capstone keynote

8/9/2019 Capstone Keynote

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Friday, May 14, 2010


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IntroductionU.S. firms are the most a!ressive players in this global game: Five ofthe world s top ten telecom firms are based in the United States--andthey are growing like kudzu in every corner of the globe.

-Gary Hu

"auer, Institute for International Economics

(2000

)

Background | Country Cases | Recommendations

Zain | China Mobile | Vodafone | ChinaUnicorn | Telefonica | America Movil | France

Telecom | Airtel |AT&T | Verizon Comm |NTT Docomo- March 2010 Economic Times*

(ordered by revenue and number of subscribers)

*http:// economictimes.indiatimes.com/articleshowpics/5721428.cms



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Background

Background | Country Cases | RecommendationsSource: Bureau of Economic Analysis, International Transactions AccountFriday, May 14, 2010


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For the non-technical audienceTelecom Market Segmentation

Network(used to provide

services)

local

mobileinfrastructure

fixedinfrastructure

domestic longdistance

Intllong distance

Competition can be introduced in one orboth segments of the market.1.At the Service Provisionand NetworkOperator level

2.At a Service Provider level (differentproviders using the same network)

In addition to WTO Commitments,

efective competition as observedfrom actual policy can be gauged by lookingat how many players are in each marketsegment and their relative market share.


1

2

data services/Internet



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Country Cases: Market Openness Indicator


0

0.75

1.5

2.25

3

FixedNetwork

sMobile

Networks

Pro-Comp.Re

g. &IndRegu

latorOpenn

esstoFDI

Utilizing the market openness indicator, we canview progress by analyzingspecific aspects ofthe market environment and in so doinginfer whicheconomicissues(as in the case of Egypt)contribute to market accessbarriers

as well as actionable recommendations to help move liberalization forward.

EGY: Limited Degree of Openness JOR: Full Market Openness QAT: Limited Market Openness

EGY JOR QAT

Restricted Market Access: Score 3Limited Market Openness: 3< Score5.5Moderate Market Openness: 5.5


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Country Cases:Formal Trade Agreements with

the United States


Formal Trade Ag eements and Year Negoti ted

EGY JOR QAT

U.S. Bilateral InvestmentTreaty(BIT)

Signed 1996,Effective 1992

Signed 1986,Effective 2003

U.S. Trade and InvestmentFramework Agreement

(TIFA) 1999 2004

U.S. Free Trade Agreement(FTA)

2001 near future?



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Country Cases:

Egypt |'12 Relevant Demographics:

Population79mnlargest in theArab world, although 34.8% of

the population is dependent.(underemployment, 25%ofpopulation under 15 yrs.)

Unemployment has hoveredaround 9.26%.

Phase II of Liberalization:Competition at the NetworkOperator Level (currently a state-owned monopoly-- Telecom Egypt)

faces 2 major issues:


1. Political hesitance due tosensitivity regarding

employment.

2. Lack of transparency inregulation of mobile markethas created investoruncertainty, and theperception of increasing risk.

Transparency Ranking*: 111th(of 180).

* Transparency Internationals 2009 Corruption Perceptions Index



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Country Cases:

Mobile Market Segment-

Egypt


Etisalat Misr

14%

Vodafone

41%

Mobinil45%

Egypt Orascom Telecom29%

France Telekom71%

Mobinil Telecom Egypt45%

U.K.55%

Vodafone

United Arab Emirates100%

Etisalat Misr



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Country Cases:Network Provision Segment

(Fixed Line Telephony)- Egypt


Individual Investors20%

State of Egypt80%

Market Openness Liberalization delayed since 2004, most

recently due to global crisis

Quality ADSL technology in use, quality is a major

concern, advertised 8Mbps download speeds,user experience is typically much less

Opaque regulatory system Ban on VoIP to preserve revenues for monopoly

TE(only on mobile networks

)

Pricing Broadband sharing prevalent to allow average

consumers to split high costs of service

Telecom Egypt (TE)



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Country Cases:

Qatar |'34


Relevant Demographics:

Changes in oil prices have aprofound impactsonthe

economy. Predicted share ofGDP from gas and oil is


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Country Cases:


Qatar


Vodafone Qatar14%

Qtel86%

Others22%

Abu Dhabi Invstmt

10%

Other govt13%

Govt

55%

Qatar Telecom (Qtel)

other Qatari Inst.15%

Qatari Publ. Shrhldrs

40%

Qatar Foundatn22%

Vodafone Grp23%

Vodafone Qatar



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(Fixed Line Telephony)- Qatar


Public Shareholders45% Qatari Govt

55%

Qatar Telecom(QTel)

Liberalization

Shares for QTel listed on Intl StockExchanges, the govt retains majorityshare.

