Algérie Télécom to Be Privatised by H1 2008

Algeria's Communications Minister Boudjema Haichour has announced, via state news agency APS: "Be it the launch of third-generation mobile services or the opening of Algerie Telecom's capital, all must be completed by the end of the first half of this year". With a population of 33 million and a GDP per capita of US$2,697, Algeria has very high growth potential compared to the rest of the Middle East and North Africa (MENA) region, especially in comparison to its closest neighbours in North Africa. Mobile growth in the country has been unexpectedly high—so much so that the Algerian telecoms regulator, Post and Telecommunications Regulatory Authority (ARPT) has had to increase the number of digits in a phone number to 10 from nine in a step to supply the predicted growth. In the fixed-line market, Algérie Télécom faces competition from Lacom, a joint venture between Egyptian operator Orascom and Telecom Egypt, with each operator taking a 50% stake. As with most countries in the region, fixed-line take-up has been relatively slow compared to mobile communications, although the added competition of a second fixed-line operator has somewhat stimulated the market.

Part of the government's aim is to allow foreign investors to enter the Algerian telecoms market, a policy that has already proven successful amongst its neighbouring countries, Morocco and Tunisia, which have opened their state-owned operators to foreign companies. Within the mobile market, Algérie Télécom had a 36% market share, with 4.9 million subscribers, and places itself second of the three operators in Algeria at the end of 2006 (see Algeria: 29 December 2006: Wataniya Telecom Algerie Hits 3 mil. Subscribers). Recently, larger Middle Eastern operators have expressed an interest in acquiring a stake in Algérie Télécom; Zain announced it was considering a stake in the operator, whilst the U.A.E. incumbent, Etisalat, claimed soon afterwards that it was ready to pay US$3 billion for a 51% stake in the operator (see United Arab Emirates: 29 January 2007: Etisalat Willing to Pay Up to US$3 bil. for Algerie Telecom and Algeria: 9 July 2007: MTC Considers Stake in Algerie Telecom). Both Zain and Etisalat have high growth plans through acquisitions over the next few years; a stake in Algérie Télécom would provide a suitable strategic opportunity to fulfil their plans.

Outlook and Implications

Whilst there is much demand from top regional players over the privatisation of Algérie Télécom, Algeria's communications minister went on to say that, "what is sure is that the majority of Algerie Telecom's capital will remain in state hands." This will mean Etisalat will have to rethink its investment strategy for the operator; however, it will still be of great interest to Zain.

• Great Opportunity for Dominant Middle Eastern operators: The country has attractive growth characteristics that are suitable for any Middle Eastern operators that have suffered increased competition in their domestic markets through state liberalisation processes. Major operators such as Qtel, Etisalat, Batelco and Zain have seen their monopolies broken in their domestic markets over the last few years and some operators, such as Batelco and Zain, will see a third mobile operator enter in the next two years. These operators are keen to expand outside their own countries and enter markets such as Algeria where there is significantly higher growth potential for both mobile and fixed-line communications.
• Broadband Services a Key Driver for Fixed-Line Growth: Mobile growth has rapidly advanced over the fixed line, which is typical of most emerging markets. Operators wishing to invest in Algérie Télécom will have to focus on the push to roll out high-quality broadband services and offer bundled packages to stimulate demand. Whilst Algérie Télécom no longer has a monopoly in fixed-line communications, it has still maintained a very high market share through anti-competitive actions such as lowering prices significantly to below cost in 2007, which nearly forced the sale of its competitor, Lacom.