We noticed you're blocking ads.

Keep supporting great journalism by turning off your ad blocker.

Questions about why you are seeing this? Contact us

Font Size

- Aa +

Tue 7 Jul 2009 04:00 AM

Font Size

- Aa +

Grand ambition

As Jordan’s regulator prepares to award the country’s 3G licence, the head of the TRC tells George Bevir about his plans for the sector, while two of the country’s leading operators reveal their plans for the industry.

Grand ambition
Dr Ahmad Hiasat, head of Jordan’s regulator, wants to implement local loop unbundling once a market review has been completed.
Grand ambition

As Jordan’s regulator prepares to award the country’s 3G licence, the head of the TRC tells George Bevir about his plans for the sector, while two of the country’s leading operators reveal their plans for the industry.

Jordan’s journey towards 3G connectivity has been a faltering one, with an auction that was meant to take place in 2008 finally concluding two months ago in May. If all had gone according to the regulator’s plan, by now an initial payment of JD50 million ($70.5 million) for the licence would have been received and the operator would be hard at work building a speedy mobile network across the Kingdom. Instead, the TRC only received one bid for the licence, from Orange Jordan, which it rejected on the grounds that it “did not fulfill the tender document requirements”.

Every quarter we have new proposals on tax for telecoms, under one form or another. But for as long as the tax regime is complicated and not technology-neutral, then it’s a problem. - Nayla Khawam, Orange Jordan CEO

Nayla Khawam, Orange Jordan’s recently appointed CEO, says the requests were mainly for assistance from the state for help with the launch of 3G, including “limiting the tax burden on 3G equipment and services during a certain time”, and launching 3G services on 900Mghz spectrum to “speed up deployment”.

The TRC says the cost of the licence was based on an average of European 3G licence auctions, but critics of the process say that that the financial commitments were simply too high to make a strong business case.

Ihab Hinnawi, CEO of Jordan’s third largest of four mobile operators, Umniah, was one of the operators deterred by the price. He says: “The regulator announced a bid for a minimum of JD50 million for a one shot payment, and then an operator would have to pay around JD2.5 million on the licence fee on a yearly basis for 15 years, and this is without building the network. You need to have at least 500,000 subscribers – if not more – that use 3G in order to break even after 10 years. The business case is not sound,” he says.

The TRC says it has listened to the concerns of operators and that it has learnt lessons from the process. Dr Ahmad Hiasat, head of the TRC, told CommsMEA that instead of a tender process the regulator will now make a direct award of the spectrum to the existing operators, “within terms that we think are fair to everybody; the treasury, operators and the consumer”.

If the direct approach is not concluded within a month, then it will be retendered with some of the conditions altered, seemingly in reponse to the “requests” of Orange Jordan. For example, Hiasat admits that the previous exclusivity period of 10 months was not long enough for an operator to build and launch a network and still retain a period of exclusivity, and he says that it will be revised under the new licencing process.

Despite the fact that Jordan is no closer to issuing any 3G licences than it was this time last year, Dr Hiasat says he would not judge the process as a failure. “We look at it more as a difficult time in which the tender was offered,” he says. “It was offered in March, and the implications of the financial crisis were still there. If the tender was launched or floated in the months before, or if we waited months until the end of the year, the result would probably have been different,” he says.

He insists the TRC’s “ultimate goal is not to maximise revenue but rather to introduce services and have more services and more competition in the telecom sector with all its submarkets.” A more collaborative approach – with a lower asking price – should see greater interest from operators.

Khawam says Orange Jordan remains committed to launching 3G in Jordan, and if there is an opportunity at a reasonable price, and with reasonable conditions, she says the operator will welcome the initiative.

Hinnawi suggests that if the conditions are favourable, Umniah may be interested. “The whole world is evolving and moving towards technology upgrade and broadband, be it on mobile or fixed,” he says. “We believe we cannot be off track, but at what price?”

WiMAX operators

If the lack of 3G connectivity has been good for anyone in Jordan, it has been for the four operators that chose to deploy WiMAX, which is thriving in the Kingdom. For Umniah, the third largest of four mobile operators, its fixed wireless WiMAX network was launched in 2007 in response to the problem of incumbent Orange Jordan controlling the last mile of fixed connectivity. Hinnawi claims that Unmniah now has a 60%-70% share of the WiMAX market, and he says that the delays in getting 3G to market will only strengthen the case for the wireless broadband technology.“The longer it is delayed, the more difficult it will be for 3G to take market share in Jordan, especially with the higher throughput of WiMAX,” he says. “Ok, the coverage and the customer base is in favour of 3G, but Jordan is not like Saudi Arabia, or the UAE, where you have customers that only use 3G and broadband over mobile. If any operator wants to introduce 3G it will take them six months to maybe a year, and in a year’s time things can change,” he says. Increasing internet

Internet penetration in Jordan currently sits at approximately 25%, and Hiasat describes the country’s target of 50% penetration by 2011 as “very ambitious”. It is a target that others in the telecom sector in Jordan have described as unrealistic, but even though they feel it is unlikely that it will be reached, they consider it a useful incentive in driving growth.

“We are working on a few measures, like introducing LLU to enhance competition in ADSL, giving the WiMAX operators more incentives to offer the services at reduced prices and expand their coverage areas,” Hiasat says. “And we are encouraging the operators to build their fibre network over the electric grid that goes to buildings and houses. Once implemented, that will offer a new competition to the internet market,” he says.

Unbundling the loop

Hinnawi says access will be improved once local loop unbundling is implemented, but unsurprisingly, it is a process that Orange Jordan, the incumbent operator, is opposed to.

“The idea that LLU makes life cheaper for the other operators is simply not correct, based on international data,” says Orange Jordan’s chief strategy officer Philippe Vogeleer. “LLU requires investment from the other operators in billing, call centres, training, technicians, and most ISP tell us that they are not willing to invest in these things today.”

The TRC has started a market review and it expects to have regulatory decisions and remedies for LLU before the end of the year.

Another measure to drive penetration is to reduce the cost of PCs to boost ownership, and to increase the range of content. “If Jordan wants high internet penetration we should offer DSL, WiMAX or broadband services with PC not exceeding JD10-15 JDs per month, and we are far away from that,” Hinnawi says. “It’s not only PC penetration - the DSL traffic collection is very high, and the IP connectivity for international prices it’s still high,” he says.

A major gripe of operators in Jordan is the tax regime. “People proposing taxes are usually doing so from a good intention, such as finding funds to finance initiatives for the citizen,” Khawam says. “But we are not charities, and we have shareholders.”

Hinaawi says telecom operators pay 10% revenue share, 4% mobile special tax, further special taxes of between 2% and 3%, 16% sales tax and 25% income tax, along with frequency fees, which he says could be among the highest in the world.

Hiasat says Jordan’s Ministry of Finance has been made aware that lowering the fees should help the sector to grow. He says the departments are working together on reducing the taxes and fees, “particularly those imposed on internet use and laptops,” and he says that the fees and taxes will be eliminated or cut “significantly”.

Khawam gives an example of the problem: “Our licence is ‘technology neutral’ but if I provide internet through wire line, or the same through wireless, it’s not the same tax regime. So, the entire idea of technological neutrality is not really applied in reality. That should change; having a simpler tax system would be positive to the development of telecoms. Every quarter we have new proposals on tax for telecoms, under one form or another. But for as long as the tax regime is complicated and not technology-neutral, then it’s a problem,” she adds.

Arabian Business: why we're going behind a paywall

For all the latest tech news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.