GSMA: Establishing industry consensus

Operators and government to overcome challenges to growth in the sector in the region
Peter Lyons, director of Middle East and North Africa at GSMA
Peter Lyons, director of Middle East and North Africa at GSMA


Spectrum has become one of the major challenges for operators worldwide, with government decisions on spectrum allocation, and operators choice of how they align their investment in different areas, likely to determine the future of operators and the services that are on offer to the end users.

Peter Lyons, director of Middle East and North Africa at GSMA, who is also member of the spectrum policy team for the GSMA, believes that spectrum is a core issue that must be tackled in order to improve the operational climate that operators are facing today.

The disparity in the penetration rate in the Middle East and Africa region is also linked to spectrum, as Lyons explains. Affordability of smartphones and uptake of services are also impacted by spectrum issues.

“To improve affordability, there are some things that the industry and the government can do together. They have to work to get harmonised spectrum to mobile broadband, in particular the 700MHz spectrum,” he said.

Lyons explains that more spectrum allocation to operators in that band will will improve connectivity. However, it also plays an important role in the affordability. This band is nearly globally harmonised, which means that mobile phone chips that operate on this radio frequency can be used in more places, giving the opportunity to produce mobile phones on a mass scale and sell them in more places, making smartphones more affordable.

If the devices are more affordable, then usage will increase, and operators will see an increase in subscribers for data services, increasing revenue, which can then be passed on to customers in the form of price cuts.

However, the gap between mobile adoption and technology deployment by operators also depends on other limiting factors, Lyons said.

“Taxes on the services or devices pushed the cost up and it promotes grey market. We recommend governments to think of the medium term, not necessarily the long term, when it comes to spectrum and taxes. They [governments] shouldn’t be looking at taxes as revenues, they should look at the final growth that will be translated into GDP.”

“We need to rearrange the taxes. It requires some readjusting, but it is a political issue. The finance minister is not going to reduce it because right now it is bringing cash to the treasury,” he said.

Regarding taxation specifically, Lyons noted some countries that are not attractive to private investment in the telecoms sector because of the high taxes related on products or services in this market. “Jordan is a good example on how taxation is affecting the telecom sector, but there are other countries with even higher levels like Turkey and Uganda,” he said.

“There are also places in the GCC where you don’t necessarily think about taxation. In Saudi Arabia and the UAE, it is not called tax and it is not consumer facing, but it is called a 'royalty' and it is absorbed by the operator. The case of the UAE, when the government takes 50% of the net profit of Etisalat, it really sends a very negative signal to investors,” he concludes.

Lyons thinks that the industry should propose specific plans for each market to show the government the changes that can be made to maintain the revenues from the telecoms sector, as well as providing a more attractive market for private investors in telecoms and related services.

“We [GSMA] are looking to propose it [specific telecom plan] to Saudi Arabia, Jordan and Tunisia. These series of studies will show how taxes can be readjusted. You have to present a very clear analysis of why reducing, for example, tax on smartphones, is going to lead to a huge upsurge in people buying smartphones and mobile data will increase, you [government] will get more money on the tax that you get from operators and you can increase the revenue tax,” he explains.

In order to improve these two issues, spectrum and taxation, Lyons believes that governments should develop, with the industry, a four to five year plan on the telecommunications sector, helping operators to maximise their investment in the country.

Challenges harmonising spectrum

On June 2015, countries will have to meet the deadline set by the International Telecommunications Union (ITU) for television stations in region 1 (Europe, Middle East and Africa) to migrate from analogue broadcasting to digital terrestrial television (DTT), to allocate the digital dividend to the mobile service for the 700MHz.

Instead of naming countries that will not meet the deadline, Lyons prefers to say which countries are making a strong effort to achieve this shift. “GCC countries will get there. For example, in the UAE, all broadcasters have shifted. I am hopeful that Egypt will make it. South Africa, half possibility as it depends on the political will because the government has enough funds, but maybe they will not use it for this. Nigeria is working really hard, I am not sure if they are going to meet the deadline but they are taking aggressive methodical steps towards it. In Central Africa, for example, they are not doing anything for obvious reasons, because of their civil war so this issue is deprioritised.”

Some countries are not financially ready for this change, Lyons explains that many countries in Sub-Saharan Africa have several analogue broadcasters, in many cases related to local and political interests, with no resources to adequately make the transition to digital. “On top of that, many of the customers have analogue televisions that cannot be updated and will not receive the digital signal,” he added.

Lyons pointed out that countries that don't make the shift are likely to find themselves facing other problems.

“There are a few challenges. What we are seeing is that government and regulators across sub-Saharan Africa are working towards this shift. Now, we know that it is a priority, not only because of the benefits that mobile broadband will bring to the coverage and the digital inclusion, but there is an increasing realisation that if these countries don’t finalise the cut off of the analogue broadcast services, they will become importers of all of the analogue junk from around the world," he said.

"These countries will be magnets for this waste. We know that there is a lot of work done on what will be the environmental impact from suddenly having your country becoming the dumping for all the analogue televisions. For example, there will be problems with all the mercury from the televisions leaking to the water and poisoning the drinking water and it will also have a negative effect on agriculture. Governments realise that it is a bigger questions than mobile broadband,” he said.

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