PLANS FOR INCREASING COMPETITION IN JORDAN'S MOBILE PHONE

UNCLAS AMMAN 002490

SENSITIVE
SIPDIS

STATE FOR NEA/ELA, EEB
STATE PASS TO EX-IM BANK

E.O. 12958: N/A
TAGS: ECPS EINV TINT JO
SUBJECT: PLANS FOR INCREASING COMPETITION IN JORDAN'S MOBILE PHONE
MARKET FACE INCUMBENT RESISTANCE

REF: 07 AMMAN 3770


1. (SBU) Summary: The number of mobile phone subscribers in Jordan
has risen to 4.8 million and represents an 84% penetration rate with
possible room for growth. Jordan is currently served by four
incumbent providers who view amenities as new ways to generate
revenue. The Telecommunications Regulatory Commission (TRC) is
seeking ways to improve competition and services, but has faced
significant incumbent resistance. TRC recently approved Jordan's
first Mobile Virtual Network Operator (MVNO),i2, but legal and
business challenges have slowed its launch. Incumbent operators
have also criticized TRC's plans to open the auction of 3G (the
third generation of mobile phone standards and technology) licenses
and spectrum to all qualified bidders, not just incumbents. In
addition to its efforts to improve services, TRC has heightened its
regulatory role and initiated a program to register owner
information for all mobile phones in Jordan. End Summary.

Current Mobile Market: There's Revenue in Ring Tones
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2. (SBU) Afram Jamil, acting Secretary General of the Ministry of
Information and Communications Technology (MOICT),reported that
there were 4.8 million mobile phone subscriptions at the end of 2007
in Jordan, which equals an 84% penetration rate. This represents a
21.4% growth in subscribers since 2006. Total revenues from
telecommunications were 920 million JD in 2007, an increase of 9.8%
over 2006. Mohammed Khasawneh, a telecommunications consultant
funded by the EU, explained that while Jordan's market is maturing,
it is not necessary saturated at 84% which he compared to the Gulf
states where penetration rates are well over 100%.


3. (SBU) There are currently four cellular providers operating in
Jordan: Zain (38% market share),Orange (33%),Umniah (26%),and
Xpress (3%). Telecommunications experts observe that customer
acquisition rates have flattened with prices continuing to fall
slightly, but mobile revenues however, continue to grow because of
increased use. Ibrahim Akinci, Marketing Director of Zain, said
Zain's revenue growth is now being driven by additional services,
such as ring tones, which account for 10% of revenues. Akinci also
explained that 90% of his customers use pre-paid phone cards and
only 10% have contracts and monthly billing.

MVNO Comes Slowly to Jordan
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4. (U) The Arab Advisors Group has described Jordan as the most open
mobile phone market in the Middle East. TRC officials are eager to
open the market further and foster the introduction of new products.
TRC issued in September 2007, its first set of guidelines on the
entrance of MVNOs, mobile service providers that have neither their
own radio spectrum, nor a complete mobile phone infrastructure.
Note: MVNOs provide service by entering into agreements with
existing operators and reselling services. Typically, existing
operators provide technical services and the MVNO focuses on
customer care and marketing. Globally, MVNOs usually capture 8-20%
of mobile subscribers by focusing on small market segments. End
Note. For Jordan, MVNO agreements would likely reduce prices
slightly and improve customer service, particularly for small
segments such as Philippine domestic workers, by increasing
competition further.


5. (SBU) Al-Ansari Al-Mashagbah, Director of the Regulatory
Department of TRC, lamented that the process to allow MVNOs in
Jordan has been difficult and slow. He said that TRC's initial
guidelines, which described a role for TRC in helping MVNOs and
operators reach agreements, were successfully challenged in the
courts by two incumbent service providers. TRC released on August
10, an information memorandum and a revised regulatory decision
which Al-Mashagbah believes addresses the concerns raised in the
court case. The revised decision says that companies wishing to act
as an MVNO require individual licenses approved by TRC, and further
states that network operators will be required to offer network
capacity on a transparent and non-discriminatory basis to new MVNOs.
It is unknown when MVNOs will begin reselling mobile phone service
in Jordan. TRC has approved one MVNO, i2 from Saudi Arabia, and

expects to approve others but thus far no MVNO has a business
agreement with an incumbent operator.

TRC Announces to Some Opposition Plans for 3G Licenses
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6. (SBU) TRC hosted a late June conference to begin the comment
period for the 3G license auction process. 3G technology enables
network operators to offer advanced services, such as video calls
and broadband wireless data, and to use spectrum more efficiently.
TRC and MoICT officials were explicit that the GOJ, while welcoming
any businesses interested in providing 3G services, will not
guarantee business model success. TRC's Director of Communications
Rawa Mirza predicted that TRC would proceed with the EU consultant's
recommendations and offer two 15-year licenses in 2008, with
possible additional auctions in 2009. One license would only cover
3G and would presumably be bid upon by any (or all) of the three
incumbent GSM operators. A second license would be for 2G and 3G
and could be bid upon by a new operator, or by Xpress, the smallest
provider in Jordan, which does not currently operate using GSM.


7. (SBU) Elaborating on TRC plans to allow all interested parties to
bid on the licenses, Khasawneh explained to conference attendees
that auctions which only include incumbents are unheard of in open
telecommunications markets. Nevertheless, several incumbents spoke
angrily about opening the process to companies not currently
operating in Jordan and Xpress's CEO Marwan Juma was the most
vehement. Xpress offers push-to-talk (walkie-talkie) mobile service
and in 2004, it received a $54 million loan guarantee from the U.S.
Export-Import Bank to finance construction of a Motorola integrated
digital enhanced network (iDEN). Since then, customer acquisition
has been slow and Juma has told TRC and the Embassy that without a
2G/GSM license and associated spectrum, Xpress will go out of
business. TRC's position is that Xpress is free to participate in
the 2G/3G auction, but that a license and spectrum will not be
provided for free. Juma counters that since the EU consultants said
that the market could handle a fourth operator, the current
restriction on Xpress' license should be removed and he should be
allowed to acquire frequency in a manner similar to the other three
operators.

Unregistered Mobile Phones Being Disconnected
--------------


8. (SBU) This spring, TRC added a requirement that all cell phone
subscribers must register their Subscriber Identification Module
(SIM) cards with their service providers before May 31 or face
disconnection. Since March, all new prepaid mobile SIM cards have
been registered with official identification. In making the change,
TRC argued in local press that registration will increase safety
especially given large numbers harassment cases in 2006. In
private, government and corporate officials said national security
was another motivation.


9. (SBU) Mirza said that 900,000 lines are still unregistered. She
agreed the operators have made good progress in the registration and
have complied with the disconnections but that not all independent
retailers are collecting the information. Akinci believes, based on
seasonal call patterns, that many of the unregistered customers are
Jordanians working abroad who own a Jordanian phone for the time
they are in Jordan.

Comment
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10. (SBU) Across areas, TRC continues to seek ways to increase
competition in telecommunications. It has been most successful in
mobile phones, which are the most used telecommunication service.
In addition to inviting MVNOs and additional providers, TRC has also
worked to allow phone number portability which would increase
competition by allowing customers to keep their phone numbers when
they switch providers. TRC, however, has faced significant
incumbent push-back at each step - not just from Jordan's legacy
monopoly Orange/Jordan Telecom Group but also from relative
newcomers Zain and Umniah. TRC's strength (or lack thereof) will be
most evident in watching the development of the broadband market,

which continues to be overwhelmingly dominated by Orange. If TRC
has sufficient muscle, other players will enter the market and
provide alternate technologies and international access.

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