Sudan and the Telecommunication Industry

By Professor Ali Abdalla Ali *

July 22, 2007 — Development in Sudan’s Telecommunication industry is one of the most visible achievements, together with Oil, of the present government in Sudan. These two achievements had given the economy a very great boost in spite of the fact that the benefits from oil at least has not reflected itself yet in a visible in the level of living of the majority of the Sudanese people. The development in the area of telecommunication was very impressive and was able to attract considerable investments from outside the country and had given a good number of the population to be in a daily contact with each other through the ingenious invention of the mobile phone. It brought distant people together in an unprecedented way and at a time when the usually well knit Sudanese social fabric is showing signs of decay, at least in Sudans’s urban areas. About 6 % of the Sudan’s population had mobile phones by end of 2005 according to the Arab Advisory Group, Amman.

All this was a result of the privatization process which was started in mid nineties in the telecommunication sector by the present government. It started by Sudan Telecommunication Company (SUDATEL for short) whose paid up capital is at present no less than US $ 725 million , about 70 % being foreign contribution and it is also the major company whose share is highly traded (70% of total trading) in Khartoum Stock Exchange. Sudatel was able to establish a mobile company in the name of Mobitel. The general policy of telecommunication affairs is run by the National Telecommunication Corporation (NTC) which is the sole licensing authority on behalf of Sudan government .The government intent on further liberalization allowed other mobile companies to come into Sudan such as MNT of South Africa (previously Areeba). The government in its drive for more liberalization also decided to sell Mobitel after it had reached about 1.7 million customers. It was wholly sold to a Kuwaiti investor for about US $ 1.3 billion. Immediately after that the government started the operation of two more mobile companies i.e.”Sudani” and later “Canar”. According to some news, Sudani was not supposed to be started because according to the same news at that time a pledge was given by NTC to the new owner of Mobitel that no other mobile company will be allowed to operate. In spite of the existence of the abovementioned companies the mobile industry is still virgin according to the above information (only 6 % of the population are mobile users).Whether the market can absorb new entrants is a matter for more discussion and also the responsibility of NTC. However, the concentration in this brief analysis is on the declaration by the CEO of Mobitel company Mr. Khalid Muhtadi on Sunday about a possible new operator in the mobile market.

According to ST on 16th.July, the CEO of the wholly owned Kuwaiti Mobitel in Sudan “had urged the government (Sudan) on Sunday not to issue a further mobile phone saying a new competitor might force it to reconsider a US $690 million expansion plan” as quoted by ST from Reuters. He also added that such a move might affect the investment environment. He also said that they (Mobitel) came to know that another mobile company (Etisalat fromUAE) might be allowed to operate in Sudan as a new mobile company. I would like to make the following comments;

1) The CEO indicated his surprise when the NTC decided to start Sudani as a new mobile company immediately after he had taken over Mobitel more than a year and a half ago. The question here is whether the new owner was given a written pledge that no more mobile companies will be allowed to operate after he had taken over Mobitel? That does not seem to be the case because in addition to Sudani, Canar was also allowed to operate. So what is the cause of this surprise?!

2) The CEO had urged the Sudanese authorities not to allow another new mobile company to operate in Sudan. This seems to be rational from the point of view of the Kuwaiti investor. However, it appears that he is not only urging the authorities not to allow new mobile companies but rather threatening that if this were to happen the company might reconsider its expansionary policy in Sudan’!! Who is supposed to design and execute telecommunication policies NTC or the CEO of Mobitel? This is one of the issues that anti-globalisation movements are worried about, i.e. the attempt on the part of multinational companies try to dictate their own terms even to the extent of forcing changes in domestic policies. If Mobitel feels that they are not treated fairly by not allowing them to become a monopoly they can always sell out and leave the place.

3) Leaving the place will not be entertained by Mobitel simply because with the present level of tariff relative to the tariff of other operators of mobile phone, Mobitel had made a profit of US $500 million in its first year of operation. If one looks at the profits of Mobitel in all its locations in Africa, the l profits of the company’s operations in Sudan seem to be very significant.

4) By trying to urge the authorities not to allow any more mobile companies, Mobitel is definitely very intent to have a full monopoly on the mobile phones business. This drive might behind the failure of MTC in Iran, Egypt and Saudi Arabia where regulation seem to be very stiff. As mentioned about 6 % only of the population own mobile phones. The market is still virgin and promising so why is Mobitel afraid of competition? MTC should not be worried to face competitions since it seems to be adopting a better policy than the other operators who seem to concentrate on the hard ware rather than the software, which is superior and the reason behind its high level of profits. In a globalised world the market is that of the buyer and not the seller and that can only happen through competition rather than monopoly that the prices to the consumers will be lowered. Monopoly, although, prohibited in Islam, and also not easily acceptable in capitalism can be exercised by the State for a certain purpose and duration, but not for a privately owned company such as Mobitel.
5) If the policy of Mobitel has immediately been directed towards changing its ownership to a public company where the Sudanese and foreigners could contribute, as is the case in Sudatel, then the situation might have become different. Usually some investors try to have the cake and eat it alone rather allowing others to share with them!!!

6) What I did not really like in this whole affair is the general attitude of the CEO of Mobitel specially his unjustified reference to the investment environment and that it will be affected. He did not say how it will be affected. Leaving such a categorical statement without explanation might give the impression that there are hidden things that he does not want to spell out. Such a statement as it is might even do more damage to the investment environment which enabled his company to earn US $ 500 million in one year! In addition is his threat that if another operator is allowed that Mobitel might revise its plans for further expansion for which the company had allocated US $ 690 million. It is this kind of attitude that gives support to those who are against Foreign Direct Investment (FDI) in Sudan .In this year’s annual meeting of the African Development Bank which was held in China during May for the first time, the Minister of Finance of Zambia Mr. Hg’anda Magande addressing the Chinese in their own home said,” We don’t want a paternalistic arrangement where someone gives us scraps while he’s taking the majority of the revenues,” and added “We want a partnership that is win-win partnership, both for those that own the mineral and those who want it.” (see ST 18th.May 2007). The same could apply to any investor in the Sudan including Mobitel!! The best way to ascertain about the mobile company that provides the best services and the best prices to the Sudanese consumers is through a questionnaire which the writer as a researcher is intent to carry out soon.

* The writer is Professor of Economics,College of Business Studies, Sudan University of Science and Technology. He can be reached at [email protected].