A New Era for Telecommunications in Lebanon Dr. Kamal Shehadi Chairman & CEO Telecommunication Regulatory Authority Lebanese German Business Council -September 16, 2008
Click to edit Master title style Table of Contents I. The Benefits of Liberalization II. The Urgent Need for Reform III. TRA Vision and Roadmap IV. The Way Forward 2
The GoL, recognizing the need for reform, has committed to open the telecommunications sector to competition and has recognized it as an Click to edit Master title style important lever for economic development � “… there is a need to reduce the cost of production resulting mainly from unreliable supply of electricity, the high cost of telecommunication …” International Conference for � “The Government of Lebanon will implement reforms in order to improve Support to competitiveness and reduce the cost of doing business in Lebanon…” Lebanon” - Paris III � “The government will seek a greater private sector role in sectors such as Conference telecommunications…” � (§56 ) إ نزاﻮﺘﻤﻟا ءﺎﻤﻧﻹا ﺰﻳﺰﻌﺗ ﻲﻓ ﻢﻬﺴﻳ ﻮهو ﻲﻨﻃﻮﻟا دﺎﺼﺘﻗﻼﻟ ﻲﺳﺎﺳأ كّﺮﺤﻣ ﻮه تﻻﺎﺼﺗﻻا عﺎﻄﻗ ن . نﺎﻨﺒﻟو ﺔﻣﻮﻜﺤﻠﻟ يرازﻮﻟا نﺎﻴﺒﻟا 2008 ﺔﻴﻤﻟﺎﻌﻟا تﻻﺎﺼﺗﻻا ةرﻮﺛ ﺔﺒآاﻮﻣ ﻞﺟأ ﻦﻣ ﺔﻴﺗﺎﻣﻮﻠﻌﻤﻟا ﻊﻤﺘﺠﻣ ءﺎﻨﺑ ﻰﻟإ فﺪﻬﺗ عﺎﻄﻘﻟا اﺬﻬﻟ ﺔﻳؤر ﻢﻳﺪﻘﺗ ﻰﻠﻋ ﻞﻤﻌﻳ داﺆﻓ ﺲﻴﺋﺮﻟاﺔﻟود ﺔﻣﻮﻜﺣ ﺎﻬﺗدﺎﻳرو تارﺎﻤﺜﺘﺳﻻ قﻮﺴﻟا ﺢﺘﻓو تﻻﺎﺼﺗﻻا عﺎﻄﻗ ﺮﻳﺮﺤﺘﺑ قﺎﻴﺴﻟا اﺬه ﻲﻓ مﺰﺘﻠﺗ ﺔﻴﻧﺎﻨﺒﻠﻟا ﺔﻣﻮﻜﺤﻟاو ،ﺔﻘﻄﻨﻤﻟا ﻲﻓ ةرﻮﻴﻨﺴﻟا قﻮﻘﺣ ﺔﻳﺎﻤﺣو ﺔﺴﻓﺎﻨﻤﻟاو صﺎﺨﻟا عﺎﻄﻘﻟا ﻚﻠﻬﺘﺴﻤﻟا . � The TRA is charged with promoting competition in telecommunications (Telecommunications Law, Art. 5.1(C)). Telecommunications � The Law provided for the liberalization of the telecommunications market by Law 431 / 2002 privatizing state-owned telecommunications entities and opening the market to private sector investments and competition. GoL Governmental Declarations in 2005 and 2008 commit the CoM to the liberalization of telecommunications 3
The Telecommunications Law 431 requires the creation of a proper Click to edit Master title style structure for a competitive telecommunications market Before Telecom Law 431 After Telecom Law 431 Ministry of MoT TRA 3 Telecommunications 1 Policymaker Regulator � Set the general guidelines for � Draft and implement regulations telecom policy Policymaker Regulator � Award telecom licenses � Recommend to CoM the award of some broadband licenses � Ensure competition and prevent ( Mobile, int’ll voice & fixed) Operators anti-competitive behavior Review and propose to CoM the � � Manage on behalf of GoL radio pricing of Radio Frequency frequencies � Approve TRA budget & other � MoT: policymaker, regulator and TRA documents as per Law 431 service provider Operators 2 � CoM: Arbitrary regulatory role Incumbents & New Entrants (e.g. issuing all licenses) � Provide telecom services to the public � No formal regulatory regime � Install own and manage telecom networks and facilities � Abide by TRA regulations, decisions and licenses 4
There is a wide range of benefits stemming from Liberalization Click to edit Master title style Benefits the Customer � Increase service penetration � Increase customer choice � Improve price to quality ratio � Introduce new technologies and services � Reach underserved areas Benefits the Telecommunications Industry � Keep up with technological advances � Introduce good governance and management � Ensure more effective infrastructure � Improve sector productivity � Improve financial performance � Increase overall telecom revenues � Attract private and foreign capital � Improve connectivity and penetration of ICT Benefits the Economy � Generate revenues from privatization � Generate revenues from licenses � Spur job creation throughout the economy � Join international trade organizations (e.g. WTO) � Join the global trading system (e.g. EU association) � Catalyze growth of information economy � Improve global competitiveness of the economy � Improve general economic performance 5
