Kudos for Kuwaiti government’s sell-off of cell phone shares

Published June 24th, 2001 - 02:00 GMT

The Kuwaiti government has received a good grade from a regional economic think tank over its continuing effort to deregulate its mobile telephone market. “Kuwait’s cellular market is on track towards full competition and much more responsive GSM operators,” wrote the Amman-based Arab Advisors Group, which provides research service to government and private sector enterprises involved in information economy in the emerging Middle East and North Africa. 


Specifically, the research company’s comment concerned a recent decision by Kuwaiti government to sell half of it’s stake in Mobile Telecommunication Co. (MTC), which the Arab Advisors Group saw as indicative of its intention to reduce its stake in MTC to equal that in Kuwait’s second mobile phone company, National Mobile Telecommunication Co. (NMTC) 


Nonetheless, commented Sami Sunna, “full competition can only be expected to be achieved as soon as the Kuwaiti government decides to withdraw most of its power from both operators.” As things are at present, the Kuwaiti government holds significant shares in both operators. 


MTC enjoyed a 13-year of monopoly, from 1986 to 1999, when NMTC launched mobile phone services in Kuwait. And by the end of 2001, it had managed to obtain a 25 percent market share. “We anticipate that this rate will rise by the end of 2005, with prepaid subscribers accounting for a major part of the NMTC subscriber base.” said Sunna. 


According to the research note the obvious growth in the number of prepaid GSM subscribers highlights the important role of prepaid services within the revenue streams of the GSM operators in Kuwait.  


In May, the Kuwaiti government announced that it would put its 49.2 percent holdings MTC for sale. Saleh Mubarak Al-Falah, the general manager of the Kuwaiti Investment Authority (KIA), announced 113 million shares would be floated in the private sector, with the floatation set to last for a period of one month, closing June 11.  


The scene originally had been set by the Kuwaiti parliament's economic and finance committee on February 11, when it approved a draft bill that allows the Kuwaiti government to sell state-run services to the private sector. The draft bill will permit the sale of public services such as electricity, communications, public works and other services worth several billion dollars to local and foreign private investors.  


But, opposition to the sale from within the parliament in early April forced the government to put its plans for MTC on hold. Lawmakers evidently were concerned that the state would lose a good source of income, while the MTC stocks would come to be held by a wealthy investor. The Kuwait Stock Exchange (KSE) reacted nervously, edging downward. 


Within several days, though, the government reversed its decision, after the parliament approved a compromise plan, according to which priority would be given to subscribers who want to buy between 250 and 1,000 shares. This was to guarantee small investors a good share of the stocks. ― (MENA Report)

© 2001 Mena Report (www.menareport.com)

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