New Era In Telecommunications

Qatar

Economic News

22 Jul 2010
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Qatar's telecommunications industry is in the midst of a massive shakeup, with domestic operator Qatar Telecom (Qtel) about to lose both its mobile and land line monopolies while at the same time pursuing new markets abroad.



At the end of June, the country's telecommunications regulator, ictQatar, formally transferred Qatar's second mobile phone licence to Vodafone and its partner, the Qatar Foundation Consortium. In December 2007, Vodafone Qatar won a $2.12bn tender for the second licence and has set March 1, 2009, as its operational launch date.



Handing over the licence to Grahame Maher, the CEO of Vodafone Qatar, ictQatar Secretary General Hessa Al Jaber said that competition in the domestic market would result in improved services and products. He also flagged the possibility of a further opening up of the sector, saying that a market review to be conducted in 2010 would determine if there would be any benefit to be derived from issuing one or more additional licences.



Vodafone Qatar has announced it will hold an initial public offering for 40% of its shares before November 30. Part of the funds generated will be used to pay for the company's operational infrastructure. Moreover, negotiations over an infrastructure sharing agreement with Qtel are expected to allow the company to achieve nationwide coverage when it launches services.



ictQatar has also opened a tender to operate the country's second fixed line network, receiving offers from eight international firms or consortia when bids closed in April. Among those bidding for the new licence are AT&T of the US; Bahrain's Batelco; a regional subsidiary of British Telecom; and a joint venture between Jordan Telecom,Orange and France Telecom.



Though the face of Qatar's telecommunications industry is being completely reshaped, this process has been long-lasting. Having said it would announce the winner of the landline tender in May, a final decision from the ictQatar is still being awaited.



A prolonged delay in naming the new fixed telephony operator will put at risk ictQatar's plans for the second service to be up and running in the first half of next year.



Qtel's response to the opening up of its home market has been an aggressive campaign of overseas expansion to broaden its operational and revenue base. Besides acquiring a 51% stake in Kuwait's National Mobile Telecommunications Company (Wataniya) for $3.8bn in March 2007, Qtel established a presence in Algeria, Tunisia, Saudi Arabia and Iraq. In total, the company now operates in 16 different countries across the Middle East and North Africa (MENA) region and Asia, and has declared its ambition of becoming one of the world's top 20 telecommunications firms by 2020.



On July 29, this ambition came a step closer to being realised when the Palestinian ministry of telecommunications and information technology announced an agreement had been reached with Israel to allocate radio frequency spectrums to the Palestinian National Authority.



The upshot of this announcement is that Wataniya Palestine Mobile Telecommunications Company (WPT), in which Qtel is a partner, is expected to be given its operating band within the next few months, ending a long delay after having been granted a licence in late 2006.



Sheikh Abdullah Bin Mohammed Bin Saud Al Thani, the chairman of Qtel and Wataniya Telecom, said WPT represented one of the most significant foreign investments in Palestine's history.



"Despite delays in securing the required frequencies, Wataniya Telecom and Qtel have always been fully committed to this venture. We look forward to launching commercial operations in Palestine and we are very confident that WPT will be a success story that will attract other foreign investors to the Palestinian market," he told the local media.



Qtel is also expanding into the Indonesian market, though its penetration may not be as strong as it would like. Having gained a 40.8% stake in Indonesian operator PT Indosat in June, paying Asia Mobile Holding $1.8bn, the Qatari firm could be thwarted in its bid to take a controlling interest.



Indonesian law stipulates that a foreign company may not own more than 49% of a landline operator, though this is capped at 65% for mobile phone network providers. With Indosat having both fixed and mobile services, Qtel may have to be satisfied with being the largest shareholder in the company, rather than having a controlling interest.



On July 21, Indonesia's capital market and financial institution supervisory board confirmed that Qtel would be allowed to acquire no more than 49% of Indosat, meaning that it may buy no more than an additional 8.2% stake.



It has been suggested that Qtel could up its stake in Indosat through teaming up with a local partner, though such a move could incur the scrutiny of Indonesian regulatory authorities.



Qtel may also be looking to increase its footprint across the Indian sub-continent, with reports it has expressed interest in taking up a 26% share in India's new mobile phone operator, Unitech. The company, which was granted an operating licence in January, is seeking a partner to provide both expertise and cash for its start up operation.

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