
of two
two forms:
forms: carrier
carrier pre-
pre- selection
selection (CPS)
(CPS) and and call-by-call
call-by-call selection
selection (CS) (CS)

CS
CS allows the customer to override on a call-by-call basis pre-selected information by dialing a specific code
allows the customer to override on a call-by-call basis pre-selected information by dialing a specific code designated
designated toto
the
the alternative
alternative carrier.
carrier. CS
CS routes
routes the
the call
call to
to the
the alternative
alternative provider
provider on on aa one-time
one-time basis
basis

CPS
CPS allows
allows customers
customers to to select
select alternative
alternative carriers
carriers in in advance
advance for
for their
their calls
calls without
without dialing
dialing additional
additional codes
codes onon the
the
Definition
Definition
telephone
telephone or or having
having special
special equipment
equipment installed
installed atat their
their premises
premises

CPS
CPS requires
requires aa deliberate
deliberate choice
choice toto switch
switch providers
providers (usually
(usually from
from thethe incumbent
incumbent to to an
an alternative
alternative carrier).
carrier). The
The customer
customer
needs
needs to to register
register with
with the
the chosen
chosen carrier
carrier and
and inform
inform itsits provider
provider of
of service
service discontinuation
discontinuation

Common
Common implementations
implementations of of CPS
CPS are:are: “single
“single basket”
basket” or or “multi-basket”
“multi-basket” pre-selection.
pre-selection. Under
Under “multi-basket”,
“multi-basket”, the the subscriber
subscriber
can
can pre-select one provider for placing long-distance calls and select another operator for placing international calls, where
pre-select one provider for placing long-distance calls and select another operator for placing international calls, where
“single-basket”
“single-basket” enables
enables the
the customer
customer to to choose
choose onlyonly one
one operator
operator irrespective
irrespective of of whether
whether itit is
is aa long
long distance
distance or
or international
international
call
call

The
The fixed
fixed line
line business
business is is characterized
characterized by by prohibitive
prohibitive investment
investment costs
costs that
that are
are severe
severe barrier
barrier to
to investment
investment and and therefore
therefore
competition.
competition. For For this
this reason
reason CSCS and
and CPS
CPS are are anan appropriate
appropriate remedy
remedy toto promote
promote competition
competition for
for the
the fixed
fixed line
line sector
sector

In
In particular,
particular, CPS
CPS is is regarded
regarded as as vital
vital to
to the
the achievement
achievement of of full
full market
market liberalization
liberalization and
and development
development of of effective
effective
Rationale
competition
competition since it provides alternative providers with the easiest form of access to the end-user for voice telephony
since it provides alternative providers with the easiest form of access to the end-user for voice
Rationale
telephony
services
services

CPS
CPS facilitates
facilitates calling
calling as as compared
compared to to CS
CS since
since no
no additional
additional codes
codes need
need to to be
be dialed
dialed

AA requirement
requirement on on the
the incumbent
incumbent operator
operator to to implement
implement CS CS and
and CPS CPS can
can enable
enable aa new
new entrant
entrant toto immediately
immediately attract
attract
customers
customers
Source: Ofcom, OECD, TRC, Connexus Analysis

Regulators generally mandate CPS from dominant providers, and play a
supervisory role in its technical and operational implementation
Carrier Selection Regulatory Principles

Operators
Operators with
with significant
significant market
market power
power in
in fixed
fixed line
line services
services are
are generally
generally mandated
mandated to to implement
implement
CPS
CPS
Mandate
Mandate CPS
CPS
The
The regulator
regulator shall
shall determine
determine the
the most
most appropriate
appropriate CPS CPS implementation:
implementation: “single
“single basket”
basket” versus
versus
provisioning
provisioning from
from “multi-basket” and which services shall be pre-selectable (long distance, international, fixed-to-mobile)
“multi-basket” and which services shall be pre-selectable (long distance, international, fixed-to-mobile)
dominant providers
dominant providers

Dominant
Dominant providers
providers have
have an
an interest
interest in
in delaying
delaying CPSCPS and and may
may stall
stall its
its introduction
introduction
Supervise
The
The regulatory
authority shall
shall play
play aa supervisory
supervisory role role in
in the
the development
development of of switching
switching and
and routing
routing
Supervise
development requirements
requirements
development of
of
switching and routing
The
The regulator
regulator shall
shall impose
impose deadlines
deadlines forfor the
the implementation
implementation of of CPS,
CPS, oversee
oversee project
project progress,
progress, and
and
switching and routing
requirements exercise its powers to prevent or punish delay
exercise its powers to prevent or punish delay tactics tactics
requirements

The
The authority
authority shall
shall supervise
supervise thethe establishment
establishment of of operational
operational processes.
processes. ItIt isis important
important to
to form
form an
an
Supervise industry forum (a platform that groups all operators involved) to develop
industry forum (a platform that groups all operators involved) to develop such processessuch processes
Supervise
establishment
The
The authority
authority shall
shall use
use its
its powers
powers and
and dispute
dispute resolution
resolution role
role to
to minimize
minimize delaydelay
establishment of
of
effective
Operational
Operational processes include but not limited to: customer process for requesting aa change
processes include but not limited to: customer process for requesting change of of
effective operational
operational
processes carriers, exchange of information between alternative providers and dominant provider,
carriers, exchange of information between alternative providers and dominant provider, switchover switchover
processes
period
period for
for new
new CPS
CPS subscribers,
subscribers, billing
billing between
between operators
operators and
and billing
billing to
to the
the end-customer,
end-customer, escalation
escalation
procedures, complaints handling
procedures, complaints handling etc. etc.
Source: Ofcom, TRC, Connexus Analysis
Regulators also play a role in determining a cost recovery and
allocation approach for CPS, and protecting consumers
Carrier Selection Regulatory Principles (Continued)

Regulators
Regulators shall
shall establish
establish some
some guiding
guiding principles
principles in
in the
the recovery
recovery of
of costs
costs by
by the
the incumbent
incumbent

Commonly
Commonly used cost recovery principles are: cost causation; distribution of benefits; effective
used cost recovery principles are: cost causation; distribution of benefits; effective
competition;
competition; cost
cost minimization,
minimization, reciprocity
reciprocity and
and practicability
practicability

Regulators
generally propose
propose the
the following
following cost
cost categories
categories to to best
best address
address cost
cost recovery:
recovery: CPS
CPS per
per
Determine
Determine cost
cost provider set-up costs, CPS per provider on-going costs, CPS per customer line set-up costs, and
provider set-up costs, CPS per provider on-going costs, CPS per customer line set-up costs, and
recovery approach
recovery approach CPS
CPS system
system set-up
set-up costs
costs
and
and cost
cost allocation
allocation

As
As competition
competition increases,
increases, thethe operators
operators cancan become
become aggressive
aggressive and and overly
overly intrusive
intrusive with
with
customers. Some countries have taken measures to protect customers
customers. Some countries have taken measures to protect customers from these practices from these practices

Regulators
Regulators maymay mandate
mandate thethe development
development of of aa code
code of
of practice
practice through
through anan Industry
Industry Forum.
Forum. AnAn
example
example ofof inappropriate
inappropriate practices
practices isis where
where the
the losing
losing carrier
carrier repeatedly
repeatedly calls
calls customers
customers to to deter
deter or
or
change their decision. Often, the losing carrier tries to ‘win-back’ the customer by
change their decision. Often, the losing carrier tries to ‘win-back’ the customer by contact prior to contact prior to
Protect
Protect consumers
consumers the
the completion
completion of of the
the change
change order.
order. Many
Many countries
countries have
have limited
limited attempts
attempts to
to win-back
win-back aa customer
customer
to one contact to try to ‘save’ the customer
to one contact to try to ‘save’ the customer

The
The code
code of
of practice
practice should
should address
address issues
issues such
such as:as: customer
customer contracts,
contracts, billing,
billing, fraud,
fraud, use
use of
of
customer
customer information
information and and win-back
win-back activities,
activities, complaint
complaint andand inquiry
inquiry handling
handling etc.
etc.

CPS has been implemented in Europe since 2000, whereas regional
experience is limited to Jordan
Carrier Selection Experience
European
European Experience
Experience Regional
Regional Experience
Experience

EC
EC Directive
Directive 98/61/EC
98/61/EC required
required Member
Member States
States to
to ensure
ensure that
that CPS
CPS
In
In March
March 2005,2005, Jordan’s
Jordan’s TRC TRC issued
issued
was
was made
made available
available fromfrom January
January 1st,1st, 2000
2000 by
by operators
operators with
with instructions
instructions on on the
the implementation
implementation of of
Significant
Significant Market
Market Power
Power (SMP)
(SMP) CPS and
CPS and CS CS

Under
Under the
the new
new EUEU regulatory
regulatory framework,
framework, NRAsNRAs were
were required
required toto
TRC
TRC is is imposing
imposing on on allall operators
operators that
that
conduct
conduct market reviews and to establish whether SMP exists in any
market reviews and to establish whether SMP exists in any are required to provide
are required to provide Call Call
market , and where it does, what regulatory obligations are
market , and where it does, what regulatory obligations are considered considered Origination
Origination the the requirement
requirement to to
necessary
necessary implement
implement CPS CPS and and CS CS

For
For example,
example, in in the
the UK,
UK, the
the market
market review
review found
found that
that BT
BT and
and Kingston
Kingston
TRC
TRC hashas elected
elected to to limit
limit CPS
CPS andand CS
CS
have
have SMP
SMP inin call
call origination
origination on
on fixed
fixed public
public narrowband
narrowband networks
networks inin for
for international
international outbound
outbound calls calls only
only
their
their respective markets and as a result were required to continue to
respective markets and as a result were required to continue to
TRC
TRC is is requiring
requiring thethe launch
launch ofof CS
CS
provide
provide CPSCPS within
within 55 months
months and and CPSCPS within
within 10
10
months
months from from the
the issuance
issuance of of the
the
instructions
instructions
Country Year CPS Introduced Penetration of CPS
(% of fixed lines)
France 2000 13% (Dec. 2003)
Ireland 2000 11% (June 2003)
Spain 2000 13% (April 2004)
Sweden 1999 36% (June 2003)
To facilitate competition in the long distance and international fixed voice
markets, CITC should require STC to implement Carrier Pre-Selection
Saudi Market Liberalization and CPS

Current
Current Situation
Situation Future
Considerations

STC
STC has
has aa monopoly
fixed voice
voice
CITC
CITC should
should require
require fromfrom STC
STC the the
services
services implementation of CPS
implementation of CPS and CS and CS

The
The liberalization
liberalization of
of fixed
fixed voice
voice services
services
CITC
CITC willwill need
need to to determine
determine through
through aa
is planned for 2006
is planned for 2006 consultation
consultation process the most suitable
process the most suitable

Article
Article 84
84 (Chapter
(Chapter 11)
11) ofof the
the Saudi
Saudi approach for CPS in terms
approach for CPS in terms of “single of “single
Telecom
Telecom By-Law
By-Law states
states that
that “the
“the national
national basket”
basket” versus
versus “multi-basket”
“multi-basket”
numbering plan shall facilitate
numbering plan shall facilitate number number
CITC
CITC should expect STC
should expect STC to to deliberately
deliberately
portability
portability and
and carrier
carrier pre-selection”
pre-selection” stall
stall the
the CPS
CPS implementation
implementation process process

CITC
CITC should play a supervisory role
should play a supervisory role in
in
ensuring the timely and
ensuring the timely and proper proper
implementation
implementation of of CPS
CPS and and the
the
development of effective
development of effective operationaloperational
procedures
procedures

CITC
CITC should
should play
play an an active
active role
role inin
defining
defining thethe best
best cost
cost recovery
recovery and and cost
cost
allocation
allocation approach
approach by by STC
STC

STC
STC should have transparent and
should have transparent and non-
non-
discriminatory
discriminatory costing.
costing. Accounting
Accounting
separation
separation is is required.
required. CITCCITC can,can,
however,
however, rely rely onon international
international
benchmarks
benchmarks where where inadequate
inadequate cost cost
information is provided
information is provided by STC by STC
Local Loop Unbundling enhances competition by enabling the new entrant to
access to the incumbent’s copper line
Local Loop Unbundling as Competition Enabler
Local
Local Loop
Loop Unbundling
Unbundling
Liberalization
Liberalization can
can be
be achieved
achieved through
through facility
facility based
based and
and service
service based
based competition
competition
When
When the
the entrant
entrant uses
uses the
the facilities
facilities of
of the
the incumbent,
incumbent, competition
competition is
is service
service based
based and
and can
can be
be realized
realized either
either through
through
resale or
resale or unbundling
unbundling
Unbundling
Unbundling of
of the
the local
local loop
loop can
can take
take different
different forms.
forms. The
The most
most fundamental
fundamental one
one is is raw
raw copper unbundling where
copper unbundling where the
the
entrant
entrant has
has access
access to to the
the incumbent’s
incumbent’s copper
copper line
line and
and can
can co-locate
co-locate and
and install
install its
its own
own equipment
equipment for
for telephony
telephony or
or
DSL
DSL
With
With line sharing,, the
line sharing the same
same local
local loop
loop is
is used
used by
by both
both thethe incumbent
incumbent and
and the
the entrant.
entrant. The
The incumbent
incumbent rents
rents the
the high
high
frequency
frequency band
band to
to the
the entrant
entrant for
for DSL
DSL services
services while
while itit keeps
keeps the
the low
low frequency
frequency band
band for
for analog
analog telephony
telephony services
services
With
With bitstream access,, the
bitstream access the incumbent
incumbent leases
leases access
access to
to its
its high
high bandwidth
bandwidth architecture.
architecture. The
The incumbent
incumbent chooses
chooses the
the
technology
technology and
and decides
decides onon its
its investment
investment plan
plan
Whereas
Whereas differentiation
differentiation is
is limited
limited with
with resale,
resale, raw
raw copper
copper unbundling
unbundling and
and line
line sharing
sharing provide
provide the
the best
best possibilities
possibilities for
for
service
service differentiation,
differentiation, as
as the
the entrant
entrant can
can choose
choose among
among aa number
number of
of access
access technologies
technologies
Broadband competition has intensified recently in Europe, due to increased
implementation of Local Loop Unbundling
Regulatory Principles for Local Loop Unbundling (LLU)
Principles
Principles Examples
Examples

Incumbents
Incumbents do do not
not choose
choose to to unbundle
unbundle but but rather
rather they
they are
are
In
In January
January 2001,
2001, the
the European
European Commission
Commission issued issued aa decision
decision
mandated
mandated by by regulatory
regulatory authorities
authorities toto do
do so
so requiring
requiring incumbents
incumbents to to provide
provide access
access to to their
their copper
copper lines
lines onon

In
In aa market
market where
where competition
competition is is non-existent
non-existent or or weak
weak fromfrom aa reasonable request
reasonable request
alternative
alternative infrastructure providers, regulators need to
infrastructure providers, regulators need to play
play aa
LLU
LLU has
has been
been slow
slow to to take
take off
off in
in Europe
Europe for for aa number
number of of
very
very active
active role
role in
in mandating
mandating LLU LLU and
and in in creating
creating aa favorable
favorable reasons,
reasons, namely,
namely, dominance
dominance of of incumbent
incumbent operators,
operators, weak weak
environment for entrants
environment for entrants infrastructure
infrastructure competition
competition (( especially
especially in in France,
France, Germany
Germany and and

LLU
LLU isis aimed
aimed at at stimulating
stimulating competition
competition in in the
the provision
provision of of Italy),
Italy), attractive wholesale offerings and pro-incumbent bias
attractive wholesale offerings and pro-incumbent bias
broadband
broadband services,
services, inin the
the absence
absence of of network
network build,
build, andand atat regulatory
regulatory environment.
environment. Since Since 2003,
2003, the
the broadband
broadband market market in in
enhancing competition in areas with only limited
enhancing competition in areas with only limited local access local access France and Germany have been experiencing
France and Germany have been experiencing intensified intensified
competition
competition competition
competition due due toto increased
increased LLU LLU as as aa result
result of of heightened
heightened

Regulatory
Regulatory intervention
intervention is is needed
needed in in the
the setting
setting ofof local
local loop
loop pressure
pressure from
from regulators
regulators which
which hashas translated
translated to to major
major drops
drops in in
rental
rental price.
price. In
In some
some countries,
countries, regulators
regulators intervene ex-ante to
intervene ex-ante to prices
prices asas well
well as
as improvement
improvement in in co-location
co-location arrangements
arrangements
fix unbundling prices, in other countries prices
fix unbundling prices, in other countries prices are left to are left to
In
In the
the UK,
UK, due
due toto strong
strong competition
competition from from cable
cable operators
operators andand
commercial
commercial negotiations.
negotiations. Pricing
Pricing can
can bebe cost
cost based
based or or at
at aa attractive
attractive wholesale
wholesale offerings,
offerings, LLU
LLU hashas been
been one one ofof the
the weakest
weakest
discount
discount of of incumbent’s
incumbent’s retailretail prices.
prices. Cost
Cost based
based pricing
pricing is is in
in Europe.
Europe. Ofcom
Ofcom introduced
introduced in in 2004
2004 aa more
more favorable
favorable
preferred where competition
preferred where competition is weak is weak environment for LLU through the Telecom
environment for LLU through the Telecom Adjudicator Adjudicator

