International firms are keen to enter Libya's telecommunications sector, one of the major business opportunities created by last year's uprisings in the Arab world. But they will only find out how they can do so after the war-torn country's first free elections in June.
The country of 6 million people remains in political turmoil; last week's inter-tribal fighting left nearly 150 dead. But Etisalat of the United Arab Emirates, Qatar Telecom (Qtel) and Saudi Telecom have all expressed potential interest in Libya.Foreign investment in the sector is much needed after a fifth of Libya's transmitter stations were destroyed in last year's revolution ending Muammar Gaddafi's 42-year dictatorship.
Gaddafi isolated Libya's economy from much foreign competition, reserving licences and contracts for his own circle, which makes the market attractive to new entrants. There are only two mobile operators, Al Madar and Libyana, which are both state-owned.
Libya's huge energy reserves mean median incomes are much higher than for neighbouring countries. And acquisition opportunities in telecommunications have dwindled globally in recent years, making Libya more alluring.
"At least three or four" foreign operators have expressed interest in entering Libya, Communications Minister Anwar El-Feitori told Reuters, "but we'll leave it to the next government to decide on that."
Elections for a national assembly will be held in June to replace the interim government, which lacks a mandate to make major decisions about the economy. Feitori said Libya would open its telecommunications market to fresh competition "when we have the rules for the competition and when we have the right infrastructure for that as well".
He said about 20 percent of the sites operated by Al Madar and Libyana were damaged, with the most severe destruction in Zlitan, Misrata and Sirte, scenes of heavy fighting during the eight-month war. Each firm has about 1,000 base stations.
The damage, which was estimated by the Gaddafi government to total hundreds of millions of dollars, meant mobile networks in the east and west of the country were cut off from each other when the conflict ended.
"We worked on getting the services back to normal and now we're almost there. There is a big demand in telecom services," Feitori said. Internet users have doubled since the revolution, he added; Facebook played a major role in mobilising opposition to Gaddafi.
New entrants
In other African markets, fierce competition and multiple operators have left newer entrants struggling to compete.
"Libya isn't like that and so would be attractive to foreign operators, both in terms of buying into the existing players or from buying a third licence," said Peter Lange, an analyst at BuddeComm in Sydney.
"Libya is one of the wealthiest markets in Africa, similar to South Africa and Gabon in terms of GDP per capita, and there's a lot of money to be made in providing broadband and internet services."
Libya's mobile phone penetration, the ratio of phones to the population, rocketed from under 1 percent in 2001 to 172 percent in 2010, according to official data. But many analysts doubt the figures, believing they may have been invented by officials in the former regime, though the uneven quality of service means a significant number of Libyans do carry two mobiles.
Real mobile penetration is probably much lower, allowing room for growth, while Libya's broadband and internet penetration lag the regional average and are below levels for the country's poorer neighbours. In 2010, 14 percent of people in Libya were using the Internet, according to the International Telecommunications Union, compared with 49 percent in Morocco, 37 percent in Tunisia and 27 percent in Egypt.
"Data offers a lot of potential, with only Libyana having a 3G licence," said Matthew Reed, a senior analyst at Informa Telecoms and Media in Dubai. "Data and mobile broadband services are relatively expensive, so there hasn't been a strong take-up yet. There are still prospects for other value-added services, which is why foreign operators are interested."
Etisalat bid for a third Libya licence in 2009 but the former regime never completed the auction, leaving the sector firmly under the control of the Gaddafi family and its associates.
Reed said the preferred option for an operator such as Etisalat would probably be to buy into one of the existing service providers.
"Libya could sell stakes in both Madar and Libyana, which would increase competition and also allow for a skills and knowledge transfer," he said.
The general manager of Libya's stock exchange, Ahmed Karoud, told Reuters last month that pre-war plans to list shares in Al Madar and Libyana would go ahead next year. The listings might be an opportunity for foreign operators to buy into the firms.
One analyst said Libyana might be valued at around US$2 billion and Al Madar at about half that amount in the event of a sale, though he stressed that many uncertainties, such as the real level of mobile penetration, meant valuing the companies at this time was very difficult.
Politics
Any sale would depend on the next government's approval - and as the country grapples with political divisions and reconstruction tasks across the economy, it is not clear when telecommunications policy will be set and what it will look like. Some fear a wait of many months.
"Telecoms is way down on its priority list," said a Middle East telecommunications analyst who spoke on condition of anonymity because of the sensitivity of the issue. "The networks are operational, but there's no clear government strategy for telecoms or a means to implement one."
He said one example that Libya might follow was post-war Iraq, which fully liberalised its market and allowed many telecommunications firms to provide international services.
That policy could be introduced in at least some areas of the country, he said; "with some regions seemingly wanting a federal Libya, regional governments could give permission for foreign telecoms firms to start operations without getting central approval."
But the case of Egypt, which is also preparing to elect a new leader following the end of Hosni Mubarak's 30-year rule, suggests major liberalisation could be delayed.
"Pre-revolution, Egypt was talking about privatising Telecom Egypt, but that's now totally on the back burner and Libya's political situation is a lot more fractious," said the analyst. "A third licence is definitely unrealistic until the government and political structures are sorted out."
Until then, foreign operators will continue to hope. Some analysts think that when the market does open, Etisalat may be treated well by the government because of the UAE's role in providing financial and logistical aid to anti-Gaddafi forces. Qatar also provided substantial aid.
Etisalat owns a 28 percent stake in Abu Dhabi-based Thuraya Satellite Telecommunications, which supplied satellite phones to the rebels. With local mobile networks shut down, those handsets were used by anti-government fighters to communicate with their commanders and call in NATO airstrikes.
"NATO played a huge role in removing Gaddafi
Source: Reuters
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