Morocco to open monopoly by selling telecoms stake




By Mark Huband in Rabat

Financial Times, 1 June 2000

Having achieved one of the fastest rates of expansion in the mobile telephone sector anywhere in the world, Morocco now intends to become the first country in north Africa to open the state monopoly on fixed lines by selling a 35 per cent stake of Maroc Telecom later this year.

However, studies by several economic analysts of the telecommunications valuation process have led to suggestions that much more could be earned from the sale than is currently expected.

The US$1.5bn income likely to be raised is based on a company valuation of $.5bn. Some economists believe this is too low, and that the true value is $7.5bn-$9bn, which would value the 35 per cent sale at up to $3bn. “If the sale of Maroc Telecom included commitments to future private majority control and a good agreement for shareholders, then $3bn could be raised. Meanwhile, bidders will have a tough time convincing their boards that they should buy into this company as a leveraged buy-out, which is what is happening,” said an economist.

After final bids are received this month, the sale is expected to be completed by September. It has attracted strong interest from at least three main global operators, two of them French and the other Italian, while three others are also examining the company.

“Maroc Telecom is ready for competition. This is proven by the fact that since it reduced its tariff, it has seen turnover increase by 15 per cent as a result of the investments it has made,” said Rachid Filali, minister of privatisation. Maroc Telecom currently has 2m subscribers, including 800,000 mobile telephone users who provide 17 per cent of company turnover.

Within six to 18 months of the strategic sale, a further 14 per cent of the company is expected to be sold, probably on the New York Stock Exchange. The government has not ruled out the possibility of reducing its stake to a minority holding.

Maroc Telecom’s mobile service has been competing with Meditel, a private sector consortium of Spanish, Portuguese and local companies, which bought a second GSM licence for a regional record of $1.1bn last year. A third private GSM licence is planned to be offered and be in operation by 2003, though sooner if the existing operators agree that the date can be brought forward.

The acceleration of the telecoms liberalisation process followed an often fraught battle within the Moroccan government. Resistance to change within the ministry of communications led to suggestions last year that the full liberalisation of the sector should be delayed until 2005. A dispute on the issue within the government led to the process being brought forward to 2002.

“In order to reap the full benefits from this experience of the reform of the telecoms sector, liberalisation should be conceived within a broader framework which gives a new role to the government. This means moving it away from direct intervention towards the role of regulating and drawing¬† up strategy,” said Mostafa Terrab, director-general of the National Telecommunications Regulation Agency.

Morocco is now in a leading position beside its neighbours in the liberalisation and privatisation stakes. It earned double the sum the Egyptian government earned from the sale of its first mobile licence.

© Financial Times