Regulators
Regulators may may mandate
mandate aa certain
certain quality
quality of of service
service in in terms
terms ofof
ILECs
ILECs have
have been
been mandated
mandated by by the
the FCC
FCC to to provide
provide LLU LLU since
since
lead
lead time
time for
for site
site readiness
readiness for for co-location
co-location purposes,
purposes, time time toto 1999.
1999. Only
Only recently
recently have
have CLECs
CLECs started
started relying
relying on on LLU
LLU forfor the
the
provision
provision andand performance
performance of of unbundled
unbundled lines.
lines. provision of broadband. The impact of unbundling
provision of broadband. The impact of unbundling on DSL on DSL
trends
trends has
has been
been relatively
relatively minor
minor due due toto the
the preponderance
preponderance of of
cable
cable broadband
broadband in in US
US
Source: World Bank, Broadband Market Outlook April 2005

Long run incremental cost plus markup has been the most widely used
approach for full unbundled local loop pricing
Pricing for the Local Loop – International Experience
Country Pricing Method
For Full Unbundled Local Loop For Bit Stream Access
Austria LRIC plus markup Not regulated

Belgium Retail minus Cost orientation
Denmark Commercial negotiation Not regulated
France LRIC plus markup Viability of competitors
Germany LRIC plus markup No bit stream access

Italy Historical costs Retail minus
Ireland LRIC plus markup Cost orientation
United Kingdom LRIC plus markup Retail minus (ADSL)

United States LRIC plus markup Not regulated
Source: Squire Sanders 2001

In recent years, LLU has been one of the drivers for broadband growth in
Europe and the USA
LLU and Broadband Growth
Broadband Growth in Unbundled Growth in

Comments
Comments
Country Year Subscribers in Broadband Local Loops in Local Loops
‘000 Subscribers ‘000 Unbundled LLU
LLU has
has experienced
experienced phenomenal
phenomenal
growth
growth in in Europe
Europe and and USUS since
since
Jun-2003 2,510 63
France 99% 1046% 2003
2003
Jun-2004 5,000 722
In
In countries
countries where
where weakweak regulatory
regulatory
Jun-2003 3,963 245 regimes and poor infrastructure
regimes and poor infrastructure
Germany 38% 165%
Jun-2004 5,479 650 competition
competition exist
exist such
such asas France,
France,
Jun-2003 1,693 154
Germany and Italy,
Germany and Italy, LLU is LLU is
Italy 109% 119% exploding
exploding
Jun-2004 3,540 337
In
In parallel,
parallel, broadband
broadband subscription
subscription
Jun-2003 1,493 129
Netherlands 69% 156% has
has been
been growing
growing at at aa very
very rapid
rapid
Jun-2004 2,526 330 pace in Europe and
pace in Europe and USA USA
Jun-2003 1,758 10 LLU
LLU isis one
one of
of the
the drivers
drivers ofof
Spain 58% 76%
Jun-2004 2,786 42 broadband penetration
broadband penetration
Jun-2003 822 14 In
In the
the UK
UK where
where the the cable
cable industry
industry
Sweden 30% 421% is
is very strong, LLU has been non-
very strong, LLU has been non-
Jun-2004 1,070 73
existent
existent and
and has
has only
only picked
picked upup
Jun-2003 2,171 6 recently
UK 100% 133% recently duedue to
to more
more favorable
favorable
Jun-2004 4,351 14 regulation
regulation (e.g.
(e.g. Telecom
Telecom
Jun-2003 22,244 733 Adjudicator)
Adjudicator)
USA 40% 81%
Jun-2004 31,040 1,324
World Bank, Broadband Market Outlook April 2005

In the short term, CITC should consider mandating STC to develop an LLU
service offering
Saudi Market Liberalization and Local Loop Unbundling
Current
Current Situation
Situation Future
Considerations

STC
STC has
has aa monopoly
fixed line
line
CITC
CITC should
should consider
consider mandating
mandating full full
services
services local loop unbundling from
local loop unbundling from STC STC

The
The liberalization
liberalization of
of fixed
fixed line
line services
services is
is
However,
However, CITC
CITC should
should continue
continue to to
planned
planned for
for 2006
2006 encourage
encourage facility-based
facility-based competition
competition

CITC
CITC should intervene in the
should intervene in the
determination
determination of of LL
LL price
price rental.
rental. Pricing
Pricing
should be cost based
should be cost based

CITC
CITC should
should mandate
mandate minimum
minimum quality
quality of
of
service standards from STC in
service standards from STC in terms of terms of
time
time to
to provision
provision LLU,
LLU, lead
lead time
time for
for site
site
readiness
readiness forfor co-location
co-location purposes,
purposes, and and
performance of unbundled
performance of unbundled lines lines
Voice over IP (VoIP) benefits new entrants, customers and incumbents,
but poses difficult questions to regulators
VoIP Benefits and Challenges
Benefits
Benefits Challenges
Challenges
New
New Entrants
Entrants Incumbents
Incumbents End
End Users
Users VoIP
VoIP debate:
debate:
IsIs itit aa voice
voice service?
service?
Even
Even though
though incumbents
incumbents Is it an IP service?
Is it an IP service?
VoIP
VoIP technology
technology has
has have
lowered have not felt yet the
not felt yet the VoIP poses
VoIP poses aa serious
serious challenge
challenge
lowered barriers
barriers to
to entry
entry competition
to the voice market competition fromfrom VoIP
VoIP VoIP
VoIP will
will deliver
deliver to
to incumbent
incumbent carriers,
carriers, while
while itit
to the voice market providers, they have telecommunication presents
providers, they have telecommunication presents an opportunity for
an opportunity for new
new
started
started to
to invest
invest in
in VoIP
VoIP services
services atat aa lower
lower price
price market
market entrants
entrants
New
New market
market players
players are
are technology (ex., BT, to end-users
entering the voice technology (ex., BT, to end-users In
In developing
developing countries,
countries, where
where
entering the voice Qwest,
market: Qwest, Verizon,
Verizon, AT&T)
AT&T) most
most incumbents continue to
incumbents continue to
market: Data
Data Operators,
Operators,
Web Based Service VoIP
VoIP will
will enable
enable the
the retain
retain aa dominant
dominant position
position in
in the
the
Web Based Service
Providers, Incumbents
Incumbents interest
interest in in delivery
delivery of unified and
of unified and market for voice services,
market for voice services,
Providers, and
and Cable
Cable VoIP
Operators VoIP technology
technology is is three-
three- integrated
integrated telecom
telecom regulators
regulators are are considering
considering
Operators fold: services
fold: services toto end-users
end-users whether
whether to allow for
to allow for converged
converged
Reduced
Reduced CAPEX
CAPEX licenses
licenses where Data Operators
where Data Operators
VoIP
VoIP allows
allows these
these new
new (VoIP
market players to add (VoIP systems
systems are are End-users
End-users will
will benefit
benefit can
can offer
offer voice
voice services
services
market players to add less
voice less expensive to buy
expensive to buy from
from the introduction of
the introduction of In
In developed
developed countries,
countries,
voice toto their
their service
service and
offering and install)
install) new
new services
services that
that are
are regulators
regulators are are debating
debating whether
whether
offering fairly
fairly quickly
quickly Reduced
and at a reduced Reduced OPEXOPEX (VoIP(VoIP enabled
enabled by
by the
the to subject VoIP to
to subject VoIP to the same the same
and at a reduced systems
investment systems require
require less
less convergence
convergence ofof Voice
Voice regulations
regulations governing
governing traditional
traditional
investment compared
compared to to overhead
the traditional voice overhead to to operate)
operate) and
and Data
Data over
over IP
IP circuit
circuit switched
switched voice voice services
services
the traditional voice Ability
infrastructure Ability to offer new
to offer new (e.g., emergency
(e.g., emergency services,services,
infrastructure costcost services Universal
services Universal Service)
Service)
VoIP is an irreversible trend, and regulators are debating which traditional
telephony regulations should VoIP be subject to
Summary of VoIP Regulatory Issues
Since
Since VoIP
VoIP isis an
an irreversible
irreversible trend,
trend, regulators
regulators allall over
over the
the world
world are
are debating
debating which
which
traditional
traditional telephony
telephony regulations
regulations are
are relevant
relevant to
to VoIP
VoIP and
and how
how they
they should
should be
be applied.
applied.
VoIP
VoIP regulatory
regulatory issues
issues include,
include, but
but not
not limited
limited to
to ::
Access
Access to to emergency
emergency services
services (Will
(Will VoiP
VoiP offer
offer Calling
Calling Line
Line Identity
Identity (CLI),
(CLI), and
and how
how nomadic
nomadic users
users
will
will be
be located?)
located?)
Number
Number portability
portability (between
(between PSTN
PSTN and
and VoIP
VoIP service
service providers,
providers, and
and between
between VoIP
VoIP service
service
providers)
providers)
Universal
Universal service
service access
access
Lawful
Lawful intercept
intercept (Law
(Law enforcement
enforcement agencies
agencies will
will want
want the
the ability
ability to
to log
log and
and monitor
monitor VoIP
VoIP calls)
calls)
Numbering
Numbering (geographic,
(geographic, or
or non-geographic
non-geographic numbers)
numbers)
VoIP has thus been slowly gaining a significant share of international voice
traffic
Trend in International Voice Traffic on PSTN and VoIP
Percentage of
VoIP
international 0.01% 0.2% 1.6% 4.8% 7.4% 12.3% 13.1%
traffic of total
international
traffic 22.3
18.9
6.0 10.2
1.60
0.18
0.01 148
128 135
118
88 98
78
1997 1998 1999 2000 2001 2002 2003
PSTN VoIP
Source: ITU, Trends in Telecommunication Reform 2004/2005

In the US, VoIP has the potential to become a disruptive technology, thus the
regulator is interfering to address social objectives
VoIP International Experience - USA
Market
Market Experience
Experience Regulatory
Regulatory Framework
Framework
The
The VoIP
VoIP is
is in
in its
its early growth stages
early growth stages Historically,, FCC
Historically
FCC hashas not
not regulated
regulated the
the Internet
Internet oror the
the
services provided over it. VoIP was and still is virtually
services provided over it. VoIP was and still is virtually
VoIP
VoIP has
has the
the potential
potential to
to become
become aa disruptive
disruptive
technology exempt
exempt from
from all
all state
state and
and federal
federal regulations
regulations
technology in the US due to the existence of
in the US due to the existence of
adequately
adequately funded
funded and
and highly
highly penetrated
penetrated cable
cable VoIP
VoIP is
is currently
currently treated
treated by
by FCC
FCC asas an
an “information
“information
competition
competition service” and is not subject to the same regulation
service” and is not subject to the same regulation
The
The Bells
Bells face
face aa three-pronged
three-pronged attack:
attack: Web
Web Based
Based facing
facing telecom
telecom services
services
Carriers, Cable Operators partnering with
Carriers, Cable Operators partnering with VoIPVoIP
FCC
FCC fosters
fosters an
an environment
environment thatthat promotes
promotes competition
competition
solutions
solutions providers,
providers, andand Cable
Cable Operators
Operators building
building their
their and
and innovation. Since VoIP is in a fairly nascent stage,
innovation. Since VoIP is in a fairly nascent stage,
own VoIP network
own VoIP network FCC didn’t want to stifle innovation by imposing overly
FCC didn’t want to stifle innovation by imposing overly
In
In 2003,
2003, less
less than
than 1.5%
1.5% ofof total
total access
access lines
lines were
were VoIP
VoIP cumbersome
cumbersome regulations
regulations
enabled. Close to 1 Million VoIP users in
enabled. Close to 1 Million VoIP users in the US the US
In
In February
February 2004,
2004, FCC
FCC issued
issued aa Notice
Notice of
of Proposed
Proposed
ItIt is
is expected
expected that
that competition
competition will
will be
be felt
felt by
by Rulemaking . The Notice recognizes that
Rulemaking. The Notice recognizes that IP-enabled IP-enabled
Incumbents in 2004-2005
Incumbents in 2004-2005 services
services (including
(including VoIP)
VoIP) should
should continue
continue to
to be
be subject
subject
to
to minimal
minimal regulation
regulation butbut important
important social
social objectives
objectives
Corporate
Corporate customers
customers are
are slowly
slowly replacing
replacing legacy
legacy PBX
PBX
with IP-PBX
with IP-PBX should
should be
be addressed.
addressed. The The Notice
Notice seeks
seeks comment
comment on on
the appropriate regulatory treatment of VoIP
the appropriate regulatory treatment of VoIP services services
RBOCs
RBOCs are
are silently
silently upgrading
upgrading parts
parts of
of their
their legacy
legacy on
on issues
issues related
related to
to traditional
telephony such
such as
as ::
PSTN networks by IP based technology
PSTN networks by IP based technology taking taking
Universal
Universal Access,
Access, CALEA
CALEA enforcement,
enforcement, Emergency
Emergency
advantage
advantage of
of lower
lower CAPEX
CAPEX Services
Services (911),
(911), etc…
etc…
Source: FCC Website, Goldman Sachs Telecom Services – US 2003
EC has adopted a “light touch approach” to Internet telephony to encourage
competition and innovation
VoIP International Experience - EU
Market
Market Experience
Experience Regulatory
Framework
Very
Very limited
limited deployment
deployment of of VoIP.
VoIP. VoIP
VoIP deployments
deployments Traditionally,
Traditionally, European
European regulators
regulators had had aa pro-incumbent
pro-incumbent
have bias
bias
have been
been limited
limited to
to the
the corporate
corporate market
market
In
In July
July 2003,
2003, EC EC adopted
adopted aa technology
technology neutralneutral
Unbundling
Unbundling ofof the
the local
local loop
loop has
has largely
largely stalled
stalled in
in regulatory
framework under under which
which VoIPVoIP cancan be
be
Europe
Europe due
due to
to capital
capital constraints
constraints and
and roadblocks
roadblocks classified
classified as as either
either an an electronic
electronic communications
communications
created
created by
by the
the incumbents
incumbents service
service or or aa "publicly
"publicly available
available telecommunications
telecommunications
service"
service" (PATS)
(PATS) ..
One
One of
of the
the lowest
lowest broadband
penetration globally
globally
The
The ambiguous
ambiguous classification
classification of of VoIP
VoIP hashas created
created aa
debate
debate in the industry. If VoIP offering is considered as
in the industry. If VoIP offering is considered as
Incumbents
Incumbents dominate
dominate the
the broadband
broadband market.
market. In
In 2003,
2003, aa PATS,
83% PATS, then then itit is
is subject
subject to to requirements
requirements such such as as the
the
83% of
of DSL
DSL lines
lines were
were provided
provided by
by Incumbents
Incumbents provision
provision of of access
access to to emergency
emergency services,
services, number
number
portability,
portability, and and universal
universal service
service safeguards.
safeguards.
Due
Due toto an
an underdeveloped
underdeveloped cable
cable industry,
industry, incumbents
incumbents Alternatively,
Alternatively, ifif itit is is considered
considered as as an an "electronic
"electronic
will
will not
not be
be facing
facing any
any serious
serious competition
competition for
for aa while
while communications
communications service", service", then then itit is
is subject
subject toto lower
lower
specifications
specifications and and fewer
fewer obligations
obligations
Low
Low voicevoice tariffs
tariffs and
and high
high interconnection
interconnection rates
rates makes
makes
itit difficult
difficult for
for aa new
new VoIP
VoIP entrant
entrant In
In June
June 2004,2004, EC EC published
published aa consultative
consultative paper
paper on on
VoIP
VoIP
One
One driver
driver for
for VoIP
VoIP rollout
rollout in
in Europe
Europe is
is coming
coming from
from
In
In February
February 2005, 2005, the the EC EC issued
issued aa statement
statement saying
saying
multinationals
multinationals who
who are
are adopting
adopting VoIP
VoIP for
for their
their networks
networks that
that itit favors
favors thethe “light
“light touch approach” to
touch approach” to Internet
Internet
telephony
telephony in in order
order to to encourage
encourage competition
competition and and
Current
Current estimates
estimates of
of VoIP
VoIP are
are at
at 110
110 000
000 users
users in in innovation.
innovation. EC aims to avoid over-regulation. ItIt will
EC aims to avoid over-regulation. will
Germany,
Germany, 220
220 000
000 in
in France,
France, and
and 50
50 000
000 in
in the
the UK
UK refrain
refrain fromfrom imposing
imposing traditional
telephony regulation
regulation to to
VoIP
VoIP to to allow
allow for for the
the technology
technology to to develop
develop andand toto
stimulate
stimulate broadband
penetration
Source: EC Website, Goldman Sachs The global impact of VoIP – 2003
With the full liberalization of the telecom sector, the Jordanian regulator
recently issued a public consultation on the regulation of VoIP
VoIP International Experience - Jordan
Regulatory
Framework -- Prior
Prior 2005
2005 Regulatory
Framework -- 2005
2005 and
and Beyond
Beyond
Jordan
Jordan Telecom
Telecom enjoyed
enjoyed an
an exclusivity
exclusivity on
on the
the provision
provision End
End of
of Jordan
Jordan Telecom’s
Telecom’s monopoly
monopoly over
over fixed-line
fixed-line
of
of Public
Public Switched
Switched Voice
Voice Services
Services up
up until
until December
December voice services
voice services
31,
31, 2004
2004
All
All operators
operators are
are now
now allowed
allowed to
to provide
provide fixed-line
fixed-line voice
voice
TRC
TRC viewed
viewed voice
voice service
service using
using VoIP
VoIP technology
technology as
as services,
services, including international services as a result of
including international services as a result of
the functional equivalent of voice service using circuit
the functional equivalent of voice service using circuit TRC’s fixed services liberalization initiative
TRC’s fixed services liberalization initiative
switched
switched technology
technology
The
The liberalization
liberalization of
of fixed
fixed voice
voice services
services willwill allow
allow 26
26
TRC
TRC considered
considered that
that any
any service
service provider
provider providing
providing existing
existing telecommunication
telecommunication licensees
licensees and and any
any newnew
VoIP
VoIP services
services to
to the
the Public
Public would
would be
be in
in direct
direct breach
breach of
of licensee to provide a broad range of telecommunication
licensee to provide a broad range of telecommunication
JT’s exclusivity license
JT’s exclusivity license services,
services, including
including domestic
domestic and and international
international fixed
fixed
JT’s
JT’s exclusivity
exclusivity covered
covered thethe termination
termination in
in Jordan
Jordan of of voice
voice services
services using
using any
any technology
technology (including
(including VoIP)
VoIP)
foreign originated calls. It is a serious violation of the
foreign originated calls. It is a serious violation of the that
that they
they consider
consider appropriate,
appropriate, subject
subject to to certain
certain
Telecommunications
Telecommunications Law Law andand JT’s
JT’s exclusivity
exclusivity for
for any
any technical limitations
technical limitations
person
person to
to bypass
bypass JT’s
JT’s network
network
TRC
TRC issued
issued interconnection
interconnection instructions
instructions which
which requires
requires
AA user
user isis free
free to
to make
make calls
calls from
from his
his PC
PC as
as long
long as
as JT
JT to
to provide
provide local
local loop
loop unbundling
unbundling to
to other
other operators
operators
there
there is
is no
no involvement
involvement of
of aa service
service provider
provider
In
In May
May 2005,
2005, TRC
TRC launched
launched aa public
public consultation
consultation on
on
the regulatory framework to be adopted for VoIP
the regulatory framework to be adopted for VoIP
Source: TRC Website, regulateonline.org

