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

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

A Regional Comparison Algeria 6.2% 1.4% Bahrain 24.4% 54.3% Egypt Country PSTN % GSM % Internet (Accounts) % Algeria 6.2% 1.4% 0.2% Bahrain 24.4% 54.3% 7.4% Egypt 11.4% 6.6% 0.3% Jordan 12.7% 22.4% 1.3% Kuwait 21.3% 57.7% 9.5% Lebanon 20.9% 3.9% Morocco 3.4% 20.8% Oman 10.2% 16.5% 2.5% Qatar 28.5% 43.0% 3.2% Saudi Arabia 15.1% 22.8% 2.6% Syria 11.9% 2.3% 0.4% Tunisia 11.7% 5.5% 0.8% UAE 29.1% 64.7% 8.3% *Figures by end of 2002 Source: Arab Advisors Group’s Reports

PSTN Penetration (%)

GSM Penetration (%)

Internet Accounts Penetration (%)

A Regional Comparison Country PSTN ARPU $ GSM ARPU $ Internet ARPU $ Algeria 12 64 Bahrain 71 46 45 Egypt 15 22 8 Jordan 30 Kuwait 65 54 48 Lebanon 52 75 20 Morocco 36 14 Qatar 120 102 Saudi Arabia 73 Syria 16 70 13 Tunisia 33 42 UAE 56 51 31 ** Figures by end of 2002 Source: Arab Advisors Group’s Reports

Regional GSM Subscriber Mix Operator/Country Postpaid % Prepaid % Space Tel -Syria 100% 0% Syria Tel - Syria STC – Saudi Arabia 57% 43% Q-TEL - Qatar 49% 51% MTC Vodafone - Kuwait 41% 59% Orascom Telecom Algeria 33% (March 2003) 67% (March 2003) Fastlink – Jordan 30% 70% Batelco – Bahrain 22% 78% MobiNil - Egypt 20% 80% MobileCom - Jordan Tunisie Telecom (Tunicell) Vodafone Egypt 16% (March 2003) 84% (March 2003) MediTel - Morocco 7% 93% Wataniya - Kuwait 6% 94% Jawwal - Palestine ** Figures by end of 2002 unless indicated otherwise Source: Arab Advisors Group’s Report “A KPI Scorecard of Arab Telecom Operators” – June 2003

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

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

Global Internet Use Status

Mobiles and Mainlines Bahrain, Kuwait, Morocco and UAE in 2000 When Mobiles exceeded / will exceed PSTN lines: Bahrain, Kuwait, Morocco and UAE in 2000 Jordan, Lebanon, Oman and Qatar in 2001 Saudi Arabia in 2002 Tunisia, expected in 2003 Algeria, expected in 2004 Syria, expected in 2007 Egypt’s PSTN subscribers are expected to continue exceeding mobile subscribers throughout the coming four years Source: Arab Advisors Group’s “A Comparative Analysis of the Cellular and Mainlines Markets in the Arab World” – October 2002 Source: Operators, Arab Advisors Group

Mainlines Market Share Index Country % Share of the Population % Share of PSTN Market Index* Algeria 15.90% 9.30% 0.58 Bahrain 0.36% 0.84% 2.31 Egypt 34.40% 36.96% 1.07 Jordan 2.69% 3.22% 1.20 Kuwait 1.14% 2.30% 2.01 Lebanon 1.93% 3.82% 1.98 Morocco 15.06% 4.89% 0.32 Oman 1.35% 1.31% 0.97 Qatar 0.31% 2.70 Saudi 11.10% 15.82% 1.43 Syria 8.91% 10.01% 1.12 Tunisia 4.95% 5.47% 1.11 UAE 1.89% 5.22% 2.76 ** Figures by end of 2002 Index= % Share of PSTN Market/% Share of Population Source: Arab Advisors Group’s Reports

Cellular Market Share Index Country % Share of the Population % Share of GSM Market Index* Algeria 15.90% 1.86% 0.1 Bahrain 0.36% 1.63% 4.5 Egypt 34.40% 18.82% 0.5 Jordan 2.69% 4.98% 1.9 Kuwait 1.14% 5.46% 4.8 Lebanon 1.93% 3.34% 1.7 Morocco 15.06% 25.91% Oman 1.35% 1.4 Qatar 0.31% 1.12% 3.6 Saudi 11.10% 20.93% Syria 8.91% 1.67% 0.2 Tunisia 4.95% 2.27% UAE 1.89% 10.15% 5.4 ** Figures by end of 2002 Index= % Share of GSM Market/% Share of Population Source: Arab Advisors Group’s Reports

