Competition improvment : the Moroccan experience

1. www.anrt.net.ma Competition improvment : the Moroccan experience Mohamed EL KADIRI Central Technical Director, ANRT, Morocco elkadiri@anrt.net.ma

2. THE CONTEXT Pop: 30 Millions Area:710 850 km2 GDP/Cap 1460 US $

3. Moroccan Regulatory framework: 1997 Telecom Act • Corporatization of incumbent operator • Separation of policy making function from regulatory function: creation of independant regulator: ANRT • Licencing regime for new operators • Obligation to publish Reference Interconnection Offer for operators with SMP • Regulated Universal Service tariffs

4. Moroccan Regulatory Framework: The Tegulatory Agency • Status:public office with financial autonomy, under direct supervision of the Prime Minister. • Main Missions: • Proposes/adapts laws, decrees , license terms, ….. • Controls implementation of license terms • Manages licensing process • Management of Frequency spectrum • Management of Numbering scheme • Encryption’s control and regulation • Interconnection dispute resolution... • Revenues • Proceeds from frequency fees • Percentage of proceeds of licences • Operator’s contribution to research, training and normalization

5. Moroccan legal Framework Three type of networks • Public telecommunications network: The entirety of the telecommunications networks established and/or operated for the needs of the public. • Independent network: a telecommunications network necessarily and exclusively reserved to private or shared use, without a commercial purpose and whose use is intended exclusively for the specific needs for which the network was established. An independent network is intended: • - for private use, when it is reserved for the use of the person or entity who establishes it; • - for shared use, when it is reserved for the use of a company or its subsidiary companies and branches, in order to exchange internal communications within the same group. • Internal network: An independent network constructed entirely on the same piece of property, without occupying either the public domain, including hertzian space, nor third party property. Public Network: Licensing regime Independent Network: Authorization Internal Network: Free Three regimes

6. State owned monopoly LICENSING : A TRANSITION PHASE IN THE LIBERALIZATION PROCESS • Transition period (limited competition) • Complete deregulation (full competition) • key decisions are driven by need to deliver operator benefits to create healthy market: • Limited price reductions • No market value destruction • Operator´s viability guaranteed • Encourage development of infrastructure and of new service offerings • But, avoid any unnecessary burdens for operators and regulators • Strategic focus • decisions are driven by focus on consumer benefits: • High price reduction • Broad range of service offerings • Key regulatory moves • Tariff re-balancing towards cost • Controlled increases in number of licenses • Managing incumbent to be prepared for competition • Creating favorable regulatory environment for entry (e.g., interconnection, spectrum, numbering) Arbitration of interoperator disputes Transparent way of access to scare resouces

7. LICENSING STRATEGY: key issue for developing competition in the context of a broader regulatory strategy • Objectives • Key levers • Action plans • Regulatory objectives and constraints • Perform diagnostic of Moroccan market • Understand regulatory objectives and policy priorities • Determine external constraints and draw implications for the licensing strategy • License strategy • Industry structure, license scope • Target operator profiles • License details • Rights and obligations • Bidding process • Award criteria • Guidelines on levers • Frequency Management • Interconnection rates and regime • Equal access terms • USO source/structure • Important regulatory levers • Support strategy using • Scare resources (Spectrum and numbering) • Interconnection • Equal access • USO • Direct incumbent regulation • Consider adaptations to regulation of incumbent, e.g., quality of service requirements • Details on incumbent regulation • CdC, including any future changes

8. Two major operations: Competition and privatization • Award of the 2nd Mobile license 1999: • Bid of $1,1 Billion • Spanish-Moroccan-Portuguese consortium "Médi-telecom” : Telefonica, Portuguese Telecom, BMCE Bank…. • Privatization of the incumbent operator 2001-2004: 65.9% private: • 35% sold to VIVENDI for $ 2,3 Billion in 2001 • 16% sold to VIVENDI for Euros 1,1 Billion in november 2004 • 14.9% in Stock market (Casablanca and Paris) • New generation licenses award 2005 (to be detailed next)

