CAMEROON PLANS TO OPEN TELCOM SECTOR

UNCLAS SECTION 01 OF 02 YAOUNDE 000407

SENSITIVE
SIPDIS

STATE FOR AF/C AND EEB/CIP - K Townsend
STATE ALSO FOR AF/C AND DRL
COMMERCE FOR ITA KAREN BURESS
STATE PASS USAID

E.O. 12958: N/A
TAGS: ECON ETRD EINV ECPS KCOR CM
SUBJECT: CAMEROON PLANS TO OPEN TELCOM SECTOR


1. (SBU) Summary: Cameroon's National Assembly will vote later
this year on a law to reform Cameroon's telecom sector, making it
more open to competition, according to Edouard Ebah Abada, the
Secretary General of the Ministry of Posts and Telecommunications
(MINPOSTEL). In a recent meeting with Poloffs, Ebah Abada said
plans to privatize telecom parastatal CAMTEL have been abandoned,
but that its management of the fiber-optic backbone would be spun
off to SITELCAM, a new parastatal MINPOSTEL wants to create. Ebah
Abada said Canadian company TECSULT (now owned by American company
AECOM) had failed to deliver on the terms of its contract and that
millions of dollars had been stolen during its management of postal
parastatal CAMPOST. End summary.

TELCOM SECTOR TO BE UPDATED, OPENED
--------------


2. (SBU) Ebah Abada said Cameroon's telecom sector has been
stifled by the "duopoly" that has allowed mobile operators MTN
(South African) and Orange (French) to set rates in Cameroon that
are the highest in Central Africa. The 1998 law that governs the
sector is "obsolete," complained Ebah Abada, which is why the GRC
intends to submit a new law to the National Assembly later in 2009.
Ebah Abada said the draft law would "open" the telecom sector to new
competition and remove the current restrictions that prevent mobile
telephony operators from also providing Internet services.


3. (SBU) Ebah Abada said the GRC recognized its earlier mistakes
in managing the sector, pointing out that both MTN and Orange
maintained their communication hubs outside of Cameroon, a
development that limited the GRC's ability to monitor communications
"to react against terrorism and other security threats." Ebah Abada
expressed the GRC's sensitivities to growing public frustration over
the high rates for cell phone air time, which Cameroonians perceive
to be the highest in Africa.


4. (SBU) Note. According to Cameroon's Telecommunications
Regulatory Agency (ART),the telecom sector in Cameroon has exploded
from 511,000 users (fixed and mobile) in 2001 to almost 5,500,000 in

2008. Over the same time period the cost of an intra-network call
has dropped from 259 francs to 150 francs per minute. The ART sets
the fees for inter-network connection costs, but says MTN and Orange
are otherwise free to set their own prices. According to public
statements by ART's spokesperson, MTN and Orange say their prices
are pushed higher by the rates CAMTEL charges them to use its fiber
optic backbone to route their calls. End note.

CAMTEL to Remain a Parastatal
--------------


5. (SBU) Ebah Abada confirmed the Minister of Finance's recent
press declaration that the GRC no longer intended to follow through
on its earlier promises to privatize telecom parastatal CAMTEL, a
commitment which had been a central component of the GRC's IMF
program during the process of HIPC debt relief. Recalling that the
GRC received no serious responses to its repeated offers to sell
CAMTEL, Ebah Abada said private companies undervalued CAMTEL's
assets and would never want to maintain CAMTEL's role as Cameroon's
sole provider of landline service. Pointing out that GRC officials,
including ministers and the Presidency, communicate across CAMTEL's
landline network, Ebah Abada argued that the GRC cannot afford to
let the terrestrial telephony network deteriorate or, he implied,
fall under the control of a private operator.

Fiber Backbone to SITELCAM
--------------


6. (SBU) During the construction of the Chad-Cameroon pipeline,
the Cameroon Oil Transport Company (COTCO),which is controlled by
ExxonMobil, built excess fiber optic capacity and offered it to the
GRC, which decided that CAMTEL would both sell bandwidth to Internet
service providers (ISPs) and act as an ISP itself. Cameroon has
failed to take advantage of this boon, in large part because the GRC
has not invested in or encouraged private investment in the
infrastructure needed to connect Cameroonian end-users to the
central backbone.


7. (SBU) Ebah Abada said MINPOSTEL hopes to receive approval from
the Presidency for the creation of SITELCAM, a new parastatal that
will take over from CAMTEL the management of the existing fiber
-optic infrastructure and the estimated 350 billion CFA ($700
million) investment to extend it. Ebah Abada said SITELCAM would
sell bandwidth to ISPs but would not be an ISP itself. (Note. A
senior CAMTEL official told Poloff on March 26 that CAMTEL
officials, eager to preserve their domain, are lobbying the

YAOUNDE 00000407 002 OF 002


Presidency to reject MINPOSTEL's plans to create SITELCAM. End
note.)

American AES in the Mix
--------------


8. (SBU) Ebah Abada said MINPOSTEL was aware that American company
AES, which has the concession to run Cameroon's power distribution
network, has proposed selling the excess capacity within its own
network to mobile telephony operators and ISPs in Cameroon. Ebah
Abada implied that MINPOSTEL felt AES had prematurely built in such
a high level of excess capacity without first obtaining permission
from MINPOSTEL. Ebah Abada predicted that AES would not be allowed
to operate as a rival network to SITELCAM, but welcomed AES as a
partner to SITELCAM, with AES contributing its infrastructure to
SITELCAM's mission.

CAMPOST: MANAGEMENT CONTRACT
RESULTS IN MILLIONS STOLEN
--------------


9. (SBU) Poloff asked Ebah Abada to comment on recent press
stories reporting GRC dissatisfaction with Tecsult, the Canadian
company (recently bought by American firm AECOM) that in 2007 won a
two-year concession to manage CAMPOST, Cameroon's postal agency.
According to Ebah Abada, the GRC chose TECSULT out of admiration for
the Canadian postal system, but TECSULT failed to provide personnel
who were up to the task of reforming CAMPOST. Ebah Abada admitted
that the GRC had also fallen short of its own commitment to provide
about $5 million in capital investment. To make matters worse,
TECSULT reported that its expatriate general manager and Cameroonian
treasurer embezzled more than 800 million CFA ($1.6 million) from
the company and that 2.12 billion CFA ($4.25 million) was still to
be accounted for. Ebah Abada said the GRC appointed an interim
General Manager to lead CAMPOST and predicted that the GRC would
reassume control for CAMPOST's operations.

Comment: How Open is "Open?"
--------------


10. (SBU) The explosive growth of mobile telephony in Cameroon
reflects the telecom sector's tremendous economic impact, not least
in the creation of low-paying but much-needed jobs for those who
sell airtime recharge cards and operate call-boxes (where customers
pay to make individual phone calls). But the GRC's heavy-handed
management of the sector, especially its insistence that the GRC
retain tight control, has curtailed new investment and thereby
retarded the sector's growth. The proposed law sounds promising,
but we will watch to see how well it lives up to Ebah Abada's
projections. The battles between CAMTEL and MINPOSTEL promise to
further cloud the sector and delay reform. Pressure to reduce
prices to the customer and to retain the GRC as the predominant
player may undermine his professed desire for a "more open" sector.
American companies are already involved in supplying the sector's
growth-Globetournet, a Cameroonian ISP, recently imported $700,000
worth of American high-end products-and we will be vigilant for
emerging opportunities. End comment.