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shake up the cellular telecoms market

OTA wants sign up one million subscribers to its Djezzy GSM network by February 2003

The Algerian telecommunications sector has been undergoing a radical overhaul over the past couple of years, to meet the needs of a burgeoning population and a modernized economy. It has not always been an easy time, especially for the former state monopoly, Algerie Telecom, but the potential market growth is huge.
A major step forward in the liberalization of the telecoms market came last year when a second GSM (Global System for Mobile communications) license was put out to international tender. The winning bid came from Egypt-based Orascom Telecom Holding (see box below), which put up $737 million. General Manager of Orascom Telecom Algerie (OTA), Lionel Coussi, believes Algeria can become the jewel in their crown.

“Algeria is seen as having the biggest potential in North Africa,” he says, “maybe in the whole of Africa, if one excludes South Africa. I think the amount we offered shows how much we wanted that license.”
OTA is nothing if not ambitious. The company is aiming to have a million subscribers within a year, thanks to its “Djezzy GSM” product, despite having to compete with Algerie Telecom’s own GSM operation. Some local commentators have been skeptical about OTA’s chances of meeting its target, but Mr. Coussi is upbeat.
“When the network started in February, of course people were a little wary about this new private enterprise. We did have a few hiccups, but everything settled down quickly. Soon we extended our coverage from Algiers to Oran, and then Tlemcen and Constantine.”

OTA now serves seven urban areas in Algeria, but the big challenge – for both OTA and Algerie Telecom – will be how to bring services to the rural areas. However, young Algerians, in particular, are taking to mobile phones like ducks to water, not least because call charge rates are modest, even in comparison with Egypt, though that situation may not last for ever.
“The situation we have at the moment is classic,” Mr. Coussi comments. “Just 20 percent of our clients – corporations and the like – generate 80 percent of our income. So the crucial thing is to win their loyalty. That is true all over Algeria, because the demand is not just in Algiers.”

There is a certain pressure of time as, in principle, the government may open the telecoms market up further by offering a third GSM license to tender in the mid-term. The deal OTA signed leaves it free from further competition until the end of 2003, but there is no guarantee beyond that. However, Mr. Coussi is not too worried, as he believes the Ministry of Post and Telecommunications will leave the situation as it is for a while, not least because Algerie Telecom is taking longer than expected to get its own house in order. In the meantime, OTA has been strengthening its own capital by inviting foreign participation. Among those who have seized this investment opportunity is the American International Group (AIG), which has put in $30 million. Equity spread will be further enhanced if OTA gets listed on the Algiers stock exchange, which is on the cards.

At the outset, OTA brought in a number of foreign telecoms experts to get the operation off the ground. But the contracts of several of those have expired, and the company is on track to meet its target of 95 percent indigenous personnel. “This basically means young people who have just graduated,” says Mr. Coussi. “The universities provide a good educational basis, and we graft on to that professional training adapted to our requirements.”

Orascom telecom Holding (OTH) is part of the Orascom group of companies, and one of the largest and most successful private sector firms in Egypt. Today the parent company is divided into five major divisions: Orascom Telecom Holding, Orascom Technology Systems, Orascom Construction Holdings, Orascom Hotel Holdings, and Orascom projects and Touristic Development.
OTH aims to be the leading telecoms firm in North Africa and the Middle East, notably through its acquisitions in Algeria and more recently in Tunisia.

In May, OTH confirmed that it had signed a concession agreement for Orascom Telecom Tunisia to operate the second Tunisian GSM license. OTH now has 21 licenses covering the region, with other networks in Jordan, Syria, Yemen, Pakistan, Congo, Chad and 12 additional countries in Africa.
As well as its GSM operations OTH has other subsidiaries in the areas of internet and satellite technology.