It has been a busy few weeks for Kuwait’s telecommunications sector, with the country’s existing mobile phone network operators announcing ambitious expansion plans overseas, while facing the prospect of a new rival in the domestic market.
Kuwait’s mobile phone market is set for a major upheaval after the government announced on Dec. 17, 2006 that it would allow a third license to join Mobile Telecommunications Company (MTC) and the Wataniya Telecom Company.
Decision comes from political pressure
The decision by the Kuwaiti cabinet to back the proposal for a third operator came after considerable pressure from the opposition, which had long contended that the establishing of Wataniya in 1999 had not done enough to boost competition in the telecoms market.
Under the cabinet’s proposal, 60% of shares in the new firm will be available to the public, 24% to state-owned authorities including a pension fund and an investment body and the other 16% to a core local or international investor. The government had rejected a bill tabled by the opposition earlier this year to set up a third operator but appears to have accepted both the economic viability of a new venture and the public pressure for a wider range of options.
The third license has been something of a political football in Kuwaiti politics, with the government contending that it was a matter for the cabinet to decide on while the opposition-dominated National Assembly took the position that it was a legislative issue.
Speaking on December 10, before the cabinet formally approved the proposal for the new network, Communications Minister Maasouma al-Mubarak said that while the government was not opposed to issuing a third license, or more if needed, any such company would be set up through the ministry of commerce and industry and not through mechanisms established by the assembly.
The government firmly believes that establishing companies is the sole jurisdiction of the government and not the legislative power, she said.
Regulation required
Al-Mubarak also said that the government was looking to establish a communications commission to regulate the telecom market, a step that would, to some degree, allay opposition concerns over a lack of competition and ensure transparency.
Whenever the new company becomes operational, it will face fierce competition in the tight Kuwaiti market. The country already has one of the highest levels of penetration in the world, with 2.5 million of Kuwait’s population of 3 million currently subscribing to either MTC or Wataniya.
Though Kuwait’s two domestic mobile phone firms may be facing additional competition at home, the threat hasn’t fazed either MTC or Wataniya. Both have recently announced new plans to expand their already sizeable international operations.
On Dec. 17, MTC announced that it was considering placing a bid for Paktel, Pakistan’s fifth-largest mobile phone company, after the operator’s Luxembourg-based owner Millicom made public plans to bow out of the Pakistani telecoms sector. If the sale goes through, it would give MTC a further 1.5 million subscribers to those it has in its 20 existing overseas operations and allow it to access a rapidly growing market.
Only days before, the international arm of rival Wataniya signed an agreement with the Palestine Investment Fund (PIF) to set up a new mobile phone company in the Palestinian territories. The deal will see the Kuwaiti company manage the operation and hold 40% of the new firm’s shares, with the PIF having another 30% and the remaining slice being offered to the Palestinian public through an initial public offering (IPO).
In September, the Palestinian government’s Ministry of Telecommunications and Information Technology awarded Wataniya the tender to establish the second mobile phone network after the company submitted a bid of $179 million for the rights.
The expansion into the Palestinian market will further consolidate Wataniya’s overseas holdings, with the company also operating in northern Iraq, Tunisia and Algeria.
News of the shareholders agreement came only a day after the Kuwait Projects Company announced that it was considering selling its 24.9% stake in Wataniya, with the proposed move being linked to the general downturn in the region’s stock markets.
