The next generation: Waiting for regulatory approval to move forward

The telecommunications market in Algeria is set to see significant gains with the introduction of third-generation (3G) services in 2012. The launch of this much-anticipated technology is set to create a number of new opportunities for operators to expand revenue sources and satisfy growing consumer demand for high-capacity data networks. As competition between Algeria’s three mobile operators intensifies and average rates per user (ARPU) fluctuate amidst price competition, firms are increasingly looking to develop value-added services for additional revenue, which will be facilitated by the 3G platform. The recurrent question of when this technology will finally be rolled out persists, but officials assert that these services will be launched by the end of 2012.

LONG DELAYS: Discussion for the rollout of 3G services began in mid-2008, and mobile operators were first invited to bid for 3G tender licences in September 2011. However, the auction was later cancelled to give operators more time to prepare their bids.

According to local media, Moussa Benhamadi, the minister of post and information and communications technology, said that the delay in 3G provision was partly made to avoid excluding Djezzy subscribers from accessing the new technology, given that since 2010 the operator has been involved in a protracted legal dispute regarding alleged foreign exchange violations in the sale of the operator.

LOOKING FORWARD: While state authorities expect resolution of the Djezzy dispute in the near term, the government announced in May 2012 that it might launch the new technology without a resolution of the Djezzy affair. Algeria’s three mobile operators have already established base transceiver stations (BTS) nationwide that can transmit and receive 3G systems. At the moment, the Ministry of Posts and Information and Communication Technologies (Ministère de la Poste et des Technologies de l’Information et de la Communication, MPTIC) is in the process of determining a strategy to award the long-awaited licences.

According to local press, there are three formats under consideration: the first is to offer a single 3G licence to the highest bidder of the three mobile operators; the second would award a permit to all three operators to establish 3G networks at a minimal price, requiring providers to pay an annual fee constituting 3-4% of their revenues; and the third would award licences to each operator at full market price.

REAL GAINS: Regardless of the outcome, the delay has cost operators almost a year in terms of development. Algeria is already behind regional counterparts, as Morocco and Tunisia set up 3G networks in January 2008 and July 2012, respectively. The benefits of 3G are manifold: the technology will stimulate competition between mobile actors as operators contend for consumer revenues, lowering prices, encouraging innovation and investment, and broadening the range of products on offer. New services enabled by 3G technology include higher data speed, video-conferencing, high-speed web and wireless application technology, internet protocol television and enhanced audio and video streaming.

Although overall consumer demand for these products remains low given limited purchasing power, foreign and private domestic firms are increasingly aware of the ability of 3G-powered services to improve business communication and feed private sector demand for these technologies. A continued rise in consumer purchasing power is also expected to spur demand for higher quality products, driving expansion in the sector as more Algerians invest in smartphones and 3G-enabled products. “The role of 3G could dramatically change the telecommunications sector. It will mean more opportunities for mobile phone companies and new services to make an impact. It will increase competition in the country,” Zhao Liang, general manager of Huawei in Algeria, told OBG. Efficiency gains are also expected from the growing accessibility and mobility of information, which facilitates decision-making and investments in the national economy.