Market Openness

Foreign ownership restrictions, up to49% allowed. Reports suggest that thiswill change in the near future.

VSAT Licenses will be allowedunrestricted, providing direct internetaccess via satellite bypassing networkinfrastructure

Consistent delays in providingmobilelicense to new entrant Vodafone--2009license slated to be issued for VodafoneQatar in fixed line services

Independent Regulator

The presence ofIctQATAR, telecomsregulator has notsufciently separated

policy-making,regulation and operation.

Qatari govt issued newlawto increasemarketliberalization



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Country Cases:

Jordan | $ Relevant Demographics:

Population79mnlargest in theArab world, although 34.8% of

the population is dependent.(underemployment, 25%ofpopulation under 15 yrs.)

Unemployment has hoveredaround 9.26%.

Phase II of Liberalization:Competition at the NetworkOperator Level (currently a state-owned monopoly-- Telecom Egypt)

faces 2 major issues:


1. Political hesitance due tosensitivity regarding

employment.

2. Lack of transparency inregulation of mobile markethas created investoruncertainty, and theperception of increasing risk.

Transparency Ranking*: 111th(of 180).

* Transparency Internationals 2009 Corruption Perceptions Index



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Country Cases:


Jordan


Xpress

3%Umniah26%

Orange28%

Zain43%

Orascom Telecom (EGY)4%

MTC Grp (Kuwait)97%

Zain

Industrial Investors33%

France Telecom51%

Jordanian Govt16%

Orange

Jordan Universities

4%

Batleco (Bahrain)96%

Umniah

Pvt Investors (SAUD)

50%

Pvt Investors (JOD)50%

Xpress



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(Fixed Line Telephony)- Jordan


Batelco29%

Orange28%

Zain43%

Relevant Demographics:

In 2009unemployment was on therise/Introduction of new technologiesunaffordable due to (high poverty)

Economy is dependent on USAID

Lowavailability ofcapitalto extendhardware uptake programs

Healthy competition in Broadband,introduction of VoIP, ISPs, &

WiMAX services



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Recommendations

Aimed at existing trade relationships:

Utilize BIT and TIFAs to negotiate specific conditions fortelecommunications trade making sure to:

Build upon the private-public partnership model exemplifiedby Vodafone in its services trade with the Middle East.

Including an obligation to share information and experience (acondition that was not carried out under the US-Jordan FTA).

Adding language to extend the soft text in US-Jordan FTA toincrease economic benefits for Jordan.

Amend BIT and TIFAs in the case of Egypt and Qatar, includetelecommunications specific section, similar to e-commerceprovisions in the US-Jordan FTA (Article 7). Creatingduty-freecyberspace.

Background | Country Cases | RecommendationsFriday, May 14, 2010


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Recommendations


Implications:

Technical assistance obligations in U.S. trade agreements, would

not present a threat to U.S. trade in telecom globally but it mayrepresent an important economic incentive for Egypt and Jordan,encouraging them to move toward market openness, political.

U.S. Side Advantages: Increase in U.S. cross-border trade in serviceswith Qatar and Egypt Jordan, commercial presence and FDI.

Foreign Side Advantages: Access to U.S. market, potential source ofincome will help to increase consumer confidence economies anddecrease investment riskfor U.S. firms, stimulatinginterest innetwork infrastructure.



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What are your questions?

We have 10 minutes of Q&A, so make it good!



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Primary Sources

Bureau of Economic Analysis, International Transactions Accounts

U.S. Census Bureau, Data on U.S. Trade

USTR

WTO

Business Monitor International, 2010 Reports on Telecommunications Regulation Q2 2010

Global Information Technology Report, 2008 - 2009

Previous research: Obstacles to Mode 3 in Value-Added Services in the MENA: Lessons

fom Jordans Privatization in Telecommunications for the United Arab Emirates

Special Thanks to Professor Wei Liang, MAITP Capstone Advisor

For full bibliography, please refer to completed Capstone

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