Despite being home to one of the region's least competitive telecom markets, many experts are optimistic about Lebanon's potential.
Lebanon consistently finds itself at the bottom of league tables that gauge the competitiveness of telecoms markets. Indeed, Lebanon has the least competitive cellular market in the Arab world, according to the Cellular Competition Intensity Index 2013 released by Jordan-based analysts Arab Advisors Group. The index takes into account the number of operators, packages, and services available in 19 countries across the region. Lebanon scored 40.71%, behind Syria and Libya (in contrast, Saudi Arabia was ranked as the Arab world’s most competitive cellular market with a mark of 76.6%). Lebanon was also one of six countries which ranked lower compared to the 2012 index, along with Oman, Morocco, Tunisia, Algeria and Syria.
The main reason is the continued high level of government ownership; Lebanon's two mobile networks are managed on behalf of the government, with Orascom looking after Alfa while Kuwait's Zain Group manages market leader Touch. For many years there has been talk of the mobile operators being privatised, a process that many feel will give the sector a boost and increase competition. Telco giants across the Middle East have long held ambitions to take a slice of the lucrative Lebanese market, with its high ARPU and tech-savvy consumers with Orascom, Zain, Batelco and Etisalat all having expressed an interest in bidding for the mobile licences.
The government started to privatise both telecom operators in 2007, but the process was shelved due to political divisions. Then, the financial crisis of 2008 took hold and it was felt the conditions were not right for privitisation. As BuddeComm founder Paul Budde states in the company's report on the Lebanon telecoms sector, “market liberalisation and privatisation is a contentious issue as revenue from the telecoms industry contributes a significant proportion of the government’s budget.”
“Privatisation is not really on the road map right now,” says Alfa president and chief executive Marwan Hayak. “The main issues we are facing today is the current system, which is to go back to the minister of telecommunications whenever we want to invest in the network. This is a process we are used to now. And the TRA’s role is not really well defined. It will take some time before it plays its regulatory role; everything is done at the Minister’s level.”
With the management at Touch and Alfa seeking approval for investment and the rate per minute the operators can charge also subject to minister’s approval, the effect is a stifling one. Operators are, however, allowed to launch packages and bundles without prior approval, giving operators a modicum of freedom.
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Ericsson North Middle East Unit president Tarek Saadi says that in keeping with the rest of the region, the biggest challenge of working in Lebanon is the political instability. And he agrees that the setup of the mobile operators as network managers with contracts on limited periods puts restraints on any long-term investment.
He says: "However, with the ongoing expansions, reduction of tariffs, availability of the connectivity, better coverage along with the latest launch of LTE technology, the Lebanese telecom market will be once again a competitive market.”
Hayak is in agreement that the country’s telecom sector is heading in the right direction. “We can claim that we are now back on track after so many years of absence. We have moved from a 2G and Edge network to one that is state of the art, with 4G deployment as well…Lebanon is one of the few countries in the region that had adopted LTE. So we can claim we are back on track.”
Indeed, a 2012 assessment of the smartphone market by the Arab Advisors Group revealed that 37.1% of the total cellular handsets in Lebanon are smartphones. Alfa claims to have more than 700,000 data subscribers on its network, which it says means around 40% of its subscriber base use the company’s mobile broadband and internet services. “[subscribers] are data hungry and they consume a lot of bandwidth, so that is a challenge to cope with this kind of high demand that we have in the market,” says Hayak. The operators have attempted to satiate an appetite for data with the provision of high speed networks.
Back in 2011, Alfa and Touch upgraded their networks to 3G. Alfa chose Ericsson to upgrade its network to 3G/HSPA+ technology while Huawei Technologies signed an agreement with Touch (known as MTC Lebanon at the time) to deploy 3G technology. Huawei integrated the end-to-end network solution including the RAN and packet switching.
Alfa is working with Ericsson on its 4G network. Alfa implemented Ericsson’s RBS 6000, a multi-standard base station which is compatible with different technologies: 2G, 3G and LTE. When Alfa shifted to 3G it replaced all antennas, a process Mayak likens to replacing the engine of plane while flying. For LTE, there has been less physical disturbance as the telco can use existing antennas while upgrading cabinets and software.
Following a series of tests in the fourth quarter of 2012, in May Alfa launched LTE services in parts of Beirut. The service - a first in Lebanon – was initially available via a USB dongle or Sim card in a tablet.
That initial deployment in May saw a small network of around 60 sites in Beirut, covering mainly downtown and the surrounding areas. In August (2013) Alfa launched a mobile VoIP service using the 4G technology representing the second phase of its LTE deployment.
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The LTE network provides speeds of up to 30-40 Mbps, which is six to ten times the current internet speed, the telco said.
The rollout continues, with the overall aim of around 300 sites, which is around 30% of Alfa’s overall sites equipped with LTE technology.
Saadi says that with 3G and most recently LTE implementation, “big opportunities await the Lebanese telecom sector”. He says: “We are witnessing the transformation to a networked society as Ericsson envisions and this opens up a sea of opportunities where we can work all together to bring the consumers’ wanted connectivity on the go.”
With the 1800 spectrum made available for LTE more suited to outdoor use, Alfa says it is intensifying its 3G network by taking it indoors. It is part of a “huge investment plan”,” Hayak says. “What we call the U900 deployment will give 3G coverage indoor similar to the 2G coverage we have today which will enable us to absorb more data traffic and offer more capacity to our indoor customers which is in a way cannibalising the DSL part of the business. As you know, the infrastructure is not that developed or advanced, and people rely on wireless and mobile broadband.”
The future depends on a clear strategy for ICT, says Ericsson’s Saadi. “The network managers will then be able to adapt accordingly by setting up their own plans of investments.” He points to a study by Ericsson which shows that quadrupling the broadband speed for an economy increases GDP by 0.6%.
“The same applies for Lebanon and therefore is a valid reason for the key stakeholders to rethink their strategies in an innovative way to reduce cost hence increase their penetration and revenues,” he says.
Fixed and data
Ogero Telecom, a wholly government-owned organisation controlled by the Ministry of Telecommunications (MoT), owns and operates the fixed-line telephony network. Data service provision is one of the few areas of the market with competition, according to BuddeComm researcher, Paul Kwon.
There are several licenced operators and private operators are allowed to compete with Ogero in non-voice services although until the launch of DSL services they were limited to using wireless technologies.
In March this year, Lebanon’s Ministry of Telecommunications acquired a 24% stake in the Alexandros marine cable which connects with Cyprus, Egypt and France, according to Lebanese newspaper.
The deal gave Lebanon 700 gigabytes of international capacity to Egypt and Europe, in addition to the current 200 GB that is supplied by the IMEWE cable. At the time, Lebanon’s telecoms minister Nicolas Sehnaoui said that he expected the deal to boost internet speeds in Lebanon and lead to a drop in internet wholesale rates.