North Africa Telecommunications Report Q3 2008

This quarter has seen a number of regulatory developments in North Africa. In Morocco, incumbent operator Maroc Telecom launched 3G services in January in a number of major cities. This followed the launch of 3G PC datacards by rival operator Meditel in 2007. The launch confirms Morocco as the most advanced telecoms market in North Africa, thanks to strong growth in all sectors and the rollout of new services. The fixed-line market continues to enjoy strong growth thanks to the expansion of fixed-wireless services by operator Wana. The market expanded by almost 90% during 2007, after a period of steady decline. Wireless services are also contributing to growth in the internet sector, although ADSL remains the key driver of the market, which is dominated by Maroc Telecom.

In Algeria, the privatisation of Algerie Telecom is inching closer. In early 2008, government officials said that the tender would take place by June 2008. We remain slightly sceptical as to whether the state will meet its target, as the sale has already missed several earlier deadlines and privatisations in other key sectors have suffered delays and cancellations. Should it take place, we maintain our view that the sale will attract considerable interest from telecoms operators around the world, attracted by Algeria's large population and growing wealth, which offers opportunities to upgrade subscribers to higher value services and hence drive up Algeria's low ARPU rates. There is also room for volume growth in the mobile sector.

The market exceeded our expectations in 2007, growing by 26% to hit almost 28mn subscribers by the end of the year. As a result, we have revised our mobile forecasts upwards and now expect penetration to exceed 100% in 2011.

In comparison to its regional peers, few developments have occurred in the Tunisian market and we maintain our core view that regulatory developments are necessary to stimulate growth across all markets.

The mobile market has benefited from competition, in the form of Wataniya/Orascom joint venture Nedjma and we believe that the operator's growth continues to outstrip that of incumbent Tunisie Telecom. As in other regional markets, the mobile sector is dominated by prepaid services - only 1.4% of Nedjma subscribers used postpaid services at the end of 2007. Driving up the proportion of postpaid users would have a beneficial impact on ARPU rates, which are currently hovering around US$14 per month.

In the internet sector, we continue to see good opportunities for growth, given Tunisia's relative wealth.

In early 2008, wireless operator Divona Telecom contracted the supply of WiMAX solutions for its city network rollout. If Morocco serves as an example, we believe that wireless services could have a positive impact on internet and broadband take-up in Tunisia.