Telecom's role as stronghold of financial resilience can drive economic growth (page 1 of 4)

In fact, economic turmoil in international markets has left governments across the globe scrabbling for an economic recovery lifeline. In the Mena region, governments may be able to reach for telecom, which has traditionally shown financial resilience.

Rethinking strategic perspectives is essential, and through a targeted approach to regulatory change and cash injection, telecom offers a strong hand to lift economies back onto their feet.

Karim Sabbagh, Head of the Global Communication, Media, and Technology Practice at Booz & Company, explained:

"At a time when Mena nations require financial security, they have a unique opportunity to transform their economies to be information-driven, with telecom at the core."

Rethinking telecom regulation:

In the Mena region, telecom, a traditional pillar of financial resilience, may offer a route to economic recovery. It is therefore essen¬tial that policymakers and regulators strengthen the sector, by adjusting their strate¬gies accordingly.

Current uncertainty presents an opportunity to broaden the boundaries of telecom's domain and bolster other parts of the economy.

Bahjat El-Darwiche, a Principal at Booz & Company, explained:

"Organizations rely on telecom for their daily operations as do individuals, and therefore operators may have an opportunity to enter into new spheres of activity."

Mena telecom operators are facing a number of new challenges: approaching market maturity, changing customer needs and preferences, and continu¬ous transformation in technology, business, and operating models. There is a danger that the economic down¬turn could delay the industry's ability to embrace these imperatives.

Policymakers and regulators must readjust their focus where needed and align telecom sector strategies with changing economic objectives, while focusing on creating long-term resilience and sustainable growth. Governments may need to reverse old trends and consider re-intervening in areas in which they have been disengaging. Cooperation between sector stakeholders is essential, requiring regulators and policymakers to address inefficiencies in sector governance and regulation, and implement elements that will create sustainable value.

Policymakers and regulators in the region should consider these six strategies:

1. Review the schedules for privatiza¬tion and liberalization
2. Reduce operators' direct financial obligations
3. Invest in national broadband infrastructure
4. Incentivize infrastructure sharing and traffic syndication
5. Grow ICT literacy among users and the workforce
6. Accelerate sector governance and regulatory reform

Review the schedule for privatisation and liberalisation:

Privatization and liberaliza¬tion schedules outlined before the downturn may not now be viable. While there is room for more competition, sustaining existing players' resilience must be a higher priority. Caution is necessary to attract solid, long-term investments, and rescheduling imminent privatization or the issuing of new licenses may be necessary.

Selling national assets now may not yield optimal returns and licensing new facility-based operators could have a negative impact on existing players' incentive to invest. The Omani government postponed the sale of a 25% stake in state telecom firm Omantel in December 2008, in light of the deteriorating global economy and declining stock markets.