Constrained by success

Jordan has one of the highest numbers of licensed communications providers per capita in the Middle East, and such a level of liberalisation has given way to its fair number of positives as well as its drawbacks. Despite its leadership position in the number of providers in the market, Jordan lags behind in the licensing and implementation of 3G services, though a process has finally commenced to rectify the situation

At the end of June a forum on mobile communications and 3G services was held in Amman, where Ahmad Hiasat, chairman of the board of commissioners and CEO of the Telecommunications Regulatory Commission (TRC) confirmed that the regulator is working on creating a suitable environment for the introduction of 3G services in the kingdom.

TRC is planning to grant two licences to permit the use of radio frequencies in the 2GHz band for delivering 3G services.

On June 25, the TRC launched a consultation process in order to permit all interested parties to provide inputs regarding the issue of the introduction of 3G services in the kingdom.

Hiasat pointed out that the TRC’s mission is to create an advanced environment of ICT services that is efficient, competitive and accessible to all, supporting effectively the socioeconomic development of Jordan.

“We believe that the best way to achieve TRC’s vision for the telecommunications sector is through the promotion of pro-competitive policies. Certainly the international experience is that as telecommunications sectors around the world have transformed from a structure of being state-owned and monopoly-controlled to a competitive structure in private ownership, users of telecommunications services have received a better deal in terms of price, quality and service offering,” Hiasat stated.

Competition in the Jordanian telecommunications sector has increased, so has the number of services provided to users. The quality of offerings has improved and the cost has decreased. Accordingly, TRC is committed to the development of new and effective conditions for competition in the sector in order for the TRC to fulfil its vision and meet its legal duties and obligations.

At the end of March, there were estimated to be 100,000 broadband subscribers in Jordan, being serviced by all 10 of the kingdom’s Internet service providers

According to TRC figures, the number of mobile subscribers in Jordan stood at 4.8 million at the end of 2007; representing a penetration rate of around 80 per cent. These subscribers are serviced by three GSM operators and a single iDEN operator, meaning at least one of the GSM operators is set to miss out on a 3G concession.

Interested parties have been given until July 25 to submit comments with respect to the 3G consultation process, upon which the TRC plans to deliberate before making any final statement that would determine how to proceed.

However, early on it should be noted that the TRC is of the opinion that there is potential for further growth in the country’s mobile sector and the possibility for new entrants through granting an additional licence for radio frequencies through a process of a comprehensive bid to take place before the end of 2008, allowing all licensed companies as well as new ones to participate in the process.

However, not all parties agree that the level of competition in Jordan’s telecoms market is a positive development for all players concerned. Inevitably, Orange Jordan, the incumbent integrated communications provider is of the opinion that too much competition runs the risk of distorting the smooth operation of a market almost as much as a monopoly position does.

Orange Jordan’s Ghossein believes there reaches a point where too much liberalisation constrains a market to much the same degree as a monopolistic one

“When it comes to things like new licences, some regulators are keen to auction licences in order to maximise the price they receive for them,” states Mickael Ghossein, CEO of Orange Jordan. “I am not sure this is always the best thing to do, because in some cases the services and value that a new company brings to the market may not equate to the amount paid for the licence.” To put things into context, Jordan has more than 70 licensed operators of various bands of services.

Jordan has licensed five WiMAX operators of which only one is operational, raising questions about the level of positive impact a regulatory policy of lowering the barriers to entry may have on the overall attractiveness and viability of a market.

In the same way that Ghossein has expressed concerns over the number of licensees entering the market, he has been outspoken about the introduction of mobile virtual network operators (MVNO) in Jordan. The kingdom was the first country in the region to open up its telecoms sector commercially to the entrance of MVNOs, though the level of resistance has so far been high from the three incumbent GSM operators.

“In France and in other parts of Europe, the MVNO model is based on having a few licensed network operators and many service providers,” Ghossein commented recently. “France has a population of 70 million, three network operators and five to 10 MVNOs. In this region we have many more licensed operators, so the position of MVNOs would be difficult in terms of penetration.”

Thus while two MVNO licences have been awarded in Jordan, neither player has yet been able to negotiate an agreement with a host network operator.

For its part though, Jordan Telecom has itself been accused of not moving quickly enough to open its network to third parties. The unbundling of the local loop, for example, is a process that third party service providers have accused Orange Jordan of dragging its feet on.

Specifically, Orange Jordan was supposed to have started opening up its network in 2006, but has still not done so. The incumbent’s management believes what is required to happen is for there to be bit-stream unbundling ahead of local loop unbundling, in what the telco describes as an international norm.

Orange Internet succeeded in raising its subscriber base by 70.2 per cent during 2007 to reach 65,700 users as compared to 38,600 subscribers at year-end 2006. Orange Internet generated revenues of JOD13.4 million (US$18.9 million) during the year pointing to a noteworthy 28.8 per cent growth year-on-year, and representing 3.4 per cent of the group’s total post-intercompany revenues.

Orange Internet maintains its grip on more than 50 per cent of the Internet services market (according to Orange estimates) with continuous growth foreseen in the near future as the high-end leased lines and ADSL subscriber bases continue to boast rapid growth.

EBITDA for Orange Internet reached JOD2 million in 2007, down from JOD 2.7 million achieved in 2006 while EBITDA margin came at 14.9 per cent in 2007, down from 26 per cent in 2006. The increase in cost of service is mainly attributed to efforts aimed at improving the quality of services offered and the rebranding campaign.

