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Morocco: Fixing the Line

Recent days have seen some major new moves in Morocco's telecoms market, with a second fixed-line licence awarded, alongside news that tenders for two 3G licences will also be launched this year.

Both moves are evidence of the continuing liberalisation of the telecoms sector, which the country's National Agency of Telecommunications Regulations (ANRT) expects to be completely deregulated by 2008.

On the second fixed-line licence, tendering for this was won on July 11 by Medi Telecom (Meditel), a consortium led by Spanish mobile phone operator Telefonica Moviles SA (TEM) and Portugal Telecom. The two European firms each hold a 32.18% stake in Meditel, with the rest going to local Moroccan investors.

It's an opportunity to communicate using the research and development undertaken by Telefonica, and with the most advanced technology, Meditel Director General Miguel Menchen told the press after the deal was announced.

The licence was awarded to the firm after it had offered Dr75m (6.8m euros), ANRT said in a statement. This beat rival Maroc Connect , which had also been bidding for the licence, yet had only offered Dr50m.

By awarding the second fixed-line telephone licence to Meditel, the ANRT statement announced, the Moroccan telecommunications sector has taken a new step in its deregulation, marking the end of Maroc Telecom's fixed-line monopoly.

The ending of this control is expected to see an opening up to competition in international calls, the national backbone and the local loop, improving services and, consumers hope, reducing call costs. The move is also widely seen as necessary if the fixed-line system is to expand sufficiently to widen internet usage and boost call capacity.

The idea too is that penetration rates will also jump. By the end of last year, these stood at only 4.43%, meaning that there is in theory, plenty of room for growth. Figures quoted by AFX news on July 12 suggested that up to 3m more fixed lines could be demanded over the next decade, along with half a million more internet subscribers.

A third fixed-line licence is also to be awarded soon, further boosting competition and, it is hoped, services.

Meditel has been a player in the Moroccan telecoms market since 1999, but up to now only as a mobile phone operator. It won its GSM licence back in 1999 in a bidding process that was highly fruitful for the Moroccan government, earning it some $1.1bn.

By mid-2004, Meditel had grabbed a 29.7% market share, with the rest going to Maroc Telecom (IAM), which is itself 51% owned by Vivendi Universal. Meditel's fixed-line licence acquisition therefore puts it into competition with the former state monopoly on two fronts. There is little love lost between the two, with Meditel taking IAM to court last year over interconnection tariffs.

Growth in the GSM market has been strong, and is expected to continue to swell. AFX estimated some 7m more subscribers over the next decade. By the middle of last year, the penetration rate was still only around 26%.

The at times fierce rivalry between IAM and Meditel has also affected a noticeable decrease in prices over the years, and a broadening of services. Both have chased new subscribers, but there is some question as to how far the market can keep expanding in terms of volume. Income levels in Morocco are on average not high, with some analysts suggesting that a plateau in subscriber numbers could be reached as early as 45% penetration.

Given this question mark, both companies were therefore also interested in the news that Morocco would launch tenders this year to sell two 3G mobile phone licences. If there is a ceiling to volume, 3G promises a wider field in terms of quality and services.

Both are expected to bid, with each licence to cost $40m and the networks expected to be operational by the end of 2007, ANRT Chairman Mohamed Benchahboun told the press on July 12.

The licences are UMTS permits, allowing for the high-speed transfer of data on mobile phones, enabling users to download music, games, and video to their handsets. This is expected to be potentially highly popular in the Moroccan market, where 65% of the 30m population are under the age of 35.

With continuing support from south-west Europe for Meditel, and IAM's continuing good performance, many analysts expect that both will be quick off the mark on roll out once the licences are sold. Big investments will be required, but there are also likely to be big rewards in the longer term.

© Oxford Business Group 2005