Jordan's mobile phone wars (page 1 of 4)

For nearly six months in 2000, the lights never went off in a six-story building in the heart of Amman. The building is the headquarters of mobile telephone service provider Fastlink, and its top officials were huddled in meetings all day and into the night for the entire period, preparing their strategy for the arrival of competition, which was going to put an end to their four-year monopoly of the Jordanian market.

And there was good reason to worry. Although Fastlink had been the sole operator in the kingdom, the mobile market had not developed rapidly. Prices were high, and there were few takers for the service. It was only in early 2000 that the market really started to grow. The arrival of competition at such a crucial juncture called for drastic measures by Fastlink if it did not want the new arrival to take large chunks of the market away from it. And the newcomer, Mobilecom, was no lightweight - it was backed by France Telecom, one of the world's largest operators.

Fastlink, initially a consortium of a few Jordanian investors, won the license to be Jordan's first mobile telephone company in 1995. Besides paying a one-time fee for the 20-year license, it also had to give 20 percent of its annual revenues to the government. But Fastlink had a monopoly for five years.

Initially, things went slowly. Mobiles were yet to come into fashion and prices were high. To get service at that time, you would have to chip in over $4,000 and then pay an exorbitant $1 per minute. As business was slow, Fastlink was not keen to invest heavily or be proactive. Fastlink's management was caught in the typical dilemma: invest for profits or wait for profits before investing.

As a result, Fastlink had a measly 11,000 subscribers in 1999. Then came two changes that completely revolutionized the market. First, Fastlink caught the attention of Egyptian businessman Naguib Sawiris, who had just begun expanding his telecom business outside Egypt. His Orascom Telecom Holding (OTH) bought out the local investors, and Fastlink became part of OTH's growing portfolio. It lost no time in bringing in entirely new management to revolutionize the way business was done.

Fastlink was not the only company that witnessed a change of management. Jordan's government had been toying with the idea of privatizing Jordan Telecom (JT), the fixed-line monopoly, and had reached a deal with France Telecom. As part of the deal, France Telecom was to buy 40 percent of JT. But France Telecom had its own precondition: it wanted a mobile license thrown in to sweeten the deal. For this, the government was forced to turn to Fastlink since it was committed to a five-year monopoly.

This proved to be a lucky break for Fastlink. Because it agreed to waive its right to monopoly status a year ahead of time, the firm won a huge concession from the government. Revenue sharing was halved - from 20 percent to 10 percent. "This was almost a gift for us. By the time Mobilecom really came online, we had barely two months more of regulatory monopoly period left. By letting in competition two months ahead of time, we made huge profits, and our costs were down sharply forever," says Saad Abu Odeh, Fastlink's marketing director.

As a result of the deal with the government, on January 1, 2000, Fastlink dropped its rates from one Jordanian dinar ($1.50) per minute to about 0.30 dinars per minute, giving Jordanian consumers the opportunity to subscribe to mobile telephony without going bankrupt. It also introduced prepaid cards.