Palestine's telecom market: growing despite very adverse conditions

Mainlines grew at a Compound Annual Growth Rate (CAGR) of 9.2% between 1999 and 2003, reaching 332,515 mainlines by September 2004, a penetration rate of 8.8%. The cellular market also grew at a very healthy (2000-2003) CAGR of 24.7%, and exceeded the 850,000 subscribers mark in October 2004. The Palestinian national operator Paltel, and its GSM subsidiary Jawwal, face limited competition from the Israeli Bezeq (for Paltel), and massive competition from four Israeli cellular operators (for Jawwal).

The telecom sector in Palestine is governed by law No. 3 for the year 1996. The Ministry of Telecommunications and Information Technology (MoTIT) is working on updating the law, and forming a separate regulatory authority. The Ministry has postponed the launch of a radio trunking tender, which is technically ready, and requires approval from the cabinet of ministers.

The only licensed telecom operator in Palestine is Paltel. It is a public shareholding company listed on the Palestine Securities Exchange. Paltel is also expected to be listed on Amman Stock Exchange beginning of 2005. Paltel faces limited competition from the Israeli fixed line operator, Bezeq. There are areas covered by Paltel, areas covered by Bezeq only, and others covered by both operators at the same time. The outbreak of the second Palestinian uprising (Intifada) in September 2000 negatively affected market growth in the following years. The fixed line market's growth decreased from 33% in 1999, to only 4.7% in 2003. Still, the market continues to grow in very adverse security and economic conditions.

A new report, "Palestine Communications Projections Report 2004" was released to the Arab Advisors Group's Strategic Research Services subscribers on October 26, 2004. This report can be purchased from the Arab Advisors Group for only US$ 850. The 74-pages report, which has 65 detailed exhibits, fully profiles and analyses the Palestinian fixed and cellular telecom markets. Detailed analysis of the operators Paltel, Jawwal as well as unlicensed Israeli operators are included in the report as well as 5-year historical and 5-year projections of over 45 major telecom and demographic indicators. The report's TOC can be received from the Arab Advisors Group upon request.

Any investment in this report will count towards an annual Strategic Research Service subscription should the service be acquired within three months from purchasing the report.

The investment can also count towards attending Arab Advisors' second annual Media and Telecoms Convergence Conference on June 11 & 12 2005. More information on the conference can be seen at http://www.arabadvisors.com/Convergence/schedule.htm. Alternatively contact the Arab Advisors Group for full information on the conference, agenda and sponsorship opportunities.

"On the cellular front, Jawwal's subscriber base grew at an accelerated pace in the third quarter of 2004. Jawwal was able to release all the equipment that has been withheld by Israel, and therefore expanded its network." Serene Zawaydeh, Arab Advisors Senior Research Analyst, wrote in the report. "Jawwal's cellular subscribers exceeded 400,000 in October 2004, and its market share improved to an estimated 47% of the total market, compared to 40% in 2003. The total cellular market grew at a (2000-2003) CAGR of 24.7%, reaching around 660,000 by end of 2003. The Arab Advisors Group projects the cellular market to grow at a (2003-2008) CAGR of 14.4% reaching around 1.3 million subscribers by end of 2008, a penetration rate of 28%."

The Arab Advisors reports, cited government surveys that point to a gap between the Palestinian areas in regards to usage of ICT and telecom services. For example, the fixed line household penetration in the Gaza Strip, which is poorer than the West Bank, stands at 36.5% whereas it reached close to 43% in the West Bank. The situation is repeated in Internet usage as well as cellular usage.