Arab Advisors IVCU Index Country IVCU* Index % Share of Circuits % share of minutes Kuwait 0.63 4.5% 7.1% Saudi Arabia 0.87 29.6% 33.9% UAE 1.12 23.4% 20.9% Oman 0.98 3.9% 4.0% Jordan 2.05 6.5% 3.2% Syria 2.68 7.2% 2.7% Lebanon 0.44 5.3% 12.1% Egypt 1.28 16.4% 12.8% A total of 64.1 K circuits and 5.38 billion minutes * International Voice Circuits Utilization (IVCU) Index. Source: Arab Advisors - International Connectivity in the Arab World

Advanced Services Availability Operator / Country GPRS MMS Algerie Telecom Mobile No Batelco – Bahrain Yes MobiNil - Egypt Vodafone Egypt - Egypt Fastlink - Jordan MobileCom - Jordan Wataniya – Kuwait MTC Vodafone – Kuwait Cellis - Lebanon LibanCell - Lebanon Maroc Telecom Qatar – Q-Tel Saudi Arabia - STC SyriaTel - Syria Tunisie Telecom -Tunisia Tunisiana - Tunisia UAE – Etisalat

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

Regional Internet Bandwidth Capacity Index Country Accounts % share of Accounts Internet Bandwidth Capacity % share of bandwidth Regional bandwidth index+ Egypt 220,000 14.16% 645 18.90% 1.33 Jordan 71,000 4.57% 225 6.59% 1.44 Lebanon 150,000 9.66% 135 3.96% 0.41 Morocco 60,000 3.86% 310 9.08% 2.35 Oman 66,000 4.25% 197 5.77% 1.36 Qatar 20,000 1.29% 155 4.54% 3.53 Saudi Arabia 581,200 37.42% 0.51 Syria 75,000 4.83% 16 0.47% 0.1 UAE 310,000 19.96% 1,085 31.79% 1.59 Source: ArabAdvisors Group

Regional Utilized Internet Bandwidth Index Country Accounts % Share of Accounts Internet Bandwidth Capacity % Share of Bandwidth Regional Bandwidth Index+ Egypt 220,000 14.73% 450 21.70% 1.47 Jordan 71,000 4.75% 90 4.34% 0.91 Lebanon 150,000 10.05% 60 2.89% 0.29 Morocco 60,000 4.42% 38 1.83% 0.41 Oman 66,000 1.34% 1.37 Qatar 20,000 38.92% 297 14.32% 0.37 Saudi Arabia 581,200 5.02% 16 0.77% 0.15 Syria 75,000 20.76% 1,085 52.31% 2.52 UAE 310,000 Source: ArabAdvisors Group

Competition in the Region? Country PSTN GSM Internet Datacomm Kuwait Monopoly Duopoly Competitive Saudi Arabia Qatar Bahrain Monopoly* UAE Oman Jordan Syria Controlled Duopoly Lebanon Egypt Morocco Libya Algeria Tunisia Source: Arab Advisors Group’s Reports

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

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

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

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

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

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

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

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

Global Telecom Operators in the MENA Region Foreign Investor Investment in Ownership Country Cable & Wireless Batelco 20% Bahrain Vodafone Vodafone- Egypt 67% Egypt France Telecom Jordan Telecom 31% Jordan Orange ECMS-MobiNil 36.3% of ECMS 71.25% of MobiNil Vivendi Universal Marco Telecom 35% Morocco Telefonica MediTel 30.5% Portugal Telecom

Regional Operators Operator Shareholder in Country of Operation Orascom Telecom Holding – Egypt MobiNil Mobilink Orascom Telecom Algeria Orascom Telecom Tunisia Telecel Libertis Tchad Moile Egypt Pakistan Algeria Tunisia Africa Congo Brazzavile Chad Batelco – Bahrain QualityNet WLL Soficom Communications SAE Batelco Jordan Batelco Jeraisy company Ltd Kuwait Jordan Saudi Arabia

Regional Operators Operator Shareholder in Country of Operation Wataniya -Kuwait Orascom Telecom Tunisia Tunisia MTC Vodafone – Kuwait Thuraya Satellite System Fastlink International Jordan Maroc Telecom - Morocco Mauritel Mauritania Etisalat - UAE Sudatel

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

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

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