The Moroccan regulator has decided to allow for the provision of VoIP
services only under a license for public voice services
VoIP International Experience - Morocco
Market
Market Environment
Environment Regulatory
Framework
Morocco’s
Morocco’s telecommunications
telecommunications market
market is
is in
in the
the process
process In
In June
June 2004,
2004, ANRT
ANRT made
made aa decision
decision regarding
regarding the
the
of
of being
being liberalized
liberalized regulation
regulation of
of VoIP
VoIP services.
services. The
The decision
decision is
is three-fold:
three-fold:
In
In the
the fixed-line
fixed-line market,
market, Maroc
Maroc Telecom
Telecom maintains
maintains aa de
de ANRT
ANRT decides
decides to to allow
allow operators
operators to to provide
provide VoIP
VoIP
facto
facto monopoly
monopoly at at this
this time.
time. InIn February
February 2005,
2005, ANRT
ANRT services
services toto the
the public
public as
as long
long that
that they
they have
have aa
launched
launched aa callcall for
for bid
bid for
for fixed-line/fixed
fixed-line/fixed wireless
wireless license
license to
to provide
provide public
public voice
voice services
services
network
network licenses
licenses (Data
(Data and/or
and/or Voice).
Voice). Maroc
Maroc Telecom
Telecom The
The utilization
utilization of
of VoIP
VoIP for
for private
private purposes
purposes and
and
claims to have 94% share of Morocco’s
claims to have 94% share of Morocco’s public public
not
not for commercial use (i.e., private networks) is
for commercial use (i.e., private networks) is
telephony
telephony market
market allowed
allowed under
under the
the authorization
authorization framework
framework for
for
In
In 2002,
2002, ANRT
ANRT issued
issued aa tender
tender forfor the
the granting
granting ofof aa independent
independent networks
networks
second
second fixed
fixed line
line license
license and
and new
new datacomm
datacomm licenses,
licenses, VoIP
VoIP isis allowed
allowed forfor the
the provision
provision of
of “information
“information
however
however thethe tender
tender failed
failed due
due to
to lack
lack ofof bidder
bidder interest.
interest. on
on line” service in a call centre environment as
line” service in a call centre environment as
Owing to the “fixed to cellular” substitution
Owing to the “fixed to cellular” substitution phenomena phenomena
long
long as the call centre has made a declaration to
as the call centre has made a declaration to
and
and the
the relative
relative underdevelopment
underdevelopment of of Internet
Internet and
and ANRT
ANRT for for the
the provision
provision ofof such
such services
services
datacomm segments, the tender to liberalize
datacomm segments, the tender to liberalize fixed fixed
services
services has
has not
not attracted
attracted anyany bidders
bidders
Source: ANRT Website, Arab Advisors Group – Morocco Communications Projections Report 2003
As the Saudi telecom market moves towards full liberalization, CITC
should follow a light-handed approach to regulating VoIP
Saudi Market Liberalization and VoIP
Current
Current Situation
Situation Future
Considerations

STC
STC has
has aa monopoly
monopoly over over fixed
fixed voice
voice
As
As technologies
technologies converge,
converge, CITCCITC willwill
services
services have to consider allowing Data
have to consider allowing Data Service Service

Newly
Newly licensed
licensed Data
Data operators
operators can
can only
only Providers
Providers to to offer
offer voice
voice services
services either
either by
by
offer
offer data
data services
services extending
extending their
their current
current license
license to to include
include

CITC
CITC has not
has not issued
issued anyany specific
specific voice or allowing them to bid
voice or allowing them to bid for fixedfor fixed
regulation
regulation regarding
regarding thethe treatment
treatment ofof voice
voice service
service license
license when
when STC’s
STC’s
VoIP
VoIP monopoly ends
monopoly ends

The
The liberalization
liberalization of of fixed
fixed voice
voice services
services
With
With convergence,
convergence, CITC CITC willwill eventually
eventually
is planned for 2006
is planned for 2006 need
need to consider the granting of
to consider the granting of

VoIP
VoIP isis aa disruptive
disruptive technology
technology that
that converged
converged licenses rather than aa license
licenses rather than license
lowers
lowers CAPEX
CAPEX and and OPEX
OPEX for for service
service for
for each
each service
service
providers
providers
When
When VoIP
VoIP becomes
becomes aa mainstream
mainstream
service,
service, CITC
CITC will
will need
need toto establish
establish aa
regulatory
regulatory framework for the treatment
framework for the treatment ofof
VoIP services
VoIP services
I. Saudi ICT Market Assessment

The number of governments with WTO telecom commitments has increased
significantly since the conclusion of GATS
Number of Governments with Telecom Commitments
91
69
20
1994 1997 2004
Signature
Signature of
of Fourth
Fourth
Conclusion
Conclusion of
of General
General Protocol of GATS
Protocol of GATS
Agreement
Agreement of
of Trade
Trade in
in (Telecommunications)
(Telecommunications)
Services (GATS)
Services (GATS) in
in February
February
Source: WTO
Telecom was a priority in the Doha round which resulted in new commitments
on basic telecommunications, value-added services and the Telecom
Reference Paper
Increase in Number of Telecom Commitments (1997-2004)
1997
1997 Today
Today
69
69 governments
governments signatories
signatories of
of Fourth
Fourth Protocol
Protocol 91
91 governments
governments with
with telecom
telecom commitments
commitments
99 Most-Favored-Nation
Most-Favored-Nation exemptions
exemptions 66 Members
Members and
and 16
16 acceding
acceding countries
countries committed
committed
33 protocol
protocol schedules
schedules improved
improved
“Phased-in”
“Phased-in” already
already in
in place
place by
by at
at least
least 12
12 trade
trade
partners: Australia, Canada, Chile, Colombia,
partners: Australia, Canada, Chile, Colombia,
Cuba,
Cuba, Japan,
Japan, European
European Union,
Union, Korea,
Korea, Mexico,
Mexico,
Norway, Switzerland, United States
Norway, Switzerland, United States
Common
Common elements:
elements:
Reduce
Reduce limits
limits on
on foreign
foreign equity
equity and
and number
number of
of
suppliers:
suppliers: Expand
Expand coverage
coverage (market
(market segments,
segments,
means
means ofof supply
supply (resale
(resale vs.
vs. facilities),
facilities), modes
modes of
of
supply
supply (cross
(cross border),
border), commit
commit on on oror move
move forward
forward
phase-in
phase-in dates,
dates, more
more service
service commitments
commitments (value
(value
added, transport capacity, satellite services)
added, transport capacity, satellite services)
More
More commitments
commitments on
on the
the WTO
WTO Telecom
Telecom
Reference Paper
Reference Paper
Source: WTO
If Saudi Arabia signs the General Agreement on Trade in Services (GATS), it
commits to a set of general and specific obligations
Obligation Types Under GATS
General
General Obligations
Obligations Specific
Specific Obligations
Obligations
•• Obligations
Obligations applying
applying automatically
automatically to to all
all
members and service sectors -
members and service sectors - except except
governmental
governmental services
services (police,
(police, fire-fighting,
fire-fighting, •• Obligations
Obligations applying
applying to
to specific
specific countries
countries and
and
Definitions
Definitions etc.) and air traffic rights
etc.) and air traffic rights possibly
possibly varying
varying across
across members
members
•• Obligations
Obligations affecting
affecting trade
trade in
in services
services at
at all
all
government
government levels
levels
•• Most-Favoured-Nation
Most-Favoured-Nation Treatment
Treatment (MFN):
(MFN):
equitable
equitable treatment of all countries, including
treatment of all countries, including
non-WTO •• Most
Most Favoured
Favoured Nation
Nation Exemptions
Exemptions (only
(only at
at
Obligation
Obligation non-WTO members
members
outset and if needed for regional integration)
outset and if needed for regional integration)
Types
Types •• Transparency
Transparency obligations
obligations
•• Schedules
Schedules of
of Commitments
Commitments
•• Other
Other “good
“good governance”
governance” provisions
provisions
(availability
(availability of legal remedies, etc.)
of legal remedies, etc.)
Source: GATS
Specific obligations along the four “supply modes” and horizontal
commitments would depend on the Saudi telecom sector policy
GATS Specific Obligations: Schedule of Specific Commitments
National
National
Service Sectors Supply Modes Treatment
Treatment Additional
Additional
Market
Market Access
Access (Discriminatory
(Discriminatory Commitments
Commitments
Treatment
Treatment ofof
Nationals)
Nationals)
Horizontal Commitments
1
Service
Service Sectors
Sectors •• Non-resident
Non-resident service
service
Cross-border
Cross-border suppliers
suppliers supplying
supplying services
services
Supply
Supply cross-border
cross-border into
into member’s
member’s
•• Business
Business Services
Services territory
territory
•• Communication
Communication
2
•• Construction
Construction
Vertical Commitments
Consumption •• Member’s
Member’s residents
residents
•• Distribution
Distribution Consumption purchasing
Abroad purchasing services
services in
in
•• Education Abroad another
another member’s
member’s territory
territory
Education
•• Environmental
Environmental Services
Services Specific
Specific commitments
commitments for for each
each sector
sector are
are filled
filled out
out along
along
3 the
•• Health
•• Foreign
Foreign service
service suppliers
suppliers the vertical
vertical and
and horizontal
horizontal categories
categories
Health Related
Related Services
Services establishing,
establishing, operating
operating or
or
•• Financial Services Commercial
Commercial expanding
expanding commercial
commercial
Financial Services presence
Presence
Presence presence in in member’s
member’s
•• Tourism
Tourism territory
territory (branch,
(branch, agency,
agency,
wholly-owned
wholly-owned subsidiary)
subsidiary)
•• Recreation,
Recreation, Culture,
Culture,
Sports 4
Sports •• Possibility
Possibility offered
offered for
for entry
entry
Movement
Movement of
of and
and temporary
temporary stay
stay in
in
•• Transport
Transport member’s
Natural
Natural member’s territory
territory of
of foreign
foreign
•• Other individuals
individuals in
in order
order to
to supply
supply
Other Services
Services Persons
Persons service
service
Source: GATS
Key for Saudi Arabia
The regulatory principles outlined in the WTO Telecom Reference Paper
already apply to Saudi Arabia
Main Principles of WTO Telecom Reference Paper

Applicability
to KSA
1.
1. Competition
Competition Avoid
Avoid abuse
abuse of
of dominance
dominance and
and anti-competitive
anti-competitive practices
practices

2.
2. Interconnection
Interconnection Ensure
Ensure interconnection
interconnection with
with major
major suppliers
suppliers at
at technically
technically feasible
feasible points
points of
of network
network

3.
3. Regulator
Regulator Separate
Separate regulator
regulator from
from any
any supplier
supplier of
of telecom
telecom services
services

4.
4. Universal
Universal Service
Service Ensure
Ensure transparent,
transparent, non-discriminatory
non-discriminatory and
and competitively
competitively neutral
neutral Universal
Universal Service
Service

5.
5. Scarce
Scarce Resources
Resources Ensure
Ensure transparent,
transparent, non-discriminatory
non-discriminatory and
and objective
objective management
management of
of scarce
scarce resources
resources

6.
6. Licensing
Licensing Ensure
Ensure public
public availability
availability of
of licensing
licensing criteria
criteria

Source: WTO Telecom Reference Paper

Technology, market and policy drivers are pushing towards converged
licenses for telecom services
Converged Licensing Framework

Refers
Refers to
to provision
provision ofof text,
text, data,
data, images,
images, voice
voice and
and video
video over
over aa single
single transmission
transmission platform
platform
Convergence
Convergence
May also mean integration of previously separate user equipment into
May also mean integration of previously separate user equipment into one device one device

Also
Also refers
refers to
to degree
degree ofof substitutability
substitutability of
of services
services (for
(for example,
example, mobile-fixed
mobile-fixed substitutability)
substitutability)
Drivers
Drivers Regulatory
Framework Principles
Principles
Technology
Technology Drivers:
Drivers:
Balanced,
Balanced, clear,
clear, consistent,
consistent, predictable,
predictable, comprehensive
comprehensive andand transparent
transparent
Developments
Developments in in IT,
IT, high-speed
high-speed electronics,
electronics, software
software controls
controls and
and
Ensure
Ensure consistent regulatory treatment of essentially similar services
consistent regulatory treatment of essentially similar services
multimedia technologies
multimedia technologies
Technology
Technology and
and platform
platform neutral
neutral
Shift
Shift from
from circuit-switched
circuit-switched to to packet-switched
packet-switched networks
networks
Non-discriminatory
Non-discriminatory
Development and availability of “open”
Development and availability of “open” platform-based
platform-based equipment,
equipment,
Pro-competitive
Pro-competitive
enhancing
enhancing the the scope
scope of of value
value addition
addition by
by users
users
Flexible
Flexible enough
enough toto adapt
adapt to
to new
new developments
developments inin technologies
technologies and
and
Utilization
Utilization ofof same
same platform
platform andand equipment
equipment toto deliver
deliver aa variety
variety of
of services
services services,
services, and to reflect the different perspectives of both
and to reflect the different perspectives of both providers
providers and
and
Ability to upgrade equipment for
Ability to upgrade equipment for multiple usesmultiple uses consumers
consumers
Market
Market Drivers:
Drivers:
Increasing
Increasing competition
competition driving
driving optimal
optimal use
use of
of existing
existing infrastructure
infrastructure to to
provide multiple services
provide multiple services
Bundling
Bundling of of services,
services, flat-rate
flat-rate price
price packages
packages andand fixed-mobile
fixed-mobile tariff
tariff
convergence
convergence
Avoiding
Avoiding duplication
duplication of of efforts
efforts and
and investments
investments
User aspiration for a single device to
User aspiration for a single device to access
access all
all information
information from
from all
all
networks
networks
Policy
Policy Drivers:
Drivers:
Common
Common policypolicy for
for computers,
computers, telecom
telecom and
and broadcasting
broadcasting
Source: ITU Trends in Telecommunications Reform 1999: Convergence and Regulation

Several countries have adopted such frameworks, motivated by a number of
objectives
Objectives and Applications of Converged Licensing
Objectives
Objectives Converged
Converged Licensing
Licensing Regimes
Regimes
Encourage
Encourage growthgrowth of of new
new applications
applications and and Australia
Carrier
Carrier license
license and
and carriage
carriage
services Australia service
services service providers
providers
Simplify
Simplify existing
existing licensing
licensing procedures
procedures to to ease
ease
market entry and operations
market entry and operations European
European Union
Union General
General authorization
authorization regime
regime
Create
Create setset ofof stand-alone
stand-alone regulations
regulations to to
comprehensively
comprehensively address issues such as
address issues such as
interconnection,
interconnection, qualityquality of of service,
service, universal
universal India
India Unified
Unified licensing
licensing
access/service,
access/service, spectrum
spectrum and and number
number allocations
allocations
Ensure regulatory flexibility to address market and
Ensure regulatory flexibility to address market and
technological
technological developments
developments Japan
Japan Simple
Simple registration/notification
registration/notification
Ensure
Ensure efficient
efficient utilization
utilization of of network
network resources,
resources,
so
so that
that individual
individual networks
networks may may bebe used
used toto provide
provide
aa broad range of ICT
broad range of ICT services services Kenya,
Kenya, Malaysia,
Malaysia, Mauritius,
Mauritius, Converged
Converged licensing
licensing regime
regime
Encourage market
Encourage market entry entry by
by aa full
full range
range ofof Tanzania
Tanzania
operators,
operators, including
including largelarge scale
scale and
and micro
micro
entrepreneurs
entrepreneurs Converged
Converged license
license for
for national
national
Mali,
Mali, Uganda
Uganda
Ensure
Ensure thatthat the
the transition
transition to to aa converged
converged licensing
licensing operators
operators
regime
regime fosters a level playing field among all
fosters a level playing field among all
competitors
competitors Facility-based
Facility-based and
and service-
service-
Singapore
Singapore based
based licensing
licensing
Source: ITU Trends in Telecommunications Reform 2004