9. Prescriptions • Drafted by ANRT • Approved by the administration • Licenses instruction : ANRT Call for bid Choice and Weighting of the different criteria Criteria Definition Diminishing the uncertainties Depend on the license objectives • Decomposition of the criteria (to be measured) • Minimization of subjective factors • Beforehand communication of the rules related to call for bid defining the procedures and the criteria License • Attribution : Governemental decree Lessons learned: clear and transparent licensing process • Set and exploitation of telecommunication networks • SELECTION PROCEDURE

10. Lessons learned:Pedictability of license terms Terms of license = tender documents + bids + = (Coverage, Tarifs, QoS,…) • Right to Interconnexion. • Right to access the state public and private domain • Right to access the ‘high level points’ • Right to frequencies • Right to numbering. • Free setting of commercial tariffs by operators except for universal access services prices.

11. 97 Telecom Act Tariffs(Dh)/min ( VAT excluded) GSM2 license Liberalization results: GSM boom and F2M substitution Acces: 97% of the population is covererd Tariffs down Flexibilty and adptation to way of live

12. Fixed Operator Mobile Operator VSAT Operator RadioTrunk opertaor GMPCS Operator ISP Competition through VASP Monopoly Duopoly Oligopoly Oligopoly Duopoly MAROC TELECOM MEDITELECOM MAROC TELECOM SPACECOM GULFSAT CIMECOM EUROPEAN DATACOM GLOBALSTAR ORBCOMM SOREMAR THURAYA • MAROC • TELECOM • MAROC • CONNECT • MTDS • Others INQUAM MORATEL Telecommunications landscapeon the eve of fixed service liberalization

13. GIVEN THE DEVELOPMENT OF MOBILE , THE FIXED SERVICE SHOULD FOCUS ON BROADBAND AND DATA TO BUSINESSES • Penetration of mobile • Per 100 inhabitant Best of 2 worlds 80 Sweden Switzerland Italy 70 Norway Mobile Societies Portugal UK Spain 60 Greece Germany Move towards residential narrowband* France Belgium Australia 50 Japan USA Internet Societies 40 30 Chile Emerging Societies Argentina 20 Hungary Mexico Move towards Enterprise Data/Internet Morocco Peru 10 Poland Romania 0 0 5 10 15 20 25 30 35 40 45 50 • Internet usage penetration • Percent situation by End 2000 For illustration Source: ITU Yearbook of Statistics 2000, The Internet Almanach Document illustrated by Mckinsey

14. 3-5 years liberalization strategy National Frequency Plan Investor’s Interests Moroccan Market Study Regulatory Levers Liberalization Process: MRC’s methodology Legal Framework Law Application Decrees Liberalization schedule Studies Leased lines Off shoring Business’ needs Number, Type, and License contour

15. Fast Moving Environment: The Convergence Fact Voice / Data 2 to 2.G GSM IP Networks 3G UMTS/CDMA Spectrum = Bottle neck? Broad Band Fixed WLL Interoperability WiFi/ WiMax Ubuquity

16. Spectrum management: A National Plan ITU Usage (NFDb) National strategy Trends Demande Draft plan + Governemental departments NPF Consultation

17. Moroccan teleco Market: important potential

18. New Generation Licences Goals • Local access Generalize telecommunications access to homes and businesses • Infrastructure Increase the international and the national long distance networks capacity • Internet and data transmission Boost Internet use at homes, businesses, schools and within the State administrations • Market Stimulate price decrease

19. Approach followed • Legal environment enhancement • Enshrining Technology Neutrality principle • Moroccan Market Study • Upgrade and visibility related to the main regulatory actions • Adoption of a realistic liberalization timetable

