The Libyan revolution destroyed an estimated $1bn in telecoms infrastructure, the new administration has yet to prove itself, and the country’s security has still not completely stabilised. Nonetheless, Etisalat, France Telecom, Vodafone, VimpelCom, Orascom, Q-Tel and Bharti Airtel, among others, have all expressed strong interest in either acquiring a new license in Libya or buying into an existing operator.
Despite all the challenges that Libya holds, the ICT market remains alluring: The Gaddafi era provided better backhaul capabilities than most carriers in the region have, allowing for rapid future deployment of 3G and 4G; Libya’s crude-oil reserves mean that income levels in the country are relatively high for North Africa; and despite a lack of competition, because of government controls, Libya’s mobile penetration is among the highest in Africa. In addition, the role that sites such as Facebook and YouTube played in the revolution highlights the large, and addressable, technology-literate youth market in the country.
To investors, these factors make Libya look like a goldmine that will provide a high ROI in a short space of time. But this is highly dependent on the success of regulatory development, which has to start from scratch.
Before the revolution, both the mobile and fixed industries were directly controlled by the government, which implemented policies that only benefited those close to the regime. The transition from a planned economy under Gaddafi to a free-market economy will test how ready Libya is to deal with various regulatory issues, such as the following:
Regulator funding, and how it will affect policies, is also of importance. Although funding previously came from the government, it is now likely to come from industry levies, which could put pressure on the regulator to favor specific operators with regard to policies. The regulator will also need to develop, quickly, enough expertise to deal with litigation that operators might initiate, in a manner that is efficient and quick enough to avoid long judicial processes.
These issues, among others, will highlight the regulator’s credibility. This will have a domino effect on investor attitudes toward the amount of control the government has in the telecoms market. Many developed markets have the government acting as a direct participant, in order institute universal-service funding and prevent problems such as market failures. I believe that this is necessary. However, confidence in the government to not distort or undermine competition will stem from belief in the regulator as an independent body that is looking to develop the market rather than benefit the government.
Although these regulatory factors are the main hurdles operators are likely to face when entering the Libyan market, other, nonregulatory factors must be taken into consideration, such as high operational costs and the lack of a large middle class (which normally acts as the main catalyst for growth in a developing mobile market).
However, should the Libyan market develop into a fully liberalised economy with efficient regulatory bodies and healthy price competition, Libya’s ICT industry is likely to grow at a fast pace. Furthermore, the market is ripe for the launch of non-SMS-based value-added services, such as mobile content, mobile payment and converged offerings that encompass mobile broadband and FTTx (fiber has already been rolled out in Libya). There is strong demand for all of these services, which will further boost revenue and subscription growth. And with GDP per capita rising to what it was before the uprising (it’s forecast to be $13,184 for 2012), subscription growth is likely to take place without ultralow ARPUs, meaning that Libya could become one of Africa’s most developed markets in the next few years.