In current trends convergence can precede full competition or introduced
simultaneously if the market is ready
Historical and Current Liberalization Sequencing
Historical trends
Regulated
Regulated and
and
Monopolies
Monopolies limited
limited Full
Full Competition
Competition Convergence
Convergence
competition
competition
Current trends
Regulated
Regulated and
and
Monopolies
Monopolies limited
limited Convergence
Convergence Full
Full Competition
Competition
competition
competition
Some countries can introduce convergence and full competition

simultaneously provided that they have prepared the market
and the regulatory framework
We are going to examine several international and regional liberalization
experiences to draw lessons for Saudi Arabia
Liberalization Experiences Studied
Countries Framework

Algeria
Algeria
Liberalization
Liberalization timeline
timeline

Egypt
Egypt
License features
License features

Chile
Chile
Sector
Sector competition
competition intensity
intensity index
index
High-level
High-level Hungary
Hungary
case
case studies
studies
Pakistan
Pakistan

India
India

Malaysia
Malaysia
Liberalization
timeline

Morocco
Morocco
License features
License features

Jordan
Jordan
Sector
Sector competition
competition intensity
intensity index
index
Detailed
Detailed
Singapore
Singapore
case
case studies
studies
UK
UK
Market
Market data
data

France
France
Subscriber
Subscriber data
data

Bahrain
Bahrain
Revenue data
Revenue data
Algeria issued its sector policy in 2000, and liberalized fixed services in 2005
after a failed trial in 2004
Algeria’s Liberalization Experience

Timeline License
License Features
Features

Fixed
Fixedline
lineinternational,
international, interurban
interurban and andlocal
local loop
looplicense:
license:
Sole Solebidder
bidderwas was Orascom
Orascom TelecomTelecom Holding
Holdingand and
Telecom
Telecom Egypt Egypt consortium
consortium (50:50 (50:50 ownership).
ownership). ItIt
Policy
Policy and
and timetable
timetable was awarded the license for
was awarded the license for US$ 65 million US$ 65 million
announced
announced Licensing
Licensing of
of ILD
ILD 15 15year
yearlicense,
license,
Law
Law voted
voted Consortium
Consortium plans plans to tobuild
buildan anadvanced
advancednext next
generation
generationnetworknetwork for forananexpected
expectedinvestment
investment of of
approximately US$
approximately US$ 1 billion 1 billion
FixedFixedline
lineservices
servicesto tobebeprovided
provided include
includevoice,
voice,
high
highspeed
speeddata dataand and other
other advanced
advancedservices
services such
such
as
as virtual
virtual private
privatenetwork,
network,multi-media
multi-mediaand andvideo
video
conferencing for residential, business
conferencing for residential, business and public and public
sector
sectormarkets
markets
Network
Network to tobebelaunched
launchedin inthe
themain
mainurban
urbanareas
areas ofof
Algiers,Oran
Algiers,Oranand andConstantine
Constantine within withintwelve
twelvemonths
months
2000 2001 2004 2005 Mobile
MobileLicense:
License:
License
Licenseawarded
awardedto toWataniya
WataniyaTelecomTelecom for forUS$
US$421 421million
million
With
WithAlgerie
AlgerieTelecom’s
Telecom’s very verypoorpoor mobile
mobileservice,
service,Wataniya
Wataniya
will
will be
beeffectively
effectivelythe thesecond
secondmobilemobileoperator
operatorcompeting
competing
against
against Orascom’s
Orascom’s Djezzy Djezzy
No
Nonewnewlicenses
licenses of of terrestrial
terrestrialcellular
cellulartelephony,
telephony, including
including
third
thirdgeneration
generation3G 3GIMT IMT 2000
2000to tobebeawarded
awardedbeforebeforeend end
2006
2006
Interconnection is according
Interconnection is according to the law to the law
Freedom
Freedom in insetting
settingprices
prices
Stringent
Stringent thethepre-qualification
pre-qualificationcriteria criteria
Third
Third mobile
mobile license
license
Data
Data services
services licenses
licenses
Regulatory
Regulatory authority
authority Attempt
Attempt to to license
license twotwo Sector
ARPT
ARPT established
established ILD
ILD networks
networks fails fails due
due to
to
Sector Competition
Competition Intensity
Intensity Index
Index
Second
Second GSM
GSM awarded
awarded lack
lack of
of tariff
tariff rebalancing,
rebalancing,
high
high ITX
ITX tariffs,
tariffs, tough
tough
roll-out
roll-out conditions
conditions Limited Full
Competition Competition

Liberalization in Egypt started in 1998 and has proceeded very slowly since
Egypt’s Liberalization Experience

Timeline License
License Features
Features
Data
Data licenses
licenses are:are: Class
Class AA (can
(can build
build facilities
facilities and
and
resell),
resell), Class
Class BB and
and Class
Class CC (ISPs)
(ISPs)
Payment
Payment by by 22 44 Class
Class AA DataData licensees
licensees and
and 44 Class
Class BB
mobile
mobile operators
operators
Licensing
Licensing ofof two
two to
to NTRA
NTRA toto Only
Only international
international remains
remains exclusive
exclusive forfor Telecom
Telecom
mobile
mobile operators
operators postpone
postpone Telecom
Telecom Introduction
Introduction of
of Egypt,
Egypt, local
local and
and long
long distance
distance cancan be
be opened
opened up up
third
third mobile
mobile
Enactment
Enactment ofof Egypt’s
Egypt’s mobile
mobile operator
operator planned
planned Plans
Plans to to give
give 1-2
1-2 international
international license
license andand aa third
third
telecom
telecom law
law operations
operations and
and mobile
access mobile license
license in in 2006
2006
access its
its mobile
mobile
frequency band
frequency band Liberalization plans for
Liberalization plans for 2006
2006 include
include the
the possibility
possibility ofof
introducing
introducing aa second
second national
national operator
operator with
with aa license
license
to
to offer
offer local,
local, long
long distance
distance and
and international,
international,
2006
1998 1999 2002 2003 2005
Telecom
Telecom Egypt’s
Egypt’s Introduction
Introduction of
of
purchase second
second fixed
fixed line
line
Establishment
Establishment of
of purchase ofof third
third operator
operator
mobile
mobile license
license Sector
telecom
telecom regulatory
regulatory New
New telecom
telecom lawlaw Licensing
Licensing of
of Sector Competition
Intensity Index
Index
unit
unit operator
operator of
of
Establishment
Establishment of of international
international
NTRA
NTRA voice
voice services
services
Limited Full

Chile was one of the early liberalizers, and has one of the most competitive
telecom sectors
Chile’s Liberalization Experience

Timeline License
License Features
Features
Some
Some exclusive
exclusive rural
rural operators
operators
Enersis
Enersis Group
Group (Chilean
(Chilean Electricity
Electricity Supplier)
Supplier) Some operators operate in
Some operators operate in one
one region
region only
only
granted
granted permission
permission in in 2003
2003 to
to operate
operate as
as Only the incumbent has full national coverage
Only the incumbent has full national coverage of of the
the
End
End of
of CTC
CTC monopoly
monopoly carriers’
Establishment
Establishment of of carriers’ carrier
carrier using
using powerline
powerline 24
24 regions
regions
Entel
Entel to provide long
to provide long communications
communications technology
technology Development
Development fund fund for
for universal
universal service,
service, funded
funded byby
distance
distance and
and budget
international budget allocations
allocations
international
Two
Two fixed
fixed line
line Licenses
Licenses cover
cover the
the installation,
installation, operation
operation and and
operators
operators commercialization
commercialization of all end-user services
of all end-user services
Licenses
Licenses areare specific
specific toto aa single
single service
service
Licensees
Licensees are are obliged
obliged to to provide
provide interconnection
interconnection to to
other
other operators
operators offering
offering similar
similar and
and compatible
compatible
services
services
Licensees
Licensees withwith aa monopoly
monopoly in in aa particular
particular market
market
1981 1982 1988 1994 required
required to charge approved rates as
to charge approved rates as part
part of
of aa 5-year
5-year
tariff
tariff plan
plan
30
30 years
years licenses
licenses andand renewable
renewable for for another
another 30 30
Ministry
Ministry could
could withdraw
withdraw or or suspend
suspend the the license
license
As
As per
per 1994
1994 law,
law, local
local service
service providers
providers can can offer
offer long
long
distance
distance services
services viavia independent
independent subsidiary
subsidiary
Users
Users access
access any any long-distance
long-distance carriercarrier via
via aa multi-
multi-
New
New Telecom
Telecom LawLaw carrier
carrier arrangement
arrangement
New
New local
local voice
voice
license,
license, 33
Passage
Passage of
of Telecom
Telecom Privatization
Privatization of
of CTC
CTC International
International Long
Long
Law
Law and
and Entel
Entel Distance
Distance (ILD)
(ILD) Sector
Sector Competition
Intensity Index
Index
licenses, 4 mobile
licenses, 4 mobile
operators
operators Chile
Chilewent
went
Local
Local loop
loop unbundling
unbundling through
throughaa phase
phase
Limited of
of regulated
regulatedand and
limited
limited
Competition competition
competition Full Competition
before
beforefully
fully
opening
openingits its
Source: Espicom Business Intelligence, Connexus Analysis market
marketin in1994
1994
Hungary has been one of the pioneers of liberalization in Eastern Europe
Hungary’s Liberalization Experience

Timeline License
License Features
Features
New
New operators
operators demanddemand authorization
authorization from from the
the
regulator
regulator in in exchange
exchange for for an
an initial
initial fee
fee
Infrastructure
Infrastructure for for private
private usage
usage does
does notnot require
require
55 fixed
fixed operators
operators won
won regional
regional authorization,
licenses
licenses to to provide
provide local
local calls
calls Opening
Opening upup of
of long
long distance
distance andand authorization, just just aa notification
notification by by the
the user
user 3030 days
days
ahead
ahead
Matav
Matav (incumbent)
(incumbent) retained
retained monopoly
monopoly international
international to
to competition
competition
over
over long
long distance
distance and
and international
international Unbundling
Unbundling of
of local
local loop
loop in
in regions
regions An
An operator
operator is is classified
classified dominant
dominant ifif itit controls
controls more
more
calls
calls where
where Matav
Matav maintained
maintained exclusivity
exclusivity than
than 50%50% of of aa relevant
relevant market
market
Second
Second mobile
mobile license
license inin 1994
1994 Interconnection
Interconnection prices prices are
are calculated
calculated basedbased on on LRIC
LRIC
Interconnection
Interconnection among among fixed
fixed operators
operators fallsfalls under
under one
one
of
of 33 categories
categories as as of
of end
end June
June 2003
2003
Matav
Matav has has been
been identified
identified asas aa dominant
dominant operator
operator inin
the resale market
the resale market
Universal
Universal Service
Service Obligations
Obligations imposed
imposed on on 55 historical
historical
operators
operators in in their
their respective
respective regions
regions
2001 2002 Fixed
Fixed tariffs
tariffs are
are regulated
regulated by by the
the price
price capcap method
method
88 operators
operators have have access
access codes
codes to to allow
allow selection
selection
59
59 local
local loops
loops were were totally
totally unbundled
unbundled
421
421 local
local loops
loops werewere partially
partially unbundled
unbundled
Unbundling
Unbundling of of the
the local
local loop
loop in
in regions
regions
where
where other
other 44 operators
operators enjoyed
enjoyed
exclusivity
exclusivity Sector
Sector Competition
Intensity Index
Index
Introduction
Introduction ofof carrier
carrier selection
selection and and
carrier
carrier pre-selection
pre-selection Hungary
Hungary went went
Local
Local voice
voice liberalization
liberalization through
throughaa phase
phase
Limited of
of regulated
regulatedand and
limited
limited
competition Full Competition
before
beforefully
fully
opening
openingits its
Source: Connexus Analysis market
market
Pakistan has recently adopted an open licensing regime to liberalize local
loop, long distance and international services
Pakistan’s Liberalization Experience

Timeline License
License Features
Features (for
(for Local
Local Loop
Loop (LL)
(LL)
and Long Distance International (LDI))
and Long Distance International (LDI))
Open
Open licensing
licensing regime
regime
Roll-out
Roll-out obligations
obligations (regional
(regional for for local
local loop,
loop, national
national
against
against bankbank guarantee
guarantee for for LDI)
LDI)
Quality
Quality of of Service
Service standards
standards
Award
Award of
of regional
regional Award
Award of
of Local
Local Loop
Loop No price regulation, except
No price regulation, except in in rare
rare instances
instances
mobile
mobile license
license and
and LDI
LDI licenses
licenses Licensees contribute 1.5% of gross revenues
Licensees contribute 1.5% of gross revenues to to aa
Universal Service
Universal Service fund fund
Access
Access Promotion
Promotion Regime
Regime for forinternational
international traffic,
traffic,
where
where regulator
regulator regulates
regulates settlement
settlement rates rates to
to
safeguard
safeguard foreign
foreign exchange
exchange revenues
revenues to to Pakistan
Pakistan
Local loop licenses are
Local loop licenses are regionalregional
Incumbent
Incumbent mandated
mandated to to give
give itsits customers
customers access
access to to
other international gateways
other international gateways
2001 2002 2003 2004
LDI
LDI licensees
licensees encouraged
encouraged to to build
build own
own networks
networks
LDI licensees permitted to sub-lease half-circuit
LDI licensees permitted to sub-lease half-circuit
capacity
capacity on on the
the SEA-ME-WE
SEA-ME-WE submarine submarine cablecable system
system
Every
Every operator
operator required
required to to interconnect
interconnect with with another
another
upon
upon latter’s
latter’s request
request
Initial license term:
Initial license term: 20
20 years
years
End
End ofof incumbent’s
incumbent’s exclusivity
exclusivity Licenses awarded to all
Licenses awarded to all applicants
applicants satisfying
satisfying eligibility
eligibility
over
over basic
basic telephony
telephony criteria
criteria
Second
Second GMPCS
GMPCS license
license Announcement
Announcement of of deregulation
deregulation
Introduction
Introduction ofof Calling
Calling Party
Party policies
policies for
for fixed
fixed and
and mobile
mobile Sector
Pays Sector Competition
Intensity Index
Index
Pays in
in the
the mobile
mobile Award
Award of of two
two mobile
mobile licenses
licenses
Creation
Creation of of Universal
Universal Service
Service
Fund
Fund
Limited Full

India established a regulatory authority in 1997 and has lately adopted a
converged licensing regime
India’s Liberalization Experience

Timeline License
License Features
Features
Fixed
Fixed Service
Service Providers
Providers (FSP) (FSP) freely
freely permitted
permitted toto
establish
establish “last
“last mile”
mile” linkages
linkages to to provide
provide fixed
fixed services
services
and
and carry
carry long
long distance
distance traffic
traffic within
within their
their service
service area
area
Direct connectivity permitted with
Direct connectivity permitted with other service other service
providers
providers
Update
Update of
of National
National
Telecom FSP
FSP may
may use use last
last mile
mile linkages
linkages in in their
their areas
areas of
of other
other
Telecom Policy
Policy service
service providers
providers
FSPs
FSPs free
free toto provide
provide all all fixed
fixed services,
services, including
including voice
voice
and
and data
data
FSP
FSP license
license valid
valid per
per one
one service
service area,
area, more
more than
than one
one
regional
regional license
license can can bebe granted
granted to to one
one provider
provider
FSP
FSP licenses
licenses awarded
awarded for for 2020 years,
years, renewable
renewable forfor 10
10
1997 1999 2000 2004 License
License feefee paid
paid asas aa revenue
revenue shareshare (6-10%)
(6-10%)
All
All access
access providers
providers mandated
mandated to to provide
provide
interconnection
interconnection to to National
National Long Long Distance
Distance Operators
Operators
National
National Long
Long Distance
Distance Operators
Operators can can use
use backbone
backbone
of
of power
power transmission
transmission companies,
companies, railways,railways, etc
etc
Universal
Universal Access
Access LevyLevy on on all
all operators
operators fundsfunds
Universal
Universal Service
Service
Opening
Opening upup of
of long
long
Establishment
Establishment ofof distance Resale
Resale for
for
distance Sector
the
the regulatory
regulatory
Resale
Resale for
for
international
international long
long Sector Competition
Intensity Index
Index
authority
authority (TRAI)
(TRAI) distance
distance
domestic
domestic telephony
telephony
Limited Full

Malaysia issued the Communications and Multimedia Act in 1999, which
paved the way for complete migration to converged licensing in 2002
Malaysia’s Liberalization Experience

