ESIS extension / Morocco / Regulatory Developments / Update Memo 2

The following report outlines new developments in the past three months and the state of on-going developments.

Out shadowed by the death of Hassan III, the essential legislative developments in Morocco concerning the Information Society during the summer of 1999 were limited to the Telecommunications sector. In this report we will concentrate our analysis to attribution of a second GSM license and its impact upon the Moroccan economy.

The use of GSM technology in Morocco is quite modest by pan-European standards. With 195,000 users at the end of September 1999, mobile telephones are used by 0.58% of Morocco's estimated population of thirty million. Government estimates predict that about six million Moroccans will use mobile phones in 2014.

The attribution of a second GSM license to the Telefonica consortium was approved by the Counsel of Ministers on Monday August 2nd, 1999. The capital of the consortium, now baptized as Médi Télécom, is held by the Spanish operator Telefonica (39.5 %), the Portuguese operator Portugal Telecom (39.5 %), the Moroccan Bank of International Commerce (20 %), the Moroccan group Akwa (ex-Afriquia) (11%) and the Caisse de Dépôt et de Gestion (8%).

Of the total tender of eleven billion Dihrams (Dhs), or 1.08 billion euros, five billion were invested directly by the consortium partners. The remaining six billion constitute international loans, the first lent by the ABN Amro consortium, the second by a Portuguese bank. The new license will be valid for fourteen years, with a period of exclusivity for the next four years. This latter clause effectively closes the market to a third operator for the near future. The consortium will invest seven billion Dhs over this period. Two to two and one half billion will be spent in the next six months for the acquisition and installation of the nearly one thousand relay stations necessary to open the new network.

Médi Télécom headquarters will be in Casablanca. The new company should effectively open shop to the public in April 2000, under the guidelines set by the ANRT.

Before the end of the year, Médi Télécom should employ 200 people. By 2002, the numbers should reach 1100 employees and 18000 jobs created indirectly elsewhere in the private sector.

During the first year of operations, the company's network should reach forty percent of the Moroccan population, and cover 2000 kilometers of the national road system. Within five years, the network will be extended to seventy-five percent of the population and 6000 kilometers of the transport infrastructure.

During a new conference held on October 1rst, 1999, M. Barrenechea, Médi Télécom's new General Director, confirmed the consortium's promise to invest 420 million Dhs in 1999, and 2.3 billion Dhs by 2002. He did not comment, on the other hand, how and when the company expected to amortize its 11 billion Dhs investment.

The consortium has chose to subcontractors, , Ericsson et Siemens, to physically set up the new network. "The choice of two subcontractors is of strategic importance for two reasons. On one hand, we wish to avoid becoming technologically obsolete by being too closely tied to one supplier, and we wish to remain flexible in our partnership agreements," argues M. Bendidi, President of the consortium.

Beyond the criteria explicitly fixed by the consortium, the two subcontractors were chosen for their previous work with Itissalat Al-Maghrib (IAM) : they have a good working knowledge of the existing network and can be called upon not only to build the new network but to assure the interconnection with IAM existing lines.

The choice of relay station sites was finalized at the end of the summer 1999. In mid-October, the construction of the new network should begin, with initial tests scheduled for the first quarter of the year 2000. The number of BTS stations (Base Transmission Stations) should run in the hundred the first year, around one thousand the second, to reach a total of around two thousand before 2002.

IAM can be expected to react to this new competition in several manners. Most importantly, a significant part of registered capital of the company will be offered to private investors within the next year. Thirty percent of the capital, based upon an evaluation of the IAM's assets, should translate into an offer some ten times superior to that raised by the second GSM license.

In the meantime, IAM will diversify its product offering. Several rate changes have already been announced or are planned in the coming months.

IAM introduced a GSM "Pack" in early July 1999 for 990 Dhs. This new product permitted the company to increase its installed base from 175,000 to 195,000 in less than three months.

Most recently, the company announced this Fall a payment card "Jaoual" (roaming), which permits thirty minutes of calls for 360 Dhs. The card can be recharged for 250 Dhs.

Finally, Itissalat Al-Maghrib , the name of the historic operator will be changed in the months to come. The media, quoting company insiders, predict that the company will be soon re-baptized "Maroc Télécoms".

Médi Télécom's network should cover all urban areas by 2002. In rural regions, where the profitability of the network is uncertain, the government has pledged complementary subsidies of up to four percent of the operator's gross sales. These funds will be taken from the ANRT's budgetary allocations.

By 2002, eleven hundred jobs will have been created directly by the new operator, and 2.3 billion Dhs invested. The 700 billion dollars invested by the consortium between now and 2014 should generate two thousand jobs directly and thirty thousand jobs indirectly in the distribution, service and subcontracting markets. The consortium has also promised to invest 1 % of its total gross sales on research and development.

"These eleven billon dirhams, indicated the recently deceased King Hassan II, represents an extremely important investment. If we re-invest them intelligently, each billion can generate three billion more in spin-off investments, which will represent an overall investment of twenty-one or twenty-two billion Dhs (in the Moroccan economy)."

As a consequence, the license feeds should not be used to finance the State budget as a whole, but should constitute a "investment fund for Moroccan infrastructure" . The program can be expected to concentrate on investments that will boost employment in public works, health and education.

Please note that this report has been prepared under the sole responsibility of the ESIS II contractors.
It does not necessarily reflect the views of the Commission, nor does the Commission accept responsibility for the accuracy or completeness of information contained herein.
The ESIS Team of contractors welcomes any additional information or corrections.