Who Is Holding Up 3G?

On May 28 2013, Agence Ecofin reported that the delay on tenders for 3G licences in Algeria is due to incumbent broadband provider Algérie Télécom's fear of competition. Previously, it has been widely assumed that the Algerian regulator had been delaying issuing 3G licences until an agreement can be reached for the government buyout of mobile operator Djezzy from Russia-based VimpelCom. As talks have come to a standstill, though, a new perspective has come to light. BMI maintains the view that delays in the launch of 3G networks and government influence over the regulator are curbing the Algerian mobile market's growth potential.

Agence Ecofin reports that Algérie Télécom fears the launch of 3G mobile broadband will dry up demand for fixed ADSL broadband services, which is the company's main source of revenue. According to the news source, it has 1.6mn broadband subscribers and employs 26,000 people. The Algerian regulator faces the difficult decision of allowing the country to lag ever further behind its neighbours in the development of advanced broadband technology or forcing the largest ICT employer to innovate and likely cut jobs.

Algeria Falls Flat
Broadband Penetration Forecast (%)

BMI believes that issuing 3G licences is the only viable option. It is in the best interest of mobile operators and consumers and will serve as a necessary catalyst for innovation for Algérie Télécom. As technology and industry needs continue to develop, depending on retail fixed line broadband services will become a less and less sustainable business model. The incumbent could look to the UAE's du and Etisalat as examples of how to adapt: it could focus on the corporate segment, move towards the wholesale of broadband services and diversify towards other IT services such as cloud computing.

Compared to other North African countries, the Algerian telecoms market is underperforming. A comparison with Libya is difficult as the new government has not yet shed any light on recent developments and its plans for the telecoms sector. However, given its large population, stable political environment and good economic outlook, Algeria's potential is comparable to Tunisia's or Morocco's. Both of those countries have seen relatively strong growth in broadband services, largely due to the uptake of 3G data service. Both countries' broadband penetration rates have more than doubled in the last two years, to 10% in Tunisia and 12% in Morocco in 2012, with good growth forecasts, especially in Morocco, which is preparing to issue 4G licences.

As the Algerian government continues to vie for controlling stakes in telecoms operators and pressure the regulator to protect state-owned enterprises at the expense of other companies and consumers, our growth forecasts and industry risk/rewards ratings remain low. BMI ranked Algeria 13 out 15, with a score of 43.7 out of 100, on our telecoms industry risk/rewards ratings and forecasts broadband penetration to reach less than 4% by 2017.

This article is tagged to:
Sector: Telecommunications
Geography: Algeria, Libya, Morocco, Tunisia

Enter your details to read the full article

By submitting this form you are acknowledging that you have read and understood our Privacy Policy.