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.