Jordan's mobile phone wars (page 4 of 4)

By mid-2001, it was becoming clear that mobile phone manufacturers had overestimated the demand for new phones and that they were sitting on a mountain of inventory. "We saw the opportunity," says Abu Odeh, "and we struck very attractive deals for hundreds of thousands of new sets, which we then literally gave away in the market and thus acquired new customers."

Mobilecom eventually caught on, but too late. It took nearly six months to react to Fastlink and by then inventories had dwindled. Manufacturers had raised the prices of handsets by 20-40 percent. Giveaways were simply no longer viable.

Fastlink's proactive approach paid off handsomely. At the end of 2001, it had increased its lead over Mobilecom significantly. While Fastlink ended the year with 650,000 subscribers, having added 400,000 new subscribers in the preceding 12 months, Mobilecom had managed to add just 80,000, for a total of 180,000. And while Fastlink was a profitable operation, Mobilecom had losses of over 20 million dinars in 2001.

But Fastlink's management had failed to foresee the boom, and the company began having problems. In late 2001, Fastlink's installed network capacity was far short of the number of subscribers, leading to network overload and poor connection rates. The problems were serious enough to shake up management, which invested $120 million in doubling its network capacity. The company says it will increase the margin between projected demand and capacity in order not to repeat the mistakes of 2001.
Saturation.

Nine months into the year, it is clear that Orascom Telecom has won this battle. By July, Fastlink's subscription base increased to 850,000, while Mobilecom was way behind at 250,000, with little chance of catching up. Fastlink says it will end the year with 1 million subscribers and that the Jordanian market is racing towards saturation. Getting every new subscriber is increasingly difficult for both operators because of a lack of purchasing power at the lower end of the economic scale. The boom of 2001 and early 2002 is clearly over.

Mobilecom says it hopes to curtail its losses to $18 million this year, but the company has little hope of recovering lost ground. The market is expected to take a year to reach a total of 1.5 million subscribers, which is saturation point for Jordan with its population of just 5 million.

The experience in Jordan has turned out very differently for Orascom Telecom and France Telecom. While Fastlink is currently one of the Egyptian company's most profitable and biggest ventures, Mobilecom represents one of the French operator's biggest losses and casts a shadow on its presence in Jordan. It is perhaps no coincidence that, in mid-September, France Telecom's embattled CEO, Michel Bon, was forced to resign. The latest victim in the global telecom wars.