At the end of March, Orange estimates there were 100,000 broadband subscribers in Jordan, being serviced by all 10 of the kingdom’s Internet service providers. It is estimated that the number will reach 200,000 by the end of the year with Orange continuing to enjoy a significant market share.

There are an estimated 500,000 personal computers in Jordan with 140,000 dial-up customers in the process of being migrated to broadband. While much of the telecoms landscape is occupied by Orange Jordan, the other players in the market are in the main part successfully carving niches for their respective businesses. GSM operator Umniah is also the operator of a WiMAX network, which is branded Umax, and offers broadband prices that are typically 10 per cent lower than prices offered on wireline ADSL.

The relatively high price of customer premises equipment (CPE) has led Umniah to heavily subsidise the installations. “The [access technology] is going to go for nothing in the future, and operators will have to focus on services,” commented Talal Ghaith, Umniah’s manager of the corporate segment. “We believe demand will come from broadband devices with voice capabilities, rather than voice devices with broadband capabilities.”

The GSM market leader, Zain Jordan welcomes a new CEO in the guise of Ahmad Al Shatti, who has held management roles at the Zain Group level. At the end of 2007, Zain estimated a market share of 43 per cent. Umniah and Orange enjoyed a 20 per cent and 33 per cent market share, respectively, at the end of 2007; with iDEN provider Xpress holding the remainder. Zain in Jordan counted more than 1.8 million active customers at the end of 2007, and has increased that to two million during the first few months of this year.

According to the TRC, the number of mobile subscribers in Jordan stood at 4.8 million at the end of 2007; representing a penetration rate of around 80 per cent. These subscribers are serviced by three GSM players and a single iDEN operator, meaning at least one of the GSM operators is set to miss out on a 3G concession

Revenues for the year reached JOD338 million, a decrease of two per cent year-on-year. EBITDA decreased by 13 per cent compared to 2006, while net income in 2007 reached JOD84.4 million, a decrease of 12 per cent compared to the previous year. The operator reported an ARPU of JOD13.45 for 2007, and despite competitive pressure from other operators, Zain continues to maintain its number one market position even with a loss in market share of 10 per cent during 2007.

Zain has thus very clearly shifted the focus of its activities in Jordan from customer acquisition to customer retention. The new Zain brand was well received and gained significant attention from customers and the media, despite the simultaneous re-branding of Orange Jordan. During the course of 2007, Zain introduced several new services including BlackBerry, ring back tones and user generated content.

The introduction of promotions and loyalty campaigns has been a marketing tool used with increasing regularity in order to stem churn. For example, at the end of March, Zain introduced its Zain 5 promotion in Jordan, which allows prepaid subscribers to call five Zain numbers of their choice at no cost. Subscribers are not required to pre-register, and has proved to be popular amongst subscribers.

From a network operator perspective, the campaign helps retain on-network calls and builds a community of users that benefit from remaining on the same network.

Executive summary of 3G consultation process

This document “Consultation regarding licensing the use of 3G communications technologies radio frequencies in Jordan” addresses a number of policy, as well as technical, commercial, economic and regulatory issues relating to the introduction of 3G mobile services in Jordan.

3G represents the next major step in the evolution of mobile communications, with an emphasis on data rather than on voice services. This reflects similar trends at the international level in fixed telecommunications, where the rise of the Internet has seen data overtake voice traffic.

The positioning of 3G in the wider telecommunications sector in Jordan can best be encapsulated in terms of bandwidth and mobility capability, as follows:

Current 2G (GSM and iDEN) mobile networks are capable of providing high mobility, narrowband services; current fixed networks are capable of providing low mobility, wide-band services; 3G mobile networks will be able to provide high mobility, wide-band services.

TRC believes that the grant of general radio spectrum licences for radiocommunication systems related to the integrated licensing regime which authorises the use of radio frequencies in the 2GHz band, (hereinafter “3G spectrum licences”) is an important step towards achieving the policy objectives of creating the conditions for effective competition in the mobile sub-sector by creating market entry possibilities.

TRC is cognisant that the incumbent mobile operators may have an advantage over new entrants in so far as the incumbents benefit from the existing operations and installed infrastructure and ultimately they are well positioned to achieve the policy objective calling for the rapid introduction of new services.

However, in awarding the 3G spectrum licences in Jordan, TRC is seeking, in line with its mandate under the Telecommunications Law and in compliance with the ICT Sector Policy 2007, to create new market entry possibilities and reduce barriers to entry and thus maximise competition in the mobile sub-sector. Government policy requires TRC to examine whether it is desirable to make spectrum capacity available for advanced mobile networks including 3G and 4G. At this time TRC is focussing on the introduction of 3G technologies only.

Accordingly, and in support of those policy objectives, TRC intends to offer the 3G spectrum licences in accordance with the following principles:

• Any qualified person including the incumbent operators and new entrants, shall be able to apply, on a transparent and equal basis without favouritism, to gain one of the offered 3G spectrum licences,
• No 3G spectrum licences will be reserved for any new entrant or any incumbent operator.
• TRC anticipates that the demand for 3G spectrum (radio frequencies in the 2.1GHz band) is likely to exceed the available supply. Thus, TRC requires a transparent and objective mechanism for determining who will be authorised to use the 3G spectrum in Jordan. To that end, TRC envisages granting the 3G spectrum licences by a competitive process.

It must be stressed that before making any final regulatory decision in this regard, TRC seeks the views and input of all interested parties on the grant of 3G spectrum licences in Jordan. All responses to this call for comments, which has a deadline of noon on July 25, 2008 will be given due consideration by TRC in its decision making process.

Source: Jordan TRC