Second National Operator (SNO) Pre-Bidders’ Conference Safari Park Hotel NAIROBI –17 th MARCH 2004 Restructuring Restructuring of the Telecommunications Sector of the Telecommunications Sector Factors of change for restructuring Factors of change for restructuring Riccardo Passerini, ITU Riccardo Passerini, ITU Riccardo Passerini ITU/BDT SNO Pre- Bidders Conference,, Nairobi 17 March 2004 1
Factor of change for restructuring Impact of new technologies Impact of mobiles Impact of Internet Digital economy Networked society Digital divide Riccardo Passerini ITU/BDT SNO Pre- Bidders Conference,, Nairobi 17 March 2004 2
Subscriber Growth 1350 1200 1050 Fixed 900 750 (Millions) Mobile Minute 600 migration Fixed Internet 450 300 Mobile Internet 150 0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Riccardo Passerini ITU/BDT SNO Pre- Bidders Conference,, Nairobi 17 March 2004 3
Calling opportunities worldwide Calling opportunities worldwide 5.0%5.0%0.3% 1993 1998 7.5% Fixed-to- fixed 19.9% 2003 Mobile-to- fixed Fixed-to- 89.7% fixed 52.7% 23.4% Fixed-to- 26.7% mobile Fixed-to- Mobile-to- 19.9% fixed mobile Mobile-to- Fixed-to- fixed mobile Source: ITU Fixed-Mobile Interconnect website: 25.0% 25.0% http://www.itu.int/interconnect Riccardo Passerini ITU/BDT SNO Pre- Bidders Conference,, Nairobi 17 March 2004 4
Convergence Computer & Data Information & Work Support B u M s ? i u n l e t i s m s e Entertainment d Telecom i a & Publishing Multimedia I Home n f G o r a m d g a t e i t o s n Consumer Electronics Riccardo Passerini ITU/BDT SNO Pre- Bidders Conference,, Nairobi 17 March 2004 5
Convergence •The coming together of telecommunications, computing and broadcasting into information and communications technologies (ICT) •Within telecom the convergence of voice and data and fixed and mobile services •ICT uses same: –Technology used to code voice, data and video –Carrier for voice, data and video •Expands the range and quality of services •Requires broadband technologies •Encourages the use of a single communications regulator Riccardo Passerini ITU/BDT SNO Pre- Bidders Conference,, Nairobi 17 March 2004 6
Paradigm Shift in Digital Economy Paradigm Shift in Digital Economy Shift from Shift from • • Information society with a Industrial society; • • Information society with a Industrial society; knowledge-driven digital knowledge-driven digital economy; economy; • Centralized control • Centralized control • Deregulated or privatized • or regulation from Deregulated or privatized or regulation from telecom; Industry-led self- regulators or telecom; Industry-led self- regulators or regulation & power of monopolies in regulation & power of monopolies in individual users ’ fingertips over individual users ’ fingertips over telecom; telecom; convergence of ICT, especially to convergence of ICT, especially to in the advent of Internet; in the advent of Internet; • Significant market • Significant market • Micro, small & medium-sized • Micro, small & medium-sized powers powers entrepreneurs esp. in the era of entrepreneurs esp. in the era of e Business or e Commerce; & e Business or e Commerce; & • Almost ‘ instant global village ’ • Almost ‘ instant global village ’ connected by various connected by various technologies and services … . technologies and services … . Riccardo Passerini ITU/BDT SNO Pre- Bidders Conference,, Nairobi 17 March 2004 7
The emergence of the ‘networked’ society’ The Industrial Information ‘Networked’ Revolution Society Society We are at the outset of a truly remarkable revolution where • Anything that can be connected will be! • Anything that can be digital will be! • Anything that can become mobile will become! Dismantling of traditional industry structures, disaggregation of traditional business models, a wealth of opportunities and considerable threaths Riccardo Passerini ITU/BDT SNO Pre- Bidders Conference,, Nairobi 17 March 2004 8
Digital divide = Telecoms divide User distribution, by income group, Jan 2000 490 912 280 6 billion million million million 100% High income 15 % 90% Upper-mid income 80% 58 % 70% Lower-mid income 69 % 60% 82 % 50% Low income 40% 30% 20% 10% 0% Internet users Mobile users Telephone lines Population Source: ITU World Telecommunication Indicators Database. Riccardo Passerini ITU/BDT SNO Pre- Bidders Conference,, Nairobi 17 March 2004 9
