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 -------------- -------------- ¶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 -------------- ¶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 -------------- -------------- ¶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 -------------- ¶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. Visit Amman's Classified Website at http://www.state.sgov.gov/p/nea/amman BEECROFT