Timeline License
License Features
Features
Technology
Technology and and service
service neutral
neutral
Individual
Individual licenses
licenses (more
(more heavily
heavily regulated,
regulated, require
require
Issuance
Issuance of
of ministerial
ministerial approval)
approval) andand class
class licenses
licenses
Communications
Communications and and
Multimedia Four
Four categories:
categories:
Multimedia Act
Act Issuance
Issuance of
of individual
individual Network
Beginning
Beginning ofof migration
migration of
of licenses
licenses Network Facilities
Facilities Providers
Providers (NFPs):
(NFPs): ownown
licensees
licensees to
to converged
converged facilities
facilities like satellite earth stations, fiber
like satellite earth stations, fiber optic
optic
regime
regime cables,
cables, communications
communications lines lines and
and exchanges,
exchanges,
radio
radio communication
communication and and transmission
transmission
equipment,
equipment, mobile
mobile communication
communication base base stations
stations
and
and broadcasting
broadcasting towers
towers andand equipment
equipment
Network
Network Services
Services Providers
Providers (NSPs):
(NSPs): provide
provide
basic
basic connectivity
connectivity andand bandwidth
bandwidth to to support
support aa
variety
variety of
of applications
applications
Applications
Applications Services
Services Providers:
Providers: provide
provide
1999 2000 2002
particular
particular functions
functions such
such as as voice
voice services,
services, data
data
services,
services, Internet
Internet access
access services,
services, IPIP telephony
telephony
and
and other
other transmission
transmission services
services
Content
Content Applications Services
Applications Services Providers:
Providers:
provide
provide broadcast
broadcast and and online
online publishing
publishing
services
services
Completion
Completion of of migration
migration toto
converged
converged licenses
licenses
Communications
Communications and
and
Multimedia Class
Class licenses
licenses issued
issued for
for Sector
Sector Competition
Intensity Index
Index
Multimedia Licensing
Licensing Applications
Regulations Applications andand Network
Network
Regulations Services,
Services, and
and Network
Network Malaysia
Malaysia
Facilities
Facilities Providers
Providers achieved
achieved
Limited convergence
convergence
and
andfull
full
competitionin in Full
period
period of
of 44
years
Competition
years
Despite a slight drop in penetration rates in Malaysia, fixed line revenues
increased in the post liberalization period from US$ 1.51 to US$ 1.69 billion
4 Years Post-liberalization Growth of Fixed Line in Malaysia
Penetration - Malaysia Revenues – Malaysia (Bil. US$)
20.3%
20.0% 1.69
19.7% 1.66
1.58
19.0%
1.51
1999 2000 2001 2002 1999 2000 2001 2002
Source: ITU 2004

Morocco was one of the early liberalizers, kicking off the process in 1999 and
hoping again to set a trend with its fixed services licenses in 2005
Morocco’s Liberalization Experience

Timeline Overview
Overview
In
In 2004,
2004, law
law 55-01
55-01 replaced
replaced the the old old law
law to
to allow:
allow:
-Better dispute resolution
-Better dispute resolution mechanism mechanism
-Better
-Better universal
universal serviceservice policy
policy
-Introduction
-Introduction of of sanctions
sanctions mechanism
mechanism
Failure
Failure to
to -Enforcement
-Enforcement of of thethe competition
competition act act
Award
Award of
of license
license fixed
fixed
second
second GSM
GSM -Obligation
-Obligation to to share
share infrastructure
infrastructure
and
and
license
license international The
The regulator
regulator started
started the the first
first step
step of of implementing
implementing aa
international
new
new licensing
licensing regime
regime on on February
February 24, 24, 2005
2005 byby
launching
launching aa tender
tender to to award
award aa new new generation
generation of of
telecom
telecom licenses
licenses to to establish
establish and and operate
operate public
public
telecommunication
telecommunication networks networks in in Morocco
Morocco
This
This process
process will
will set
set convergence
convergence and and technological
technological
1997 1999 2000 2002 2004 2005 neutrality
neutrality principles
principles through
through “new “new generation
generation ”” licenses
licenses
Each
Each bidder
bidder will
will be
be able
able to to adopt
adopt aa different
different approach
approach
with
with the
the most
most appropriate
appropriate technology
technology according
according
to
to its
its own
own vision
vision ofof the
the market
market development
development
The
The newnew generation
generation licenses
licenses will will be
be “custom-made”
“custom-made”
licenses
licenses andand open
open in in terms
terms of of technology,
technology, services,
services,
Updated
Updated infrastructure
infrastructure and and coverage
coverage
telecom Plan
Plan toto offer
offer
telecom law
law fixed,
55-01 fixed,
55-01
Vivendi
Vivendi international
international
Further
Further
Telecom
Telecom law
law Universal
Universal privatization
and
and mobile
mobile
privatization of
of
Establishment
Establishment acquired
acquired 35%
35% licenses
licenses (2 (2 Sector
of
Maroc
Maroc Sector Competition
Intensity Index
Index
of ANRT
ANRT of
of Maroc
Maroc Telecom
fixed
fixed licenses,
licenses,
Telecom Telecom one
Telecom (Vivendi one with
with
(Vivendi now
now limited
hold limited
hold 51%
51% ofof mobility)
shares) mobility) Limited Full
shares)

ANRT has started executing a well defined plan of regulatory lever reforms
Planned Regulatory Levers Development
2004 2005 2006 2007 2008
New Telecom Law

Carrier
National
Pre-selection
Frequency Plan
Subscription
Fixed licenses Reselling
3rd mobile license Local Loop Number

Unbundling Portability
National
Roaming Obligation Interconnection
based on Long Run
Co-location Incremental Cost
(including in-span or radio) (LRIC)
Infrastructure Sharing
Source: ANRT
In 2005, Morocco launched a tender to award fixed voice licenses
The
The bid
bid was
was launched
launched on
on February
February
25,
25, 2005
2005
Up
Up to
to May
May 2,
2, 2005,
2005, 31
31 companies
companies
Morocco New Generation Licenses had withdrawn the tender
had withdrawn the tender
documents
documents
The
The deadline
deadline for
for submission
submission of
of
offers
offers has
has been
been postponed
postponed to
to June
June
20,
20, 2005
2005
Custom
Custom Made
Made Licenses
Licenses License
License Batches
Batches
Batch
Batch 1b:1b: Local
Local Mobility
Mobility
•• The
The new
new licenses
licenses are open in
are open in terms
terms of:
of: Batch
Batch 1a:
1a: Local
Local Loop*
Loop* Building
Building and operating wire-line
and operating wire-line //
Building
Building and operating wire-line
and operating wire-line // wireless
wireless local loop networks to
local loop networks to
•• Technology
Technology (Wireless
(Wireless // Wireline)
Wireline) wireless
wireless local loop networks to
local loop networks to offer
offer fixed
fixed services
services and
and mobile
mobile
•• Services
Services (Voice
(Voice and/
and/ or
or data),
data), (Fixed
(Fixed and
and /or
/or local
local offer
offer fixed
fixed services
services service
service in in predefined
predefined restricted
restricted
mobility)
mobility) local
local areas
areas
•• Infrastructure
Infrastructure options
options
•• Using
Using interconnection
interconnection
•• Using
Using partial
partial local
local loop
loop unbundling
unbundling
•• Using
Using complete
complete local
local loop
loop unbundling
unbundling
•• Leasing
Leasing others’
others’ infrastructure
infrastructure Batch
Batch 2: 2: National
National Transmission
Transmission Batch
Batch 3: 3: International
International transit
transit
•• Building
Building own
own infrastructure
infrastructure Building
Building and operating national
and operating national Building and operating
Building and operating
•• Coverage
Coverage targets
targets transmission
transmission infrastructure
infrastructure (LD).
(LD). international
international infrastructure
infrastructure forfor
Accessing
Accessing endend users
users through
through pre-
pre- outgoing
outgoing and incoming
and incoming
•• The
The licenses
licenses concern
concern three
three market
market segments:
segments: selection
selection international
international traffic
traffic (ILD)
(ILD)
•• Local
Local loop
loop (2
(2 licenses
licenses perper region)
region)
•• National
National backbone
backbone (2 (2 licenses)
licenses)
•• International
International gateway
gateway (2 (2 licenses)
licenses)
The
The evaluation
evaluation process
process will
will favor
favor the
the bidders
bidders requesting
requesting multiple
multiple batches
batches
* The local loop license with limited mobility can be extended to a

Source: ANRT 3G license im 2007
Meditel has acquired a market share of 32% since its entry in 2000
Mobile Market Shares in Morocco (1999-2004)
18%
32%
Meditel
100%
82% Maroc
68% Telecom
IAM
1999 2000 2004
Source: ITU 2004; ANRT

Mobile penetration in Morocco witnessed remarkable growth with the start of
competition in 1999
Mobile Penetration in Morocco

(%, 1999-2004)
31%
8%
Competition G R: 8 24%
Introduction
CA
21%
16%
8%
1%
1999 2000 2001 2002 2003 2004
Source: ITU 2004; ANRT

Morocco has a very low fixed line penetration that has been almost steady
over the last six years
Fixed Line Penetration in Morocco

(%, 1999-2004)
CAGR: - 4%
5% 5%
4%
4% 4% 4%
1999 2000 2001 2002 2003 2004
Source: ITU 2004

Liberalization in Morocco has clearly led to an increase in telecom revenues
Telecommunications Revenues in Morocco

(in USD Million) (2000 – 2004)
2426
1,966
1,549
1,345
1,169
868
1999 2000 2001 2002 2003 2004
Source: ANRT; ITU 2004; World Bank

Jordan started liberalizing in 2000, and has moved to an integrated licensing
regime since the beginning of the year
Jordan’s Liberalization Experience

Timeline Overview
Overview

In
In1995,
1995, the thetelecommunications
telecommunications law law was was enacted
enactedand andthe the
Jordanian
Jordanianregulator
regulator(TRC) (TRC)waswas setup
setupin in1996.
1996. Competition
Competition
started
startedin inthe
themobile
mobilesector
sectorin inJordan
Jordanin in 2000
2000
Formulation
Formulation of of aa New
New telecom
telecom Award
Award ofof third
third

Jordan
Jordan reviewed its telecommunications act
reviewed its telecommunications act in in2002,
2002, 77years
years
clear
clear policy
policy for
for law
law mobile
mobile license
license after
afterthe
theinitial
initial act.
act.TheThenew
newact act prepared
preparedJordan Jordanfor forfull
full
the
the telecom
telecom strengthening
strengthening and
and trunking
trunking liberalization
liberalizationand andthe thenew
newintegrated
integratedlicensing
licensingregime regime
sector
sector TRC
TRC license
license
According
Accordingto totelecommunications
telecommunicationscommitments commitmentsJordan Jordanhas has
undertaken
undertaken upon uponjoining
joiningthe
theWTO WTOin in1999,
1999, Jordan
JordanTelecom
Telecom
lost
lost exclusive
exclusiverights rights ononvoice
voicetelephony,
telephony, telex, telex, telegraph,
telegraph,
facsimile
facsimileand andprivate
privateleased
leasedcircuit
circuitservices
serviceson onin inDec
Dec 2004
2004

The Jordanian government fully
The Jordanian government fully liberalized its liberalized its
telecommunications
telecommunicationsmarket market in inJanuary
January2005. 2005. Licenses
Licenses for for
supply
supplyof of services,
services, other otherthan
thanpublic
publicmobile
mobilewireless
wirelessservices
services
and
andservices
services where wherescarce
scarceresources
resources are arerequired,
required, areare
granted
grantedto toallall qualified
qualifiedapplicants
applicants that that satisfy
satisfycriteria
criteria
1995 1996 2000 2002 2003 2004 2005
Licensing
Licensingapplication
applicationprocess
processcarried
carriedout out objectively
objectivelybasedbased
on
onpublished
publishedcriteria,
criteria, and
andonly
onlydetermines
determines whether whetherapplicants
applicants
meet
meetthese
thesecriteria
criteria

Integrated
IntegratedLicensing
LicensingRegimeRegimeto tobe beimplemented
implementedby by2006.
2006. AllAll
licenses
licenses issued
issuedduringduring 2005
2005 willwill prevail
prevail in inthe
theIntegrated
Integrated
Regime.
Regime.Existing
Existingnon-class
non-class licensees
licensees will will not
not beberequired
requiredto to
transition
transitiontheirtheirlicensed
licensedactivities
activities to tothe
theIntegrated
IntegratedRegime Regime
Full
Full until
until 2006
2006
Privatization
Privatization of
of liberalization:
Jordan liberalization: No
No
Jordan Telecom
Telecom Issuance
Issuance ofof
Establishment
Establishment of
of Company
limit
limit on
on number
number
Company (JTC)
(JTC) trunk
trunk radio
radio
Telecom
Telecom of
of licenses
licenses Sector
Sector Competition
Intensity Index
Index
Regulatory Award
Award ofof license
license (with
(with except
Regulatory second except where
where
Commission second mobile
mobile interconnection)
interconnection) resources
Commission license resources areare
(TRC) license (to
(to JTC)
JTC) Two
Two data
data scarce
(TRC) scarce
Liberalization
Liberalization of
of licenses
licenses issued
issued Limited Full
data Integrated
Integrated
data licensing Competition Competition
licensing regime
regime

The new integrated licensing regime currently applicable in Jordan
distinguishes between individual and class licenses
Types of Licenses in Jordan Under the Integrated Regime

Individual
Individual Licenses
Licenses Class
Class Licenses
Licenses
Provision
Provision of of public
public telecom
telecom services
services and
and networks
networks Provision
Provision of of fixed
fixed services
services (neutrality
(neutrality between
between voice
voice
that
that use
use scarce
scarce resources
resources (Radio
(Radio spectrum,
spectrum, public
public and
and data)
data)
rights
rights of
of way
way and and phone
phone numbers)
numbers) Public
Public VSAT
VSAT based based services
services and
and satellite
satellite systems
systems
License could permit operation of
License could permit operation of facilities
facilities and
and Radio spectrum used on a
Radio spectrum used on a secondary basissecondary basis
provision
provision of of services
services Internationally
Internationally unlicensed
unlicensed spectrum
spectrum used
used for
for WiFi
WiFi
License
License conditions:
conditions: services
services
Initial
Initial license
license fees:
fees: JD
JD 100,000
100,000 (USD
(USD 140,845)
140,845) International
International Signaling
Signaling Point
Point Codes
Codes
Annual
Annual license fees not to exceed 1% of
license fees not to exceed 1% of Dialing
Dialing codes
codes for for routing
routing to
to enable
enable Carrier
Carrier Pre-
Pre-
revenues
revenues Selection
Selection
License
License conditions:
conditions:
Initial
Initial license
license fees:
fees: JD
JD 30,000
30,000 (USD
(USD 42,254)
42,254)
Annual
Annual license
license feesfees not
not to
to exceed
exceed 1%1% ofof revenues
revenues

TRC
TRC offers
offers those
those two
two types
types ofof licensing
licensing to to all
all new
new entrants
entrants

Licenses
Licenses are
are standardized
standardized for for each
each typetype

New
New entrants apply for either one of the
entrants apply for either one of the two
two types
types depending
depending on
on their
their need
need to
to build
build infrastructure
infrastructure and
and use
use scarce
scarce
resources
resources
There is
There is no
no limit
limit on
on the
the number
number of of licenses
licenses that
that are
are granted
granted under
under either
either category
category
There
There is
is no
no limit
limit on
on the
the type
type and
and range
range of of non
non public
public mobile
mobile wireless
wireless services
services that
that may
may bebe provided
provided under
under licenses,
licenses, or
or
on the types of networks
on the types of networks used used
Source: TRC Jordan
Jordan put in place a comprehensive regulatory program to migrate to the
new integrated licensing regime
TRC Program Moving To Integrated Licenses
JT and Public
mobile
Licensing wireless
Licensing licensees may
Program
Program continue with
decision by
submission to existing
Cabinet Cabinet
licenses until
2006 or Evolution Period
Integrated
TRC voluntarily
Licensing
publishes TRC accepts transition
and
response to license
regulatory
consultation applications
TRC accepts regime
and: Form of Grants
applies –
License Licenses for applications
2005
Application operation in and Grants
Licenses under licensing is
procedures 2005
2005 Licensing not changed
and criteria
Oct 04 Nov 04 Dec 04 Jan 05 Feb 05 Mar 05 Q2 05 Q3 05 Q4 05 2006
Source: TRC Jordan

TRC has been busy updating the regulatory framework in 2005 to
accommodate the new licensing regime
Regulatory Levers Under Improvement or Development in Jordan
Competition Regulation
Competition Regulation Cost of
Cost of Capital:
Capital: JT
JT and
and Fastlink
Fastlink Retail Price
Retail Price Controls
Controls
Quality of Service
Quality of Service
Dispute Resolution
Dispute Resolution
Access Markets
Access Markets
Rule Making
Rule Making Procedure
Procedure Number Portability
Number Portability
Consumer Protection
Consumer Protection
Enforcement Procedure
Enforcement Procedure
Fixed Wireless
Fixed Wireless Access
Access
Licensee Transition
Licensee Transition Provisions
Provisions to
to
Integrated Regime
Integrated Regime
Dec 04 Jan 05 Feb 05 Mar 05 Q2 05 Q3 05 Q4 05 2006
Interconnection Guideline
Interconnection Guideline Market Definition
Market Definition and
and Market
Market
Power LRIC Model
LRIC Model
Update
Update Power
Reference Access
Reference Access Offer
Offer
Carrier Selection
Carrier Selection Ethics // Conflicts
Ethics Conflicts Procedures
Procedures
Accounting Separation
Accounting Separation
Universal Service
Universal Service Modification of
Modification of RIO
RIO
Universal Service
Universal Service Obligation
Obligation
Scarce Resources
Scarce Resources and
and Spectrum
Spectrum
Management
Management
Source: TRC Jordan

Mobilecom’s market share increased significantly between 2001 and 2002
Mobile Market Shares in Jordan (2000-2004)
18%
29%
Mobilecom
82%
71% Fastlink
2000 2004
Source: Arab Advisors Group (2003); TRC Jordan

Mobile penetration has increased very little since 2002, despite the increase
triggered by the start of competition
Mobile Penetration in Jordan

(in % of Population) (1998 – H1 2004)
R 57%
CAG 24.6% 25.2%
22.3%
Competition 15.7%
Introduction
7.0%
1.7% 1.9%
1998 1999 2000 2001 2002 2003 H1 2004