The digital divide is shrinking, but also shifting Share of low and lower- Jan. 1995 Jan. 2000 18% 28% middle income countries in: Telephone main lines 5% 14% Mobile subscribers 1.1% 7.6% Estimated Internet Users Source: ITU World Telecommunication Indicators Database. Riccardo Passerini ITU/BDT SNO Pre- Bidders Conference,, Nairobi 17 March 2004 10
Second National Operator (SNO) Pre-Bidders’ Conference Safari Park Hotel NAIROBI –17 th MARCH 2004 Restructuring Restructuring of the Telecommunications Sector of the Telecommunications Sector Objectives of the restructuring Objectives of the restructuring of the telecomunications sector of the telecomunications sector Riccardo Passerini ITU/BDT SNO Pre- Bidders Conference,, Nairobi 17 March 2004 11
The growing importance of the telecommunication sector Telecommunications are a crucial factor of efficiency for the administrations, public utilities and private companies . • Synergy with computers for data processing, • Faster information and better dialogue Telecommunications play a crucial role for increasing the competitivity of entreprises : • Better productivity and better services • More jobs with added values with new services • Less intermediary positions without added values Riccardo Passerini ITU/BDT SNO Pre- Bidders Conference,, Nairobi 17 March 2004 12
Results of convergence of ICT (Information and Communication Technology) The telecommunications sector evolves in a broader « ICT » sector After 1980 After 1995 Till 1980 Telecom- munications Telematics ICT Informatics or Mediamatics Electronic Electronic media media Riccardo Passerini ITU/BDT SNO Pre- Bidders Conference,, Nairobi 17 March 2004 13
Why restructuring: The past � Telecoms Sector used to be viewed as a Natural Monopoly (due to large investments needed) � States considered it their responsibility to provide telecoms service � Telecoms was not viewed as a busienss but rather a service � Hence emergence of Public Telecommunications Operators (PTO’s) as State-Owned Enterprises (SOE’s) Riccardo Passerini ITU/BDT SNO Pre- Bidders Conference,, Nairobi 17 March 2004 14
Why restructuring: Things have changed � Governments no longer put telecoms as their core activity any more (whether willingly or forced by global and sectoral changes) � Governments have no capital for investment in the sector. Have other competing priorities such as Health, Education, etc. � Changing Industry Structure from Monopoly to competition � Need to attract Investment , Stimulate Innovation � Acquire Technology � Failure of Monopolies to meet social obligations Riccardo Passerini ITU/BDT SNO Pre- Bidders Conference,, Nairobi 17 March 2004 15
Why restructuring: The reasons • Restructuring is necessary when monopolies are characterized by: • telecom is not central to governmental priorities • no capital for investment • poor network development • delay for introducing new technologies and services • long waiting lists ( Unmet Demand ) • poor technical and financial performances • skill and technology shortag • low productivity Riccardo Passerini ITU/BDT SNO Pre- Bidders Conference,, Nairobi 17 March 2004 16
Shift from protectionist model to market access model • telecom area of trade in which non-state actors should be permitted • access to market non-discriminatory, level playing field and end to cross-subsidisation • apply to telecom trade principles of non-discriminatory market access; fair and effective competition; • transparency in rates and regulations • competition between firms and countries in international services • increased foreign direct investment, strategic alliances and joint ventures Riccardo Passerini ITU/BDT SNO Pre- Bidders Conference,, Nairobi 17 March 2004 17
Objectives of the restructuring of the telecommunications sector • Attract financial resources from international institutions and private investors in order to develop the network and services • Satisfy and Expand the demand for a whole range of business and consumer services • Improve the welfare of the population by increasing telephone penetration at affordable prices • Establish rules and conduct of institutions and players in the telecoms market through Regulation • Improve the efficiency of the Incumbent Operator and increase value to shareholders. • Improve the quality of service . • Sharpen Business focus • Withstand competition Riccardo Passerini ITU/BDT SNO Pre- Bidders Conference,, Nairobi 17 March 2004 18
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