Liberalization has led to higher penetration of mobile services and lower Click to edit Master title style prices in India… Fixed Mobile Cellular WLL(M) Cellular Mobile Growth and effective charge per minute Mobile Subscriber base Lowering of ADC from 16 50 30% to 10% of sector revenue NTP '99 45 14 CPP 43 Mobile subscriber base (in Million) 40 Effective charge (in Rupee. per min.) introduced Telecom 12 Tariff Order 35 10 30 3rd & 4th WLL cellular introduced 8 25 operator 20 6 15 4 10 2 5 0.44 0 0 0 Mar-98 Mar-99 Mar-00 Mar-01 Mar-02 Mar-03 Mar-04 Jun-04 Sep-04 Source: OECD Communications Outlook 2005 6
Click to edit Master title style …and Jordan 1 2 Evolution of Lowest Mobile Peak Minute Rate Evolution of Mobile Penetration In Jordan Umniah Xpress Mobilecom Fastlink 70 120 60 Penetration Rate 100 50 80 40 Year competition 30 60 introduced in concerned markets, 20 40 2004 for Qtel 10 20 0 0 y-3 y-2 y-1 y 0 y+1 y+2 Year Batelco STC Fastlink Qtel In Jordan, a country with comparable population and Prices start decreasing prior to competition in a move to size but much lower per capita income, liberalization prepare for the entry of a new operator. and licensing of new mobile operators met with jumps in As a result of competition prices tend to continue mobile penetration. Real benefits were realized after the decreasing after liberalization unless capped by the introduction of the third and fourth mobile operators regulator Sources: Tarifica, Operators, Booz Allen and Hamilton, Global Investment House, World Bank 7
International experience shows that countries with a liberalized telecommunications Click to edit Master title style sector have proven to be more technologically advanced, offering more choices and better access to their customers The map shows networks commercially launched as of May 2007. For some countries where more than one technology has been commercially deployed, the most advanced technology is represented. 2G = Second-generation wireless telephone technology CDMA2000 1x = Code Division Multiple Access CDMA2000 1x EV-DO = Code Division Multiple Access Evolution- Data Optimized WCDMA = Wideband Code Division Multiple Access HSDPA= High-Speed Downlink Packet Access 8 Source: ITU, based on data adapted from 3Gtoday
In Bahrain, liberalization has resulted in providing the consumer with a Click to edit Master title style wide choice of services National Operator Name Internati Internet Leased services onal C Mobile Other Fixed data alls Line 2 Connect • • • • • Anis • Batelco • • • • • • BT Solutions Ltd. • Business Communications Networks • Etisalcom • • • • • Fakhro IT Services • Fastelco (TeleGulf) • Kalaam Telecom • • • • • • • • • • Light Speed Mena Telecom • • Northstar • • • • • • Nuetel Communications Orbit • • Viacloud • Zain (Bahrain) • • • • 9 Total 7 15 2 10 6 6
Click to edit Master title style Liberalization also led to improved telco performance… Effect of Liberalization on the Telecommunications Industry Enterprise employment growth +1.2% Sales growth +3.4% Profitability +5.1% Investment rate +2.5% Re-Investment rate +6.0% Total factor productivity +1.0% Worldwide, Telecom liberalization has positively impacted sector performance and the penetration of key services. A 2006 World Bank study demonstrates how greater ICT use in enterprises results in an improvement of performance 10 Sources: Petrazzini, World Bank
Click to edit Master title style … and improved productivity of firms in different sectors Manufacturing ( 10 EU countries) Services ( 10 EU countries) 140 140 120 120 Labour (Hourly) Productivity Labour (Hourly) Productivity 100 100 80 80 60 60 40 40 20 20 0 0 0 20 40 60 80 100 0 20 40 60 80 100 % of workers with access to broadband % of workers with access to broadband 11 Source: EU 6th framework program EUKLEMS 2008
Liberalization has also contributed to the growth of telecom revenues Click to edit Master title style as share of GDP Telecom Service Revenue as a % of GDP Telecom Service Revenues in US $ Billion 6 1,472 1600 5 1400 4 1200 1000 3 800 517 600 2 400 1 200 0 0 1994 1996 1998 2000 2002 2004 2006 1995 1998 2000 2002 2004 Africa Asia Oceania Americas Europe World Source: ITU World Telecommunication/ ICT Indicators Database 12
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