LIBERIA: NASCENT TELECOM SECTOR

UNCLAS MONROVIA 000165

SIPDIS

SENSITIVE
SIPDIS

DEPARTMENT FOR AF/W

E.O. 12958: N/A
TAGS: ECPS ECON AORC LI
SUBJECT: LIBERIA: NASCENT TELECOM SECTOR

REF A) STATE 9659
B) MONROVIA 32 Investment Climate Statement
C) 07 MONROVIA 987 Telecom law


1. (SBU) Summary: Most of Liberia's communications infrastructure
was destroyed in the 14-year civil war. Cell phones are ubiquitous
but there are no land line phones. Internet access is expensive and
bandwidth is limited. All electricity in Monrovia is privately
generated except 2.5 MW (soon to increase to about 10 MW) provided
by international donors. Liberia has a small population (under 4
million people) and low disposable income (GDP per capita estimated
at under $500 a year). It remains a challenging market for
importers and investors. (Ref B). Newly created telecommunications
regulator Liberia Telecommunications Authority (LTA) intends to
enact regulations that will protect both investors and consumers.
LTA is also embarking on negotiations to access the SAT-3 submarine
fiber optics cable, which will expand availability of Internet
bandwidth. End Summary.


The Regulator Takes the Reins
--------------


2. (SBU) The Telecommunications Law, enacted July, 2006 (Ref D),has
brought some order to the cell phone sector. Under the Act, the
Ministry of Post and Telecommunication now handles policy, with
regulation handled by the newly created Liberia Telecommunications
Authority (LTA). LTA Chairman Albert Nah Bropleh told Econoff and
Econ Assistant February 7 that the first regulation, on licensing,
was to be issued February 8, and LTA is in the process of
harmonizing GSM licenses issued by the previous National
Transitional Government of Liberia. Although the Act mandated that
LTA harmonize GSM licenses by February 17, 2008, Bropleh confirmed
they did not meet that deadline. Bropleh said the number of
licenses will be influenced by protecting market share of existing
investors, but there is still room to partner with them.

Cell Phones Booming
--------------


3. (U) Cell phones are ubiquitous. The destruction of land-line
infrastructure and absence of regulation provided fertile ground for
the cell phone sector, even in the unsettled period before the 2003
peace agreement. The cell phone companies operate in 12 of the 15
counties, in addition to the Monrovia area. According to recent
estimates they have approximately 250,000 subscribers with a
penetration rate at 30%. However, estimates are difficult because
firms double-count owners of multiple phones.


4. (SBU) The four existing cell phone companies are, Bropleh said,
ripe for consolidation or partnerships, and there are opportunities
in support services. Lonestar claims over 50% of the market; Cellcom
about 40%, Comium is estimated at 10% and Libercell has a negligible
share. The major firms are upgrading their technology and trying to
respond to GOL pressure to provide national coverage. Lonestar has
upgraded services after a capital injection from new majority
partner MTM. Cellcom is working to expand service across the
country and is planning to add WIMAX wireless service in Monrovia.
Comium already provides WIMAX in three counties. Libercell is the
only GPRS-enabled network service provider. Bropleh said there is
room in the market for a back-haul provider (inter-city transmission
for all the GSM companies). LTA, he said, is prepared to spend to
support that initiative.

Internet Potential
--------------


5. (SBU) Internet access is expensive and bandwidth is scarce.
Internet penetration is difficult to estimate. Most Internet users
are in Monrovia. Many subscribers are non-Liberians, such as NGO
employees, and there is high turnover. The lack of a viable
subscriber base outside Monrovia undermines expansion. One firm, for
example, supports a money-losing WIMAX (long distance wireless
transmission) base station in Liberia's second-largest city, but it
has only 6-7 subscribers. There is limited GPRS access for world
wide web access. At present, there is no "push e-mail" service
(such as BlackBerry),but the largest service provider, owned by MTN
Group SA, is planning to introduce the service in 2008.


6. (SBU) According to Bropleh, Liberia is looking into the
possibility of tapping into the South Atlantic 3/West Africa
Submarine cable (SAT-3),which would greatly expand bandwidth.
Liberia, like neighboring Sierra Leone and Guinea, does not have a
SAT-3 landing point. However, Bropleh said they have stopped trying
coordinate with these countries to implement a common link up
strategy. According to one analyst, the best option for Liberia
would probably be to connect via an overland fiber optic cable to
the Cote d'Ivoire landing point.

Market Dynamics
--------------


7. (SBU) Many of the market challenges are not sector specific.
Companies note the difficulty of maintaining nation-wide service in
the absence of roads or electricity in most of the country.
Obstacles such as onerous customs procedures for all imports --
whether technical equipment for the company's own use (i.e. not for
resale) or even for simple promotional products to be given away
free such as t-shirts -- are an additional encumbrance.


8. (SBU) The telecom industry came under stress during debate over
the Telecommunications Act last year, but the companies tell us they
now coordinate well on advocacy. The industry meets regularly and
works well together. The agree there should be harmonization, but
it should not be one-sided and retroactive. Their existing licenses
may have been issued on favorable terms but, they note, they
invested heavily when "there were still guns in the streets."


9. (SBU) GSM companies tell us they consider the LTA high-handed,
interested more in squeezing revenue from the existing firms than in
building the sector. They would like more clarity on the
government's policy direction and more predictability on licensing,
investment incentives and frequency allocation (and motives for it).
(Note: In a meeting with one of the major cellular companies, the
Chief Executive had no idea of the status of proposed regulations,
or that the LTA intended to issue licensing guidelines that day.
There had been no prior consultation with the industry. End note.)



10. (SBU) Tensions between companies and the LTA persist. Bropleh
himself has been described to us (by industry sources) as
intolerable, arbitrary and stubborn. He recently returned to
Liberia as a businessman, had his application for a telecom license
rejected, and was shortly thereafter named Chairman of the newly
created regulator, a selection that passed over a current LTA
Commissioner who had worked hard to shepherd the bill through the
legislature. None of the Commissioners has a regulatory background
and both industry participants and international experts have
suggested that the LTA seems primarily focused on collecting all the
revenues they can from industry. Three of the cell phone operators
have told us that immediately after the LTA pressured them for fee
payments in excess of those required by their licenses ($100,000, in
at least one case),the LTA released a tender in the local
newspapers for luxury vehicles for the commissioners' use.


11. (SBU) Comment: The need to harmonize license fees and
regularize the industry in line with best practices is clear.
Arbitrary fee requests from the LTA even affected the Embassy during
preparations for a recent POTUS visit, as Emboffs had to negotiate
down an outrageous fee demand for frequencies. We believe exposure
to more experienced regulators and assistance to move toward
international best practices would be extremely helpful as LTA gets
its bearings. USAID is considering several possible forms of
technical assistance in that regard. End Comment.

Robinson