Source: Arab Advisors Group (2003); TRC Jordan
ADSL penetration is picking up rapidly in Jordan, with a growth rate of 100%
per year
ADSL Subscribers in Jordan

(Q4 2003-Q4 2004)
Comments
Comments
10,400 The
The ISP
ISP liberalization
liberalization inin
Jordan
Jordan allowed
allowed thethe
20%
CAGR: introduction
introduction of of several
several ISPs
ISPs
since
since 2000
2000
7,900 Due
Due toto pressure
pressure from
from ISPs
ISPs
and market dynamics,
and market dynamics,
Jordan
Jordan Telecom
Telecom reviewed
reviewed
5,600 5,600 its
its wholesale
wholesale prices
prices on
on
5,085 ADSL
ADSL in 2003 allowing aa
in 2003 allowing
more
more profitable
profitable business
business
model
model forfor ISPs
ISPs
2004
2004 witnessed
witnessed an an
increase
increase in in marketing
marketing
efforts
efforts from
from ISPs
ISPs toto
promote ADSL
promote ADSL
Q4 2003 Q1 2004 Q2 2004 Q3 2004 Q4 2004
Note: CQGR: Compounded Quarterly Growth Rate

Source: Jordan Telecom
Jordan has succeeded in increasing revenues from the telecom sector to
benefit the whole economy
Telecommunications Revenues in Jordan

(in USD ‘000s) (1999 – 2003)
828,170
760,560
688,730
562,680
398,590
1999 2000 2001 2002 2003
Source: ITU 2004; Arab Advisors Group (2005)

Singapore fully liberalized all services and moved to a converged licensing
regime in 2000
Singapore’s Liberalization Experience

Timeline Overview
Overview
Singapore
Singapore started
started aa shy
shy liberalization
liberalization trend
trend in in 1993
1993
before
before full
full competition
competition was was introduced
introduced inin 2000
2000
IDA,
IDA, the
the current
current regulator
regulator in in Singapore
Singapore waswas setset up
up in
in
Award
Award of
of first
first cellular
cellular 1999
1999 after
after consolidating
consolidating two two other
other regulatory
regulatory
license
license Award
Award of
of first
first data
data Full
Full liberalization
liberalization of
of all
all authorities
authorities in in Singapore
Singapore
Resale
Resale of
of license
license services
services IDA
IDA was
was among
among the the first
first to
to introduce
introduce an
an integrated
integrated
international
international licensing
licensing regime.
regime. The The regime
regime isis based
based on on two
two major
major
types
types licenses
licenses
FBO
FBO (Facility
(Facility Based
Based Operators):
Operators): 4747 licenses
licenses asas of
of
April
April 2005
2005
SBO
SBO (Service
(Service Based
Based Operators)
Operators) :: 710
710 licenses
licenses as as
of
of April
April 2005
2005
Three
Three main
main fixed
fixed line
line operators
operators
Singapore
Singapore Telecommunications
Telecommunications Ltd Ltd (Singtel)
(Singtel)
StarHub
StarHub Pte Pte Ltd
Ltd
1995 1997 1998 2000 Singapore
Singapore Cable Cable Vision
Vision (SCV)
(SCV)
Three
Three main
main mobile
mobile operators
operators
Singtel
Singtel Mobile
Mobile
Mobile
Mobile One One (M1)
(M1)
StarHub
StarHub Pte Pte Ltd
Ltd
Licensing
Licensing for
for all
all Sector
Sector Competition
Intensity Index
Index
services
services to
to start
start
operation
operation in
in 2000
2000 Singapore
Singapore wentwent
through
through55years
years
Limited of
of regulated
regulated
competition
competition
Competition before
beforereaching
reaching Full
full
fullcompetition
competition
and
Competition
and
Source: Connexus Analysis convergence
convergence
IDA introduced a new licensing framework in 2000, categorizing licensees into
Facility Based and Service Based Operators
Facility Based Operators versus Services Based Operators in Singapore

Licensing
Licensing Framework
Framework
AA new
new licensing
licensing framework
framework streamlined
streamlined for
for aa fully
fully competitive
competitive telecommunication
telecommunication environment
environment waswas introduced
introduced in
in 2000
2000 to:
to:
Ensure
Ensure minimal
minimal market
market entry
entry barriers
barriers
Facilitate
Facilitate the
the entry
entry of
of new
new operators
operators andand thethe expansion
expansion of
of service
service scope
scope by
by existing
existing licensees
licensees
The licensing framework is based on the following two broad
The licensing framework is based on the following two broad categories categories
Facility
Facility Based
Based Operators:
Operators: 4747 licenses
licenses asas ofof April
April 2005
2005
Services
Services Based Operators: 710 licenses as of April 2005
Based Operators: 710 licenses as of April 2005
Facility
Facility Based
Based Operators
Operators (FBO)
(FBO) Service
Service Based
Based Operators
Operators (SBO)
(SBO)
Facilities-based
Facilities-based operations
operations referrefer to
to the
the deployment
deployment of of any
any Operators
Operators intending
intending to to lease
lease telecommunication
telecommunication network network
form of telecommunication networks, systems
form of telecommunication networks, systems and facilities and facilities elements (such as transmission capacity
elements (such as transmission capacity and switching and switching
by
by any
any persons,
persons, outside
outside of of their
their own
own property
property boundaries,
boundaries, to to services)
services) from
from any any Facilities-Based
Facilities-Based Operator
Operator (FBO)
(FBO) licensed
licensed
offer
offer telecommunication
telecommunication servicesservices to to third
third parties,
parties, which
which maymay by
by the
the IDA
IDA so so asas to
to provide
provide their
their own
own telecommunication
telecommunication
include
include other
other licensed
licensed telecommunication
telecommunication operators,operators, services,
services, or or toto resell
resell the
the telecommunication
telecommunication servicesservices ofof
business
business customers or the
customers or the general
general public
public FBOs, to third parties
FBOs, to third parties
Telecommunication
Telecommunication networks,
networks, systems
systems and and facilities
facilities include
include The
The SBO
SBO licenses
licenses issued
issued by by IDA
IDA fall
fall under
under two
two categories:
categories:
any
any telecommunication infrastructure for the carriage of
telecommunication infrastructure for the carriage of the SBO (Individual) License category,
the SBO (Individual) License category, where individual where individual
telecommunication
telecommunication or or broadcast
broadcast traffic.
traffic. The
The traffic
traffic can
can bebe licensing
licensing is is required
required for for the
the stipulated
stipulated types
types of
of operations
operations
cross-border
cross-border or or local
local in
in nature,
nature, and
and the the network
network coverage
coverage and
and services;
services; and and the
the SBOSBO (Class)
(Class) Licence1
Licence1 category,
category,
can
can be
be nationwide
nationwide or or only
only confined
confined to to selected
selected geographical
geographical where
where interested
interested parties
parties will
will only
only be
be required
required toto register
register with
with
areas in Singapore
areas in Singapore IDA before providing the stipulated types
IDA before providing the stipulated types of services of services
Source: IDA Singapore

IDA offers 5 types of FBO licenses with a limitation on licenses that require
use of frequency spectrum
Facility Based Operator Licenses in Singapore

Types
Types of
of FBO
FBO Licenses
Licenses License
License Details
Details
Annual
Annual Fee:
Fee: 1%1% AGTO*,
AGTO*, subject
subject to
to aa minimum
minimum of of S$250,000
S$250,000 per
per year
year
FBO
FBO designated
designated as
as Public
Public Telecommunications
Telecommunications (no
(no initial
initial fee)
fee)
Licenses
Licenses (PTL)
(PTL) License
License Duration:
Duration: 20
20 years,
years, renewable
renewable forfor aa further
further period
period as
as IDA
IDA thinks
thinks
fit
fit
Annual
Annual Fee:
Fee: 1%1% AGTO,
AGTO, subject
subject to
to minimum
S$100,000 per
per year
year (no
(no
Terrestrial
Terrestrial telecommunication
telecommunication networks
networks for
for initial fee)
telecommunication initial fee)
telecommunication purposes
purposes
License
License Duration:
Duration: 15
15 years,
years, renewable
renewable forfor aa further
further period
period as
as IDA
IDA thinks
thinks
fit
fit
Public Due
Due toto limited
limited frequency
frequency spectrum,
spectrum, thethe license
license fees
fees and
and license
license duration
duration

Public cellular
cellular mobile
mobile telephone
telephone services
services will
Public will be
be specified
specified together
together with
with the
the approach
approach to to award
award the
the respective
respective

Public mobile broadband multimedia services
mobile broadband multimedia services spectrum
Public spectrum rights
rights and
and licenses,
licenses, via
via aa comparative
comparative selection
selection exercise
exercise

Public fixed-wireless
fixed-wireless broadband
broadband multimedia
multimedia services
services and/or an auction exercise
and/or an auction exercise

Public
Public radio
radio paging
paging services
services Annual
Annual Fee:
Fee: 1%
1% AGTO,
AGTO, subject
subject to
to minimum
S$1,200 per
per year
year (no
(no

Public
Public mobile data
mobile data services
services initial fee)
initial fee)

Public
Public trunked
trunked radio
radio services
services License
License Duration:
Duration: 10
10 years,
years, renewable
renewable for
for aa further
further period
period as
as IDA
IDA deems
deems

Public
Public Radio-communication (Maritime)
Radio-communication (Maritime) services
services fit
fit
Terrestrial
Terrestrial telecommunication
telecommunication network
network for
for broadcasting
broadcasting
Annual
Annual Fee:
Fee: S$5,000
S$5,000 (no
(no initial
initial fee)
fee)
purposes only
purposes only
License
License Duration: 10 years, renewable
Duration: 10 years, renewable on
on aa 5-year
5-year basis
basis
(*) AGTO = Audited Gross Turn Over

IDA differentiates between SBOs that require an individual license and SBOs
that require a class license
Service Based Operator Licenses in Singapore

Types
Types of
of FBO
FBO Licenses
Licenses License
License Details
Details
Services-Based
Services-Based Operators
Operators to
to be
be Individually
Individually Licensed
Licensed
SBO
SBO (Individual)
(Individual)
Annual
Annual Fee:
Fee: S$5,000
S$5,000 (no
(no initial
initial fee)
fee)
Live
Live Audiotex
Audiotex services
services only
only S$200
S$200 every
every three-yearly
three-yearly
Services-Based
Services-Based Operators
Operators to
to be
be Class
Class Licensed
Licensed
Audiotex
Audiotex services
services S$200
S$200 every
every three-years
three-years
Call-back
Call-back and
and call-origination
call-origination services
services S$200
S$200 every
every three-years
three-years
Internet
Internet based
based voice
voice and
and data
data services
services S$200
S$200 every
every three-years
three-years
International
International calling
calling card
card services
services S$200
S$200 every
every three-years
three-years
Store-and-retrieve
Store-and-retrieve value-added
value-added network
network services
services (where
(where
leased S$200
S$200 every
every three-years
three-years
leased circuits
circuits are
are used)
used) services
services
No
No fee
fee payable
payable
International
International calling
calling card
card services
services

Singapore’s mobile market witnessed a high penetration growth after the
entrance of a third provider was announced
Mobile Penetration in Singapore

(%, 1998 – March 2005)
Full Liberalization
of the market in
2000 and entry of
%
3rd operator CAGR 8
91.0% 94.1%
83.1%
77.8%
74.8% 69.2%
4%
46.
GR
CA
45.7%
32.3%
1998 1999 2000 2001 2002 2003 2004 Mar-05
Change in the computation method

of penetration rates. Total population
is used instead of total residential
population

StarHub acquired a relatively high market share within four years of its entry
Mobile Operators Market Shares in Singapore

(%, 1999-2004)
29.0% StarHub
33.4%
30.5% Mobile One
66.6%
Singtel
40.5%
1999 2004
Source: Merrill Lynch 2005

Fixed line penetration is decreasing in Singapore and has dropped at a rate of
2% in the last 5 years
Fixed Line Penetration in Singapore

(%, 1998 – March 2005)
Full Liberalization of the

market in 2000 and entry of
3rd mobile operator
CAGR - 2%
CAGR 3%
59.3% 47.2%
46.4%
57.5%
45.3%
55.4% 44.0% 43.8%
1998 1999 2000 2001 2002 2003 2004 Mar-05
Change in the computation method of penetration rates.

Total population is used instead of total residential population
Telecommunications revenues / GDP stands at 3.8% in Singapore, a
percentage higher than the calculated international average
Telecommunications Revenues in Singapore

(USD Million, 1998 – 2004)
3,349
3,124 3,153
2,959
2,522
1998 1999 2000 2001 2002
Source: ITU 2004

The United Kingdom was one of the early telecom liberalizers, introducing
competition as early as 1982
UK’s Liberalization Experience

Timeline Overview
Overview
British
British Liberalization
Liberalization The
The UKUK licensed
licensed aa second second fixed
fixed network
network 22 years
years prior
prior
Telecom to
to the
the establishment
establishment of of the
the regulator
regulator (Oftel)
(Oftel)
Telecom ActAct of
of International
International
separating
separating BTBT Licensing
Licensing of
of Gateway
Gateway First
First MVNO
MVNO The
The 1984
1984 Telecommunications
Telecommunications act act established
established Oftel
Oftel
Licensing
Licensing two
two cellular
cellular First
First license
license to
to (Virgin
(Virgin Mobile)
Mobile) Licensing
Licensing continued
continued between
between 1984 1984 and
and 1997
1997 including
including
mobile
mobile and
and long
long distance
distance licenses
licenses
Mercury
Mercury mobile
mobile offer fixed
offer fixed started
started
Communicatio networks wireless operation In
In February
February 15, 15, 1997,
1997, thethe UKUK committed
committed to to open
open its
its
Communicatio networks wireless operation in
in telecommunications
ns telecommunications sector sector to to competition
competition under
under the
the
ns to
to operate
operate aa service
service (BT(BT the
the UK
UK WTO
second WTO agreement
agreement
second fixed
fixed and
and Mercury
Mercury AA new
new communication
communication law law was
was enacted
enacted in in 2003
2003
network
network excluded)
excluded) allowing
allowing the
the convergence
convergence of of several
several regulatory
regulatory
authorities
authorities andand thethe creation
creation of of Ofcom,
Ofcom, thethe new
new
regulatory
regulatory body
body in in the
the UK
UK
The
The new
new law
law andand thethe new
new regulator
regulator allowallow for
for aa better
better
convergence
convergence in in communications
communications services services and
and
81-82 1984 1985 1991 1996 1997 1999 2003 encompass
encompass aa new new regulatory
regulatory regime.
regime. TheThe licensing
licensing
process,
process, nownow in in the
the hands
hands of of the
the regulator,
regulator, shifted
shifted to
to
become
become an an authorization
authorization system..
system.. The The authorizations,
authorizations,
adopted
adopted from
from an an the
the European
European Commission
Commission (EC) (EC)
directive
directive ref.
ref. 2002/20/EC
2002/20/EC are are of of two
two types:
types:
Electronic
Electronic Communication
Communication Networks Networks (PECN)
(PECN)
Electronic
Electronic Communication Services (PECS)
Communication Services (PECS)
New
New
New
New fixed
fixed Communicatio
Communicatio
Establishment
Establishment network Full
Full nn Act
of network Act (2003)
(2003)
of Oftel
Oftel under
under licenses
liberalization
liberalization allowing
licenses allowing the
the Sector
the
the granted
granted ending
ending
following
following the
the convergence
convergence of of
Sector Competition
Intensity Index
Index
telecommunica
telecommunica ratification
ratification of
of
the
the duopoly
duopoly of
of different
different
tions
tions act
act of
of the
the WTO
WTO
BT
BT and
and regulators
regulators and
and
1984
1984 agreement
agreement
Mercury
Mercury the
the creation
creation of
of Limited
Ofcom
Ofcom Competition
Full Competition
Source: Ofcom
Ofcom is a consolidation of five different regulatory bodies in the UK
Ofcom Duties and Governing Principles

