Tough conditions

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Middle East envoy Tony Blair has been negotiating with Israel for more frequency to be released for Jawwal and Wataniya.

Distant switches

The problems experienced by Paltel and Jawwal in getting equipment into Palestine are starkly illustrated by the location of Jawwal's switches, which are 2,240 miles away in London. No other mobile operator in the world has its customers in one continent and its core network stationed in another.

"The idea of having the London location, with every single local call going to London was crazy," Paltel CEO Abdul Malik Al-Jaber says. "But when we were born as a company we were competing with four monsters, so we had no choice but to take such a risk."

Last month Al-Jaber announced that the switches would be moved to the Dead Sea area of Jordan, with fibre connecting the site to Palestine. The shorter distance is expected to help cut downtime, and it will also help Jawwal to reduce prices, as part of its wider commercial plan.

Aker says peak rate prices will be reduced by a significant percentage this month, with cuts in the region of 30% per minute for mobile-to-mobile calls. Cutting prices might help to shore up its customer base ahead of Wataniya Palestine's proposed launch, but churning the 20% of Palestinians who use Israeli mobile operators may prove to be more difficult. It seems that there are two main obstacles to getting Palestinians off the Israeli networks: price, and network coverage.

Sim cards and top-up vouchers for Israel's four mobile networks are sold in the Palestinian territories, but because the operators are not licenced by the Palestinian Authority they are sold on the black market and are not subject to the same taxes that Jawwal's products are. According to a report conducted four years ago by Beirut-based consultancy firm Connexus it gives Israeli operators a 24% price advantage over Jawwal.

Arab Advisors' Sakkijha says that while Palestinian subscribers are loyal to Jawwal the quality of signal is so bad in some areas of Palestine they have no choice but to take an additional Israeli line for use when their Jawwal mobile fails them.

"For business people, there is multi Sim usage in Palestine," she says. "It is not because they are not loyal. If it came down to loyalty they would only use one Sim card, but because the quality of the services fails to serve them, they have more than one line.

"Some of these people who have more than one line are in the telecoms sector; I know people who work in Jawwal and Paltel who have more than one line, because there are areas in Palestine where there is no network for Jawwal," she says.

With Israel controlling the flow of equipment into Palestine it will not be possible for Jawwal to improve its coverage in those pockets of the Palestinian territories - and take market share from Israel's operator - without Israel acquiescing.

"Maybe Israeli authorities will try to play it smart and prevent them from having full coverage in order to guarantee having the Palestinians using the Israeli operators," Sakkijha says. "I expect Israel to keep on making things hard either for Jawwal and Wataniya, in order for Israeli operators to have their share in the Palestinian market."

Zain attraction

Following Zain's acquisition of Paltel in a share swap deal two months ago, Jawwal is set to be rebranded by the end of the year. It will also join Zain's ‘One Network' borderless roaming scheme, although whether this takes place before or after the rebrand has not been decided. Aker acknowledges the importance of mobile data, but given the limitations of Jawwal's network it will not be included in the data roaming aspect of Zain's ‘One Network'.

Combining with regional behemoth Zain will undoubtedly give Paltel and Jawwal a boost when it comes to competing with Wataniya, which has the backing of Qatar's Qtel, another regional behemoth. There will inevitably be cost savings generated by the increased purchasing power, and Aker says that Zain's international experience will also be of benefit. And Zain's One Network proposition should also help with both customer retention and acquisition, particularly for the many Palestinians with friends and family members living abroad.

But there is a sense that those associated with Jawwal will be sad to see the brand disappear. At last month's Arab Advisors conference, which Jawwal sponsored, Al-Jaber joked that it might be the last time the operator gets to make such a decision. Although it was a light-hearted remark, it hinted at the loss of control that will follow when Zain takes over.

Following approval of the deal by the market authority there will be an assembly meeting to elect a new board, of which Zain will have majority control. Aker has been CEO for five years, but he is unsure if he will remain in the top role once Zain assumes control of the group.

"Maybe. It's still too early to decide that, and it will be up to Zain " he says. "There will be a choice for the CEO, but for the rest of the team we don't expect that Zain will make a lot of changes to the management. On the contrary, we expect our employees will have a value to add to Zain, because we know that Zain needs a lot of human resources to meet its expansion everywhere, and hopefully that will mean there will be the potential for growth for our employees."

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