Jordan: Fourth telecoms provider?
The Middle East | 17 Jan 2013
The government is working hard to keep telecoms investment from leaving the country and expand the sector’s role in domestic employment, particularly as the short-term economic outlook looks set to remain strained. As a result the Kingdom is considering the possibility of allowing a new provider to enter the mobile telephony segment.
The overall economic tightening in Jordan was reflected in recent numbers posted by the Jordan Telecom Group (JTG), the country’s sole fixed-line provider, which saw a 12.5% drop in its in third-quarter 2012 net profits, amounting to JD21m ($29.48m), compared with the JD24.1m ($33.83m) recorded in the same period of 2011.
The JTG, 51% owned by France Telecom, saw overall net income fall by 1.8%, with JD126.7m ($177.87m) reported in combined profit. The government is keen to keep France Telecom invested in Jordan. To this end, in early November, Prime Minister Abdullah Ensour met with Stéphane Richard, the chairman and CEO of France Telecom, to stress the company’s importance to Jordan’s economy.
The PM encouraged the firm to pursue new investments, specifically in systems and training technology. This training is particularly important, as the Kingdom works to boost its domestic employment, a must under the terms of the country’s $2bn loan agreement with the IMF.
Under the arrangement, “The authorities will also step up efforts to address skills mismatches, a key factor behind the country’s high unemployment rate,” said Kristina Kostial, the IMF mission chief to Jordan, in an interview with IMF Survey magazine, following the loan’s announcement.
“Jordan already has promising initiatives that align education curricula with private sector needs, and training programmes that equip the unemployed with skills demanded in the modern market place.”
Efforts are now underway to enhance the telecoms sector’s ability to hire new recruits and expand its role in employment. The Kingdom’s teachers’ association is now being encouraged to speak to students about the potential of a career in the telecoms sector, for example.
Similarly, the Business Leaders Campaign (BLC), an initiative sponsored by the government, has more than 130 accomplished Jordanian professionals, including a number of telecoms executives, visiting schools throughout the Kingdom to encourage more students to enter the private sector, rather than simply aim for government jobs. It is estimated that the BLC met with over 6500 students by the end of 2012.
The government is also attempting to ensure that information and telecommunications (ICT) entrepreneurs receive full funding and support through a number of government-supported incubators. It is hoped that Amman can become a global leader in terms of innovation from its ICT firms.
Expanding the number of providers in the mobile segment may also ensure macroeconomic stability and growth, with the government announcing in early December that it was open to the idea of a fourth mobile operator.
Whether this will actually happen is unclear, however. Jean-François Thomas, CEO of Orange Jordan, immediately denounced the move as unwise and a negative step, suggesting the cash-strapped government was simply looking for a short-term boost from the sale of a new mobile operating licence.
“The decision to open the door for a fourth mobile operator at this point is not wise at all,” Thomas told local press. “We all know that the government is facing difficult financial conditions and may want to sell another licence and get cash but this is a short-term solution.”
Thomas’ objections originate with the already high mobile penetration rate, which was around 138% in September 2012, according to government statistics. The objection is likely to carry some weight, as in early November PM Ensour praised the firm as a model of privatisation and treasury revenues.
The initiatives currently underway to further enhance the sector, particularly regarding its contribution to local employment, should help keep it at the centre of economic importance through the long term.