Ofcom's
Ofcom's Statutory
Statutory Duties
Duties Under
Under the
the Communications
Communications Act
Act 2003:
2003:
Article
Article 3(1):
3(1): ““ ItIt shall
shall be
be the
the principal
principal duty
duty of
of Ofcom,
Ofcom, in
in carrying
carrying out
out their
their functions;
functions;
(a)
(a) to further the interests of citizens in relation to communications matters;
to further the interests of citizens in relation to communications matters; and
and
(b)
(b) to further the interests of consumers in relevant markets, where appropriate
to further the interests of consumers in relevant markets, where appropriate by
by promoting
promoting competition"
competition"
Ofcom
Ofcom consolidated
consolidated entities
entities and
and duties
duties Regulatory
Regulatory Principles
Principles
Consolidated
Consolidated Entities
Entities Duties
Duties Ofcom
Ofcom will
will regulate
regulate with
with aa clearly
clearly articulated
articulated and
and publicly
publicly reviewed
reviewed
annual plan, with stated policy objectives
annual plan, with stated policy objectives
Oftel,
Oftel, the
the former
former Regulator
Regulator ofof Ensuring
Ensuring thethe optimal
optimal use use ofof the
the Ofcom
Ofcom will
will intervene
intervene where
where there
there is
is aa specific
specific statutory
statutory duty
duty to
to
Telecommunications
Telecommunications electro-magnetic
electro-magnetic spectrum
spectrum work
work towards
towards aa public
public policy
policy goal
goal which
which markets
markets alone
alone cannot
cannot
Radio
Radio Communications
Communications Ensuring
Ensuring that
that aa wide
wide range
range of of achieve
achieve
Agency,
Agency, thethe Commercial
Commercial arm arm electronic
electronic communications
communications
of
of the
the Department
Department of of Trade
Trade services
services -- including
including highhigh speed
speed
Ofcom
Ofcom will
will operate
operate with
with aa bias
bias against
against intervention,
intervention, but
but with
with aa
and
and Industry
Industry with
with special
special data
data services
services -- isis available
available willingness to intervene firmly, promptly and effectively where
willingness to intervene firmly, promptly and effectively where
responsibility
responsibility forfor Spectrum
Spectrum throughout
throughout the the UK
UK required
required
Allocation
Allocation andand Management
Management Ensuring
Ensuring aa wide
wide range
range of of TV
TV
Ofcom
Ofcom will
will strive
strive to
to ensure
ensure its
its interventions
interventions will
will be
be evidence-
evidence-
Independent
Independent and
and radio
radio services
services of of high
high
Telecommunications
Telecommunications quality
quality and
and wide
wide appeal
appeal based,
based, proportionate,
proportionate, consistent,
consistent, accountable
accountable and
and transparent
transparent in
in
Commission,
Commission, which which held
held Maintaining plurality
Maintaining plurality inin the
the both
both deliberation
deliberation andand outcome
outcome
special
special responsibility
responsibility forfor provision
provision ofof broadcasting
broadcasting
broadcasting
Ofcom
Ofcom will
will always
always seek
seek the
the least
least intrusive
intrusive regulatory
regulatory mechanisms
mechanisms
broadcasting content
content Applying
Applying adequate
adequate protection
protection
to achieve its policy objectives
to achieve its policy objectives
Radio
Radio Authority,
Authority, which
which sets
sets the
the for
for audiences against
audiences against offensive
offensive
Radio
Radio Standards
Standards or
or harmful
harmful material
material Ofcom
Ofcom will
will research
research markets
markets constantly
constantly and
and will
will aim
aim to
to remain
remain at
at
Broadcasting
Broadcasting Standards
Standards Applying
Applying adequate
adequate protection
protection the
Commission, the forefront
forefront ofof technological
technological understanding
understanding
Commission, which which isis for
for audiences against
audiences against
responsible
responsible for for terrestrial
terrestrial unfairness
unfairness or or the
the infringement
infringement Ofcom
Ofcom will
will consult
consult widely
widely with
with all
all relevant
relevant stakeholders
stakeholders and
and
channel
channel allocations
allocations of
of privacy
privacy assess
assess the impact of regulatory action before imposing
the impact of regulatory action before imposing regulation
regulation
upon
upon aa market
market
Source: Ofcom
The UK adopted EC Electronic Communication Network and Service
definitions and introduced a new Authorization regime
UK Adoption of Directive 2002/20/EC

Directive
Directive 2002/20/EC
2002/20/EC UK
UK Adoption
Adoption
In
In 2002,
2002, the
the EC
EC issued
issued the
the The
The UK
UK adopted
adopted thethe directive
directive and
and incorporated
incorporated the
the authorizations
authorizations inin its
its communications
communications act
act of
of 2003.
2003. The
The UK
UK
Authorization
Authorization Directive
Directive currently
currently offers
offers two
two types
types of
of authorizations
authorizations replacing
replacing the
the old
old licensing
licensing regime
regime
2002/20/EC
2002/20/EC based
based on on
consultation
consultation within
within the
the EC.
EC.
The
The directive
directive allows:
allows: Authorizations
Authorizations for
for Electronic
Electronic Communications
Communications Authorizations
Authorizations for
for Electronic
Communications Networks
Networks
Services
Services
An An easier
easier convergence
convergence of of
services
services
TheThe creation
creation of
of common
common
legal
legal framework
framework forfor the
the The
The new
new authorization
authorization system
system integrates
integrates all
all networks
networks under
under one
one type
type of
of authorizations
authorizations and
and all
all services
services under
under aa
provision
provision ofof second type of authorizations
second type of authorizations
telecommunications
telecommunications Under
Under the
the authorizations
authorizations regime,
regime, the
the UK
UK General
General Conditions
Conditions ofof Entitlement
Entitlement distinguish
distinguish between
between three
three types
types of
of
services
services network
network oror service
service providers.
providers. Specific
Specific conditions
conditions are
are applicable
applicable for
for each
each type
type of
of network
network or
or service
service provider.
provider. The
The
The
The directive
directive specifies
specifies two
two three
three types
types are:
are:
types
types of
of integrated
integrated Providers
Providers of of Electronic
Communications Services
Services or
or Networks
Networks
authorizations
authorizations Providers
Providers of Public Electronic Communications Services or
of Public Electronic Communications Services or Networks
Networks
Providers
Providers of of Publicly
Publicly Available
Available Telephone
Telephone Services
Services or
or Public
Public Telephone
Telephone Networks
Networks
Definitions
Electronic
ElectronicCommunication
CommunicationService:
Service: Service
Servicenormally
normallyprovided
providedfor
forremuneration
remunerationwhich
whichconsists
consists
Electronic
ElectronicCommunication
CommunicationNetwork
Network ::Transmission
Transmissionsystems
systems andandwhere
whereapplicable,
applicable, switching
switchingoror wholly
whollyorormainly
mainlyin inthe
theconveyance
conveyanceof of signals
signals on
onElectronic
ElectronicCommunications
Communications Networks,
Networks,
routing
routing equipment
equipment andand other
otherresources,
resources, which
whichpermit
permit the
theconveyance
conveyanceof of signal
signal by
by::Wire,
Wire, Radio,
Radio, Including
Includingtelecommunications
telecommunicationsservices
services and
andtransmission
transmissionservices
servicesin innetworks
networks used
usedfor
for
Optical,
Optical, or
orother
otherelectromagnetic
electromagnetic ((satellite
satellitenetworks,
networks, fixed
fixed networks
networks (circuit-
(circuit-and
andpacket-switched,
packet-switched, broadcasting
broadcasting
including
includingInternet),
Internet),mobile
mobileterrestrial
terrestrial networks
networks and
andelectricity
electricitycable
cablesystems
systems to tothe
theextent
extent that
that they
they Excluding
Excludingservices
services providing,
providing, or
orexercising
exercisingeditorial
editorial control
control over,
over, content
content transmitted
transmittedusing
using
are
areused
usedforforthe
thepurpose
purpose ofof transmitting)
transmitting) Electronic
Communications Networks,
Networks, asas well
well as
asinformation
informationsociety
societyservices,
services,as
as defined
definedinin
Article
Article11of
of Directive
Directive98/34/EC,
98/34/EC, which
whichdo
donotnot consist
consistwholly
whollyorormainly
mainlyin
inthe
theconveyance
conveyanceofof
signals
signals on
onElectronic
Communications Networks
Networks
Source: EC; Ofcom

The new authorization regime includes 21 general conditions applicable
differently to three categories of providers
General Conditions Under UK Authorization Regime

Providers
Providersof
ofPublic
PublicECNs
ECNsand
and Providers
Providersof
ofPublicly
PubliclyAvailable
Available Telephone
Telephone
Condition
Condition (obligation
(obligationon
onthe
theauthorized
authorized entity)
entity) All
All Providers
Providersof
ofECNs
ECNsand
and ECSs
ECSs ECSs
ECSs Services
Servicesor
orPublic
PublicTelephone
TelephoneNetworks
Networks
11 General
General access
accessand
andInterconnection
Interconnectionobligations
obligations Partially
Partially Yes
Yes (network
(network providers)
providers) Yes
Yes (network
(network providers)
providers)
22 Standardization
Standardizationand
andspecified
specifiedinterfaces
interfaces Yes
Yes Yes
Yes Yes
Yes
33 Proper
Properand
and effective
effectivefunctioning
functioningof
of the
thenetwork
network Yes
Yes (excludes
(excludes mobile
mobilenetworks)
networks)
44 Emergency
Emergencycall
call numbers
numbers Yes
Yes
55 Emergency
Emergencyplanning
planning Yes
Yes
66 Public
Public pay
paytelephones
telephones Providers
Providers of
of public
public pay
paytelephones
telephones
77 Must
Must carry
carryobligations
obligations Providers
Providers of
of “Appropriate
“Appropriatenetworks”
networks”used
usedfor
forreceiving
receivingTV
TV
88 Operator
Operatorassistance,
assistance, directories
directories and
anddirectory
directoryenquiries
enquiries Yes
Yes
99 Requirement
Requirement to
tooffer
offercontracts
contracts with
withminimum
minimum terms
terms Yes
Yes Yes
Yes
10
10 Transparency
Transparencyand
andpublication
publicationof
of information
information Yes
Yes
11
11 Metering
Metering and
andbilling
billing Partially
Partially Yes
Yes (subject
(subjectin
inpart
part to
toturnover
turnoverthreshold)
threshold)
12
12 Itemized
Itemizedbills
bills Yes
Yes
13
13 Non-payment
Non-payment of
of bills
bills Yes
Yes (excludes
(excludes mobile
mobileservices)
services)
14
14 Codes
Codes of
of practice
practiceand
anddispute
disputeresolution
resolution Yes
Yes Yes
Yes
15
15 Special
Specialmeasures
measures for
forend
endusers
users with
withdisabilities
disabilities Yes
Yes
16
16 Provision
Provisionof
of additional
additional facilities
facilities Yes
Yes
17
17 Allocation,
Allocation, adoption
adoption and
anduse
useof
of telephone
telephonenumbers
numbers Yes
Yes Yes
Yes Yes
Yes
18
18 Number
Numberportability
portability Yes
Yes Yes
Yes Yes
Yes
19
19 Provision
Provisionof
of directory
directoryinformation
information Yes
Yes Yes
Yes Yes
Yes
20
20 Non
Nongeographic
geographic numbers
numbers Yes
Yes Yes
Yes Yes
Yes
21
21 Quality
Qualityof
of service
service Yes
Yes Yes
Yes
Source: Ofcom
Since the full opening of the UK mobile market in 1997, the growth in
subscribers has accelerated
Mobile Penetration in the UK (%, 1995 – 2004)
29%
CAGR 99%
MVNO 91%
Introduction 84%
77%
73%
Full
Competition 46%
25%
15%
10% 12%
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Source: ITU 2004; Merrill Lynch 2005

The UK mobile market is almost equally divided between four GSM operators
Mobile Operators Market Shares in the UK (%, 1999 – 2004)
2.7% 3G: 3 Hutchison

17.2%
25.7% T-Mobile
20.5%
23.5% Orange
29.1%
23.4% O2
33.2%
24.7% Vodafone UK
1999 2004
Source: Merrill Lynch 2005

Fixed line penetration has been steadily increasing in the last two decades
Fixed Line Penetration in the UK (%, 1980 - 2004)
CAGR 0.3%
CAGR 3% Full Competition in
1997
59% 58%
Competition in Fixed 57%
in 1982
50%
46%
43%
38%
35%
32%
1980 1983 1986 1989 1992 1995 1998 2001 2004
Source: ITU 2004; Ofcom 2005

In the UK telecommunications revenues represented 4.7% of GDP in 2002, a
clear indication of a fully liberalized market
Telecommunications Revenues in the UK

(USD Million, 2000 – 2002)
72,836
66,212 65,942
Full Competition 50,806
44,715
38,963
1997 1998 1999 2000 2001 2002
Source: ITU 2004

The mobile market in France was liberalized in 1989 and the fixed market
starting 1998
France’s Liberalization Experience

Timeline
Telecom
Telecom Act Act that
that
opens Loss
Loss of
of
opens all
all market
market incumbent
to incumbent
to competition
competition monopoly
starting monopoly on on
starting January
January Launch
Launch ofof
Launch
Launch ofof 1998
fixed
fixed voice
voice second
operations 1998 second local
local
operations of
of services
services
second Launch
Launch ofof third
third fixed
fixed voice
voice
second mobile
mobile mobile Launch
Launch ofof
operator mobile operator
operator operator
operator (branch
(branch
operator (SFR)
(SFR) (Bouygues
second
second long
long of
(Bouygues distance of Cegetel)
Cegetel)
Telecom) distance operator
operator
Telecom) (branch
(branch ofof
Creation
Creation of of Cegetel)
Cegetel Cegetel)
Cegetel
Sector
Sector Competition
Intensity Index
Index
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
Limited
Competition
Full Competition
End
End of of monopoly
monopoly
on Establishment
Establishment of
of EC
EC Regulation
Regulation
on all telecom
all telecom the
services the regulator
regulator on
on Local
Local Loop
Loop
services except
except (ART) Unbundling
for (ART) Unbundling
for fixed
fixed voice
voice
Sources: ART; Informa

Liberalization has created several regulatory issues, related in particular to
Local Loop Unbundling and interconnection
Regulatory Levers in France

Coverage
Coverage of
of blind
blind spots
spots
Sharing
Sharing of
of France
France Telecom
Telecom (FT)’s
(FT)’s local
local Spectrum
Local
Mobile
Mobile
Spectrum management and
management and GSM
GSM licenses
licenses
Local Loop
Loop network
network between
between FT FT and
and new
new operators
operators Telephony renewal
Unbundling Telephony renewal
Unbundling Issues:
Issues: Unbundling
Unbundling tariffs,
tariffs, colocation,
colocation, etc.
etc. Challenges
Challenges MVNO
MVNO regulation
regulation
Resale
Resale as
as an
an alternative
alternative toto unbundling
unbundling
Mobile
Mobile number
number portability
portability
Definition
Definition ofof dominant
dominant players
players obligations
obligations Combined

Combined phone,
phone, TV TV and
and Internet
Internet offers
offers
Inter- Interconnection
Interconnection tariffs
tariffs of
of dominant
dominant players
players Multiplay
Multiplay Competition
Inter- and

Competition dependent
dependent on on unbundling
unbundling
connection and their
their relationship
relationship to
to real
real costs
costs Offers
Offers Necessity
connection How to determine new operators Challenges

Necessity or
or not
not of
of developing
developing aa common
common
How to determine new operators Challenges regulatory
interconnection regulatory framework
framework
interconnection tariffs
tariffs (e.g.,
(e.g., reciprocity)
reciprocity)

Difficulty
Difficulty of
of Carrier
Carrier Preselection
Preselection
Call-by-call Definition
Definition of
of universal
universal service
service and
and

Call-by-call preselection as
preselection as aa temporary
temporary Universal
Universal mandatory
Fixed
Fixed solution Service mandatory services
services for
for operators
operators
solution Service
Telephony
Telephony Permanent Designation
Designation ofof universal
universal service
service operators
operators
Challenges

Permanent link link of
of clients
clients to
to FT
FT Obligation
Obligation National versus regional approach
Challenges Unfair National versus regional approach

Unfair customer
customer reacquisition
reacquisition practices
practices by
by FT
FT Challenges
Challenges
Number Portability Universal
Universal service
service funding
funding
Number Portability
Detailed in next slides

