1. (U) SUMMARY: Djibouti Telecom announced the completion of
its infrastructure extension on 21 June 2004. The extension
is part of the new look that foreign management is bringing
to Djibouti Telecom over the course of its two-year
transitional period before privatization. This step is part
of a system upgrade, which includes the eventual offering of
DSL speed Internet and the use of fiber optics in the
telephone switches. The latest upgrade has increased the
Internet capacity to 47 Mbps, which is eleven times the
previous bandwidth and allows greater access to international
sites. END SUMMARY.



2. (U) Djibouti Telecom (DT) has a brand new look. Starting
late May this year, enigmatic billboards started appearing
around town telling of a new start for Djibouti Telecom to be
revealed in June. The mystery behind these billboards was
revealed shortly after: a new look and logo for the company
and its affiliate services for mobile phone and Internet.
Pol/Econ and Econ assistant met with Djama Aouled Djama,
Director of International and Legal Affairs to find out more
about the "new" Djibouti Telecom. The change in image is
being accompanied by an increase in capacity for the Internet
and an eventual move to fiberoptics for the main switching
center. This increase brings the Internet bandwidth
available to Djibouti's users up to 47 Mbps from 4Mbps. The
end goal for DT is to provide DSL service to commercial and
residential clients. They hope to unveil this new service at
the end of June, though realistically it can be expected
sometime this fall. DT will also soon begin installing fiber
optics for use in the switching of telephone lines.



3. (C) Privatization looks to be a long process for Djibouti
Telecom. According to a law passed in 1998, which sets forth
key steps for privatization, the company will go through a
two-year transition period followed by an open tender in
order to decentralize shares. DT's two-year transition
period, which started November 2003, has brought in foreign
management contracted for the specific task of reorganizing
the company, improving the company's operations and restoring
financial credibility. The new management team brought in
includes a French telecom specialist as the Director General
and a Tunisian specialist as the Director of Finance. Djama
commented that while the new team is certainly changing
things, the changes are not in the right areas. The team has
been spending large sums to overhaul the look of DT, purchase
cars and equipment, and improve the superficial face of DT.
Djama noted that the new management has not made a move to
focus changes on the efficiency and training of staff, both
current and potential. The current make-up of Djibouti's
workforce has few trained technicians in telecom specialties,
necessitating the contracting of more expensive foreign
workers.



4. (C) After the transitional period, an open tender will
sell the bulk of the company's shares creating a Strategic
Equity Partnership between the Government of Djibouti (GODJ)
and the purchasing company. The goal for the GODJ is selling
49 percent of shares to private investment, though Djama
commented realistically the government does not want to sell
more than 30 percent. He said he was doubtful about the
success of the 1998 privatization law's implementation,
citing the lack of interest so far and the fact that there
are more problems to fix in Djibouti before it can attract
the kind of company needed to successfully privatize the
telecom sector. Djama said most often the reasons government
utilities are privatized are fiscal constraints, industry
liberalization, improving quality of services, reducing
costs, and complete overhaul of a sector of industry. For
Djibouti, the motivation appears to be a little of each as
the government strives to update its industries to modern
technology. Djama said he believed that the privatization
would succeed, it would just take much more time than
planned.



5. (C) COMMENT: Post feels the privatization of the telecom
industry in Djibouti will take time, but will eventually
succeed. Outside influences, especially foreign investment
and the GODJ desire to connect to the transoceanic cable
SEA-ME-WE4, will have positive effects on the reorganization
and recreation of the telecom industry in Djibouti.
RAGSDALE