MAROC TELECOM TAKES GABON TELECOM

UNCLAS LIBREVILLE 000081 SIPDIS PARIS FOR AFRICA WATCHER SIPDIS E.O. 12958: N/A TAGS: EINV EINT ECPS ECON EFIN GB SUBJECT: MAROC TELECOM TAKES GABON TELECOM ¶1. Summary: On February 9, 2007, the Government of Gabon awarded Maroc Telecom a 51 stake in Gabon Telecom for approximately USD 78 million. (The French company Vivendi owns 51 of Maroc Telecom.) This concludes the privatization process of Gabon Telecom, which originally began in 2003 and which was last re-initiated in January ¶2006. Privatization of Gabon Telecom was a benchmark set in the GoG's last IMF program, and one which the IMF will look at as Gabon negotiates a new three-year program. End Summary. -------------- Gabon Telecom's Profile -------------- ¶2. Gabon Telecom was the state telecommunications company. With an average of 2.5 main lines per 100 inhabitants, it operates approximately 35,000 fixed lines. The company owns the connection to the submarine fiber optic cable (South Atlantic Telecommunications cable, SAT-3),which is currently underused. The most lucrative part of the company is the cellular telephony operator, Libertis, which is estimated to have 40 of the national cellular market. This market is estimated at nearly 500,000 and is expected to reach 700,000 by 2008. The company's net profit was $7 million in 2004. Gabon Telecom's payroll is inflated with approximately 1,800 employees; it is estimated that only 300 are needed. -------------- The Deal and Potential -------------- ¶3. On February 9, Maroc Telecom was awarded 51% of Gabon Telecom for approximately $78 million, with a pledge of an additional $100 million of investment over the next five years. This concludes a privatization process which began in 2003 and was last re-initiated in January 2006. Under the GoG's original call for proposals, the transaction grants Maroc Telecom exclusivity in land lines for five years. The pubic announcement of the transaction underlined the importance of better utilizing the SAT-3 cable. ¶4. Despite Gabon's small market (population of approximately 1.4 million),Gabon Telecom has the potential to reach an 80 million person market in the central African region through extension from the SAT-3 cable. If Maroc Telecom is able to properly develop this infrastructure, it could dramatically increase its profits. ¶5. Comment: The sale of 51% of Gabon Telecom has been long awaited and expected. Maroc Telecom was known to be the favorite bidder, and the collapse of Air Gabon International (and the Moroccans' interest in the airline) may have tipped the scales in Morocco's favor. Other factors that surely didn't hurt Maroc Telecom's chances were that 51% of the company is owned by Vivendi, and that high-level GoG officials are rumored to hold shares in the company. Nevertheless, one of the key remaining state companies is now privatized, which should benefit the state's finances and the population. Privatization of Gabon Telecom was a benchmark set in the GoG's last IMF program, and one which the IMF will look at as Gabon negotiates a new three-year program. WALKLEY