20. Legal framework enhancement • New notions in favor to investments • Broadening of the universal service definition to comprise value added services including Internet • Ability of public and private companies to lease their infrastructures to public telecommunications operators : Definition of «Alternative infrastructures» and «Alternative infrastructures operators» • Introduction of local loop notion for unbundling purposes • Operator contributions revised • Operator contributions to (U.S.) decreased from 4 to 2% of the turnover before tax, interconnection charges excluded • The financial contribution of all operators for training, research and standardization is set to 1% of their turnover, with clear distinction between research (0.25%) and “training and standardization”

21. Legal framework enhancement • New measures to guarantee fair competition • By keeping continuous watch against abuse of dominanceand other practices that aim to eliminative a market • By empowering ANRT to decide disputes regarding anti-Competitive Practices as well as those related to infrastructure and equipment providing • New mechanisms for regulation • Consultations, measures to be taken on own initiative basis • Processes for urgent cases included in the rules of procedures regarding disputes, sanctions and protective rules against anti competitive practices

22. Enshrining general principles • Technology neutrality • Making availbale a wide range of frequency bands to cope with diverse technologies • Convergence • Voice + Data • Fixed and / or limited mobility (around 35km) : 3G Mobility option (one license requirements of the first 18 months complied) • Several infrastructure options • Using interconnection • Using partial/complete local loop unbundling • Leasing others’infrastructure • Building own infrastructure • Custom-made approach open in terms of coverage targets • Each operator can apply for diffrent batches

23. Upgrade and visibility related to the main regulatory actions • Update of Incumbent’s Interconnexion catalogue • Publication the main orientations related to the telecommunications sector liberalization for the period 2004-2008 • Licenses’ range and timetable • Guidelines • Relevant market/SMP 2005 • Colocation and infrastructure sharing 2005 • Carrier selection 2005/2006 • Local loop unbundling 2006/2008 • LRIC / Price Cap 2006/2008

24. Diversity of batches offered in New generation licenses • 2 local loop licenses • Building and operating wireline/ wireless local loop networks to offer fixed service • Building and operating wireline/ wireless local loop networks to offer fixed services and mobile services in predefined restricted local areas • 2 licenses for national trasmission • Building and operating national transmission infrastructures (LD) • Accessing end users through carrier selection • 2 licenses for international transit • Building and operating international infrastructure for outgoing and incoming international traffic • Accessing end users through carrier selection

25. Key Principles for granting New Generation licenses • Participants have to satisfy a minimum set of criteria • The evaluation process will favor large scope bidders requesting multiple batches. • Proposals from participants are assessed in their entirety, all batches included • The assessment is based on a combination of technical and economic criteria (references and commitments) and financial criteria (the proposed license fee) • Technical and economic criteria account for the larger part of the assessment • The technical and economic criteria are largely based on the commitments that participants are willing to make in terms of network deployment and quality of service • Once the license is attributed, the commitments proposed by a participant become legally binding

26. To be qualified , the candidate should fulfill some specific criteria Qualification Criteria Any candidate that would be graded ‘insufficiently’ to one of these criteria will be disqualified

27. Global assessment process

28. Technical rating

29. Roadmap February 2004 November 2004 January – February 2005 January 2005 24 February 2005 March- April- May 2005 20 June 2005 8 July 2005 21 September 2005 Launch of the study Approval of study results by ANRT board Pre-roadshow Approval of 3G option by ANRT Board + Timetable Presentation of New Generation licenses+ Launch of the tender Roadshow Candidates submit their offers Medi Telecom was awarded a fixed license Maroc Connect was awarded a limited mobility license

30. CONCLUSION • Licensing process should fit the actual environment, as well as the development objectives of the sectors. • It should be tailored to take into consideration • The exact needs of the operators, the regulator and the state, • With a view of maximizing their profits, and those of the end users. • Special focus on the most scare resource: frequency For Mobile and Fixed networks thanks to convergence Introducing competition is a necessity Setting it is more than this

31. www.anrt.net.ma THANK YOU FOR YOUR ATTENTION elkadiri@anrt.net.ma