The impossibility of duplicating the local infrastructure has led to local loop
unbundling
Local Loop Unbundling in France
Development
Development ofof Telecom
Telecom Possible
Possible Forms
Forms of
of Unbundling
Unbundling
Infrastructures
Infrastructures in France
in France
Alternative
Alternative long
long distance
distance infrastructures
infrastructures were
were quickly
quickly
developed in France thanks to partnerships between
developed in France thanks to partnerships between
operators
operators and
and utilities
utilities companies:
companies:
Cegetel
Cegetel with
with SNCF
SNCF (railways
(railways company)
company) There
There are
are two
two unbundling
unbundling options:
options:
LDCom
LDCom and
and VNF
VNF (fluvial
(fluvial and
and maritime
maritime transportation)
transportation) Total
Total unbundling:
unbundling: FT FT shares
shares the
the entire
entire copper
copper line
line and
and
However,
However, thethe long
long distance
distance model
model was
was not
not replicable
replicable for
for the
the the final customer is managed solely by the new
the final customer is managed solely by the new entrant entrant
local
local loop
loop with
with no
no links
links with
with FT
FT
Sharing
Sharing local
local loop
loop with
with FT
FT was
was hence
hence necessary:
necessary: Shared
Shared unbundling:
unbundling: Internet
Internet dial-up
dial-up is
is managed
managed byby the
the
new
new entrant
entrant but
but the
the voice
voice traffic
traffic continues
continues to
to be
be
Sharing
Sharing local
local loop
loop civil
civil works
works did
did not
not happen
happen managed
managed byby France
France Telecom
Telecom
Local
Local loop
loop unbundling
unbundling was
was hence
hence the
the solution
solution
In
In parallel
parallel to
to local
local loop
loop unbundling
unbundling implementation,
implementation, an
an
alternative
alternative solution
solution waswas resale
resale of
of access
access
Local loop unbundling was difficult to implement, which led to the adoption of
alternative solutions
Local Loop Unbundling Difficulties
Difficulties
Difficulties in
in Implementing
Implementing Local
Local Loop
Loop Unbundling
Unbundling Alternative
Alternative Solutions
Solutions
Wholesale
Wholesale OfferOffer «« option
option 33 »» ::
Local
Local loop
loop unbundling
unbundling took
took aa long
long time:
time: Following
Following aa decision
decision by by the
the Competition
Competition Council,
Council, FT FT was
was
End
End of
of 2002,
2002, less
less than
than 1,000
1,000 lines
lines unbundled
unbundled (the
(the obliged
obliged to grant alternative operators virtual access to its
to grant alternative operators virtual access to its
readiness
readiness date
date was
was set
set to
to January
January 1,1, 2001)
2001) local
local loop,
loop, allowing
allowing them
them to to provide
provide ISPs
ISPs with
with aa competitive
competitive
access
access offer.
offer. New
New entrants
entrants could
could access
access FT FT network
network at at any
any
January
January 1,
1, 2004
2004 :: 273,255
273,255 lines
lines unbundled
unbundled technically feasible point, but they were billed as
technically feasible point, but they were billed as if they were if they were
Main
Main reasons
reasons for
for the
the delay:
delay: connected
connected to to the
the optimal
optimal point
point
Tariffing
Tariffing The
The ART
ART specified
specified the the pricing
pricing and
and technical
technical conditions
conditions forfor the
the
Technical
Technical difficulties
difficulties ADSL LLU offer as well and the consolidation
ADSL LLU offer as well and the consolidation of traffic at of traffic at
different
different stages
stages in in the
the local
local loop
loop
Anticompetitive
Anticompetitive behavior
behavior ofof the
the incumbent
incumbent (FT)
(FT)
Access
Access andand Carrier
Carrier Offer
Offer «« option
option 55 »» ::
The
The ART
ART has
has warned
warned FTFT atat several
several instances
instances
February
February 2000:
2000: The
The ARTART required
required thethe suspension
suspension of of FT’s
FT’s
On
On July
July 16,
16, 2001,
2001, FT
FT launched
launched new
new unbundling
unbundling tariffs
tariffs ADSL
ADSL offers
offers until
until alternative
alternative ISPs
ISPs are
are able
able to
to offer
offer the
the
On
On April
April 8,
8, 2002,
2002, ART
ART obliged
obliged FT FT to:
to: service
service
Provide
Provide colocation
colocation facilities
facilities to
to new
new entrants
entrants The
The ART
ART allowed
allowed newnew entrants
entrants to
to resell
resell FT’s
FT’s ADSL
ADSL offers
offers
Reduce
Reduce total
total and
and shared
shared unbundling
unbundling tariffs
tariffs FT
FT was
was compelled
compelled toto reduce
reduce its
its unbundling
unbundling tariffs
tariffs in
in July
July
In
In the
the meantime,
meantime, alternative
alternative solutions
solutions emerged
emerged 2000 and June 2001
2000 and June 2001
In
In June
June 2000,
2000, the
the ART
ART approved
approved FT’s
FT’s new
new offer
offer
Interconnection obligations apply to operators with significant market power
Interconnection Obligations
In
In France,
France, operators
operators with
with significant
significant market
market power
power (market
(market share
share >> 25%)
25%) were
were obliged
obliged to:
to:
Propose
Propose interconnection
interconnection tariffs
tariffs that
that reflect
reflect real
real costs
costs
Fulfill
Fulfill interconnection
interconnection demand
demand indiscriminately
indiscriminately
Propose
Propose an an interconnection
interconnection price
price list
list approved
approved by
by the
the ART,
ART, ifif they
they hold
hold market
market power
power in
in fixed
fixed and
and leased
leased
lines
lines services
services
Interconnection
Interconnection covers:
covers:
Interconnection
Interconnection ofof the
the different
different telecom
telecom networks
networks to
to allow
allow communication
communication between
between users
users from
from different
different
networks
networks
Offering
Offering of
of leased
leased lines
lines and
and access
access toto data
data operators
operators backbone
backbone
The
The main
main issue
issue of
of interconnection
interconnection was was the
the calculation
calculation of
of real
real costs
costs incurred
incurred by
by players
players with
with significant
significant market
market
power;
power; in
in particular,
particular, one
one key
key question
question is is what
what types
types of
of costs
costs toto include
include
The
The ART
ART doesdoes not
not have
have the
the right
right to
to impose
impose modifications
modifications onon FT’s
FT’s interconnection
interconnection price
price list
list (it
(it can
can either
either
approve
approve itit or
or not),
not), except
except inin case
case of of dispute
dispute resolution
resolution
The entry of Bouygues Telecom into the French mobile market increased
mobile penetration
Mobile Subscribers (1990 –2002) (in Thousands)
36,251
35,530
28,800
18,040
Entry of third
mobile operator 9,821
4,924
2,286
839 1,289
274 367 435 529
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002
Source: Informa
The entry of Bouygues Telecom into the French mobile market increased
mobile penetration
Mobile Operator Market Shares (1990-2002)
3%
17% 15% BYT
37%
35% SFR
83%
FT/
Orange
60%
49%
1990 1996 2002

Source: Informa
With competition in fixed voice services, FT lost one third of long distance
traffic
Fixed Line Market Shares in terms of Long Distance Traffic

(1998-2002) (In Minutes)
5%
FT Comments
Comments
36%
FT
FT kept
kept aa market
market
share
share close
close to
to 100%
100%
on the fixed access
on the fixed access
network
network
This
This is
is mainly
mainly duedue to
to
95%
local
local loop
loop unbundling
unbundling
difficulties
difficulties
Competitors On January
On January 1, 1, 2004,
2004,
64% only
only 273,255
273,255 lines
lines
were
were unbundled
unbundled
1998 2002
Source: ART, Espicom; OECD

Competition in the DSL market increased in 2002, which lead to a surge in
penetration
French DSL Market
DSL Market Shares DSL Subscribers

(2000-2003) (2000-2003)
(In Million)
10% 10% 10% 9% 6% 6%
17% 2.5037
29% 29%
34% 32%
38%
FT/ 2.039659
Wanadoo
1.77861
1.4178
94% 94% Other
90% 90% 90% 91%
83%
71% 71% 0.882043
66% 68%
62% 0.7308
0.587472
0.4304
0.257
0.177
0.068 0.096
Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
00 01 01 01 01 02 02 02 02 03 03 03
00 01 01 01 01 02 02 02 02 03 03 03
Source: Informa
Market liberalization lead to increased spending on telecom services, which
allowed the development of the French telecom market
Evolution of Telecom Spend

(€ per month, 1990-2001)
38
Comments
Comments
30
In
In spite
spite ofof fixed
fixed line
line
tariff
tariff reductions,
reductions,
household
household spend spend
23 remained
remained stable
stable duedue to:
to:
Price
Price elasticity
elasticity
15 Service
Service innovation
innovation
Mobile
Mobile and
and Internet
Internet
expenses
expenses werewere hence
hence
8
added
added to
to fixed
fixed
expenses
expenses without
without
reducing
reducing them
them
0
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
Fixed
Fixe Mobile Internet
Bahrain started liberalizing in 2002 and opened the telecom market to full
competition in 2004
Overview of the Bahraini Telecom Market Liberalization

Timeline Overview
Overview
Bahrain
Bahrain started
started itsits liberalization
liberalization inin 2002
2002 with
with the
the
Grant
Grant of
of second
second enactment
enactment ofof aa new
new telecommunications
telecommunications law law (law
(law 48
48 of
of
license
license to
to offer
offer mobile
mobile 2002)
services 2002) and
and the
the establishment
establishment of of the
the regulatory
authority
services
Grant
Grant of
of several
several Bahrain
Bahrain isis aa founding
founding member
member of
ofWTO,
WTO, therefore
therefore itit isis
licenses
licenses to
to offer
offer highly
highly committed
committed to toWTO
WTO requirements
requirements
value-added
value-added and and
Internet
Internet services
services July
July 1,
1, 2004
2004 marked
marked the
the full
full liberalization
liberalization date
date for
for the
the
Creation
Creation ofof Bahrain
Bahrain telecommunications
telecommunications sector
sector in in Bahrain
Bahrain
Internet
Internet Exchange
Exchange
Bahrain
Bahrain did
did not
not adopt
adopt anan integrated
integrated licensing
licensing regime
regime
but
but allows
allows entrants
entrants to
to acquire
acquire different
different licenses
licenses and
and
converge
converge
2002 2003 2004
Grant
Grant of of multiple
multiple
national
national fixed
fixed service
service
licenses
licenses
Grant
multiple
Enactment
Enactment of licenses
licenses forfor
of
international
Sector
Sector Competition
Intensity Index
Index
Telecom
Telecom Law
Law international services
services
Establishment
Establishment of
of TRA
TRA and
and international
international
facilities
facilities
Grant
multiple Limited
licenses
licenses forfor VSAT,
VSAT,
paging Competition
paging andand PAMR
PAMR Full Competition
Source: TRA Bahrain

Bahrain’s is the closest to a “Big Bang” liberalization, with TRA issuing 66
licenses between 2003 and 2005
Licenses Issued in Bahrain

TOTAL
TOTAL (2003-2005)
(2003-2005)
Individual
Individual Mobile
Mobile Telecommunications
Telecommunications License
License 22
Individual
Individual Paging
Paging Service
Service License
License 11
VSAT
VSAT License
License 77
International
International Telecommunications
Telecommunications Facility
Facility License
License (IFL)
(IFL) 77
International
Telecommunications Services
Services License
License (ISL)
(ISL) 13
13
Individual
Individual National
National Fixed
Fixed Service
Service License
License 22
Internet
Internet Service
Service Provider
Provider License
License (ISP)
(ISP) 99
Value
Value Added
Added Services
Services (VAS)
(VAS) “Class”
“Class” License
License 24
24
Bahrain
Bahrain Internet
Internet Exchange
Exchange License
License 11
Note: Number of licenses include licenses issued to the incumbent (Batelco)

66
66
Source: TRA Bahrain (May 2005)
Licensing in Bahrain includes nine different types of licenses and restrictions
apply on technologies that require radio frequencies
Types of Licenses in Bahrain

License
License Description
Description
This
This license
license allows
allows provision
provision of
of mobile
mobile Telecommunications
Telecommunications service
service by
by its
its own
own network
network
Mobile 22 licenses granted to Batelco and MTC-Vodafone.
licenses granted to Batelco and MTC-Vodafone.
Mobile Telecommunications
Telecommunications License
License
No
No further
further licenses
licenses are
are currently
currently available
available
This
This license
license allows
allows the
the commercial
commercial use
use of
of paging
paging services
services to
to subscribers
subscribers
Paging
Paging Service
Service License
License
This
This license
license grants
grants the
the use
use of
of Very
Very Small
Small Aperture
Aperture Terminal,
Terminal, aa digital
digital satellite
satellite data
data network
License
network
of License
VSAT
VSAT License
License with
with small
small antenna
antenna diameter,
diameter, for
for private
private use
use only
only
Public
Public Access
Access Mobile
Mobile Radio
Radio Service
Service This
This license
license allows
allows the
the use
use of
of Public
Public Access
Access Mobile
Mobile Radio
Radio in
in dispatch
dispatch applications
applications
Number of
License
License
on Number
International This
This license
license authorizes
authorizes the
the termination/
termination/ landing/
landing/ establishment
establishment of
of international
international connectivity
connectivity
Telecommunications
Facility License and obligation and right to connect to other Bahrain licensed networks
and obligation and right to connect to other Bahrain licensed networks
Facility License
Restriction on
International
Telecommunications This
This license
license allows
allows the
the provision
provision of
of international
international voice
voice and
and data
data services
services with
with requirement
requirement to
to
deploy
deploy physical
physical traffic
traffic aggregation
aggregation structure
structure
No Restriction
Service
Service License
License
This
This license
license allows
allows the
the provision
provision of
of national
national fixed
fixed voice
voice and
and data
data services
services by
by its
its own
own network
network
National
National Fixed
Fixed Services
Services License
License
This
This license
license allows
allows the
the provision
provision of
of internet
internet services
services excluding
excluding voice
voice
Internet
Internet Service
Service Provider
Provider License
No
License
This
This license
license allows
allows the
the provision
provision of
of services
services over
over an
an exiting
exiting network
network (e.g.
(e.g. calling
calling cards)
cards)
Value
Value Added
Added Services
Services License
License
Source: TRA Bahrain

Bahrain registered a 42% growth in mobile penetration in the year following
competition, a marked increase on the historical trend
Mobile Penetration in Bahrain

(%, 1999 – 2004)
Competition
Introduction
42%
91%
CAGR
35% 64%
58%
46%
32%
20%
1999 2000 2001 2002 2003 2004
Source: Arab Advisors Group (2005)

MTC Vodafone is steadily increasing its market share by attracting a larger
percentage of new subscribers
Mobile Market Shares (in %) (2001 – Q1 2005)
1%
16% 20%
MTC Vodafone
99%
84% 80%
Batelco
2003 2004 Q1 2005

Fixed line penetration is rather stable in Bahrain but has witnessed a slight
increase in 2004 in anticipation of competition
Fixed Line Penetration in Bahrain

(in % of Population) (1999 – 2004)
Market
Liberalization
29%
27% 27% 27%
26%
25%
1999 2000 2001 2002 2003 2004

Telecom revenues show an increasing trend which confirms that liberalization
will positively impact the sector’s performance
Telecommunications Revenues in Bahrain

(in USD ‘000s) (1999 – 2004)
CAGR
(1999-2004)
553,933 9%
505,260
488,940
448,970
387,660
364,400
1999 2000 2001 2002 2003 2004*
Note: 2004 GDP figure is estimated to be USD 11.29 Billion

(*) 2004 revenues are an estimate
Source: ITU 2004; Arab Advisors Group (2005)
Several conclusions can be drawn from the international experience in
liberalization
Main Conclusions from International Liberalization Experiences
Conclusions
Conclusions
Countries Framework
Algeria Liberalization The

The later
later the
the liberalization
liberalization

Algeria
timeline
Egypt License process
process starts,
starts, the
the less
less time
time itit is
is

Egypt
License features
features

Chile
Chile
Sector
Sector competition
competition
likely to take
likely to take
High-
High-
Hungary
Hungary intensity
intensity index
index Licenses
Licenses are are more
more likely
likely to to be
be
level
level
Pakistan
Pakistan “converged” as the
“converged” as the market market
case
case
India
India becomes
becomes more more competitive
competitive and and
studies
studies countries
countries are are moving
moving towards
towards
converged
converged licensing
licensing
The
The move
move to to an
an open
open licensing
licensing
regime and full competition
regime and full competition
requires
requires aa market
market structure
structure that that

Malaysia
Malaysia
Liberalization
timeline is
is at
at least
least moderately
moderately

Morocco
Morocco
License features
License features competitive
competitive with with aa multiplicity
multiplicity of of

Jordan
Jordan
Sector
Sector competition
competition viable
viable service
service providers
providers
Detailed
Detailed
Singapore
Singapore intensity
intensity index
index The
The move
move to to full
full competition
competition

UK
UK
Regulatory
framework also
case
case also requires
requires an an effective
effective
studies
France
France
Market
Market data
data regulatory
studies regulatory regime
regime

Bahrain
Bahrain
Subscriber
Subscriber data
data
Revenue data Competition leads
Competition leads toto lower
lower
Revenue data prices,
prices, increases
increases access
access to to
telecom services, and
telecom services, and positivelypositively
impacts
impacts sector
sector turnover
turnover

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June 21 2005

Liberalization Strategy for Saudi

II. Liberalization Enablers

III. International Liberalization Experience

B. Saudi ICT Market Assessment

II. International Liberalization Experience

Review of ICT Investment Environment in Saudi Arabia

Net Change In Fixed Capital Formation By The Non-oil Private Sector

Oil barrel price $US

1998 1999 2000 2001 2002 2003 2004

Investment Laws in Saudi Arabia

Foreign Direct Investments in Saudi Arabia

FDI Inflows FDI Inflows in 2003

5,000 140% 129%

3,000 New Investment Law 100%

2,000 80% 72%

Saudi Public Agencies Overseeing Investments In The ICT Sector

Ranking of Selected ICT Investment Related Indexes

Finland 8.9 1 Korea 44%

Australia 7.2 10 Saudi Arabia 2%

Saudi Arabia 4.4 37

Saudi ICT Market

Source: IDC (2003) Source: Digital Planet 2003, IDC (2003)

Strengths and Weaknesses of Saudi ICT Industry Components

Overview of Saudi Hardware Market

Source: Arab Advisors / Connexus Survey(2005), Zawya.com (2005)

India Jordan KSA (Saudi) US KSA Egypt Jordan

Budget = SR 600 million

Source: Arab Advisors / Connexus Survey(2005)

Malaysia US Tunisia Jordan Saudi Korea Saudi Arab. Egypt Jordan

22 Saudi IT Services Market Landscape

Source: IDC (2003)

22 Opportunities In The IT Services Sub-sectors

Source: IDC (2003)

22 Saudi Companies Software Development Needs

Outsourced ERP 2.2%

Source: Arab Advisors / Connexus Survey of 500 companies, 2005

Source: Madar Research (2004))

22 E-Commerce in Saudi Arabia

22 Internet Content in Saudi Arabia

Preferred Language on the Internet

Source: Arab Advisors / Connexus Survey of 1037 individuals, 2005

22 Content Business Opportunities

National Innovation System

Weak Funding New Technology

Selected Recommendations for the Saudi National Innovation System

B. Saudi ICT Market Assessment

II. International Liberalization Experience

Saudi Market Assessment

STC Fixed Line Subscription and Penetration (2000 – 2004)

Fixed Line Subscribers (000s) Penetration (%)

Source: STC; Arab Advisors Group

Fixed Line Penetration (%) (2004)

Tariffs for Residential Fixed Line Subscription and Connection (US$)

Residential Monthly Residential Connection

Source: Arab Advisors Group ; * ITU data(2004)

Tariffs for Business Fixed Line Subscription and Connection (US$)

Business Monthly Business Connection

Source: Arab Advisors Group ; * ITU data(2004)

Revenue per Line (SR) Revenues (SR billions)

2002 2003 2004 2002 2003 2004

Source: ITU, Arab Advisors Group