The Washington Diplomat / October 2009
By Larry Luxner
In his office near Tripoli International Airport, top Ericsson executive Hans Josef Brueggen proudly displays the portraits of three famous people: company founder Lars Magnussen Ericsson, Sweden's Queen Silvia and Libya's Col. Moammar al-Qaddafi.
The last portrait is much larger than the other two, and Brueggen has no intention of taking it down. After all, the Qaddafi regime has been good to Ericsson over the years; in 2009 alone, the Swedish telecom giant expects its Libya operations to generate 70 million euro (nearly $100 million) in sales.
"Oil revenues are attracting a lot of investment to Libya, so there's no real poverty here," said Brueggen, country manager for Ericsson Libya. "Even immigrants here make the same salaries as educated professionals in Tunisia or Algeria."
Thanks to its vast oil wealth, Libya's annual per-capita GDP of $14,400 is now the highest in Africa; it's also the only one of Africa's 53 countries with more phones than people.
Officially, Libya's mobile penetration rate exceeds 125 percent, meaning there are more than 125 wireless lines in service for every 100 inhabitants, up from a minuscule 2 percent in 2002.
Brueggen says the official number is somewhat distorted. "They never really cleaned up the database, and they are also taking the number of subscriptions and dividing it only by the number of Libyan citizens," he said, explaining that not counting the millions of Egyptians, Tunisians and other immigrants who live in Libya and have cellphone service artificially drives up the penetration rate.
Even so, there's no question Libya is on the verge of a telecom explosion.
The country's current 20-year plan calls for spending $10 billion on telecommunications between 2005 and 2020. The objective: to bring wired phone service to all of Libya's 1.6 million households and wireless Internet to an estimated 300,000 subscribers using advanced WiMax technology. Libya's proposed Next Generation Network (NGN) is one of the most ambitious projects of its kind in the world.
"There is a will — for sure, driven by the chairman of the General Authority for Information and Telecommunications, Mohammad al-Qaddafi [one of the four sons of Col. Muammar al-Qaddafi] — and of course there are the means: a huge amount of money," said Mohamed Bala, an executive with French telecom giant Alcatel-Lucent. "What they need at the end of the day is somebody to execute these projects."
For that kind of expertise, GAIT, through its Libya Posts, Telecommunications and Information Technology Co. (LPTIC) subsidiary, has turned to companies like Ericsson, Alcatel and Nokia-Siemens as well as Chinese telecom giants ZTE and Huawei.
Toronto-based telecom consultant Robert Pachal has traveled to Libya at least 18 times to help negotiate contracts on behalf of LPTIC.
"The overall vision is to bring fiberoptic access to every home and business in Libya. That has to be tempered with the practicality of cost," said Pachal. Eventually, he suggested, the government's planned Next Generation Network will reach 80 percent of Libyan premises with high-speed Internet, high-definition TV and other advanced servicees.
"The current program is designed to deliver 100 megabits of bandwidth to each customer, which is among the fastest access anywhere," he said. "This is going to be an extremely significant improvement in access to modern telecom, particularly in isolated communities. And it'll allow Libyans to place themselves potentially as leaders for Internet-based businesses."
To accomplish that, LPTIC is in the process of implementing a Next Generation Network that will link all Libyan cities via fiberoptic cable. Under two contracts estimated to be worth a combined $230 million, Alcatel-Lucent and Italy's Sirti are laying more than 8,400 kilometers of fiberoptic insfrastructure — boosting capacity for transmission of voice, television and Internet services.
For the moment, U.S. companies do not play a major role in Libya'a telecom sector, though Cisco Systems and Motorola are trying to increase their foothold here.
"In this country, there is an artificial separation between European and Chinese companies," said Brueggen. "It was decided that Al Madar would be supplied by Alcatel and us, and Libyana would be supplied by the Chinese."
Ericsson supplies Al Madar's core network and 60 percent of its radio base stations, mainly in western Libya. Alcatel supplies eastern Libya and is also involved in a number of other projects throughout the country. In 1997, it built an earth station in Sirt for the regional satellite network known as Arabsat; two years later, it completed a 2,400-kilometer-long submarine cable linking 13 cities along Libya's Mediterranean coast.
Al Madar is the smaller of Libya's two mobile operators, with about 2.2 million subscribers. Libyana, the dominant operator, has around 6.2 million customers. As in most of Africa, pre-paid clients account for 99 percent of the business; only 56,000 VIPs have monthly plans, a holdover from the days when SIM cards were prohibitively expensive.
Prepaid cards now sell for around LD5 ($4), compared with LD400 ($325) prior to 2004, according to Mohamed Ben Ayad, general manager of Libyana. That company and Al Madar compete mainly on affordability since 2004, when Al Madar had to slash its prices to keep up with Libyana's cheaper rates. Average revenue per user now hovers around LD25 ($20) per month.
"Both operators are 75 percent owned by LPTIC, so they can drive the market any way they want," said Brueggen, noting that the lack of competition has kept the quality of service down. "Professional services do not exist here because there is no competition. You can call a help desk, but you will not get any help."
Yet that's about to change.
Later this month [September], the Libyan government will open tenders for a third mobile operator; unlike Al Madar and Libyana, this third operator will be 51 percent owned by foreign investors and 49 percent owned by LPTIC.
Three international telecom entities have submitted bids: Turkcell, the leading mobile operator in Turkey; Etisalat of the United Arab Emirates, and Digicel, which operates in 24 countries throughout the Caribbean, Central America and the Pacific. The license is expected to be awarded before year's end.
"This is obviously a signal that the market is open for investors, so whoever comes in will have a huge job to do," said Alcatel's Bala, who expects revenues of 80 million euro ($115 million) this year. "With mobile penetration as high as it is in this market, the only thing that will be able to distinguish new entrants is quality of service."
Under terms of the tender, whichever company wins the license will also be obligated to invest in fixed-line access.
"You cannot load everything on wireless," Bala said. "People by nature would also like to have a fixed phone at home. Also, when you encourage people to call from one fixed line to another, you take the load off the wireless network."
Wired service, meanwhile, remains very cheap, with monthly service costing the equivalent of $1.50 per month. And all landline calls within Libya are free — which is one way the government distributes its oil wealth to its citizens.
Fixed-line penetration is relatively low, at 20 percent. And that must be increased dramatically to keep pace with Libya's frenetic economic growth, projected at 6 to 8 percent this year.
"It is understood that proper, modern telecom infrastructure will drive businesses in other areas," said Brueggen. "For example, you need telecom services to survey pipelines and operate an oilfield. The country plans to build 400,000 apartments in the next two years or so, and for this telecom infrastructure is also required."
Yet Internet penetration is only 10 percent, lagging well behind mobile and fixed-line density. WiMax aims to change that.
With this new technology, anyone within 50 km (30 miles) of a WiMax tower and plug a simple USB device into a laptop and start surfing the net — eliminating the need for fixed phone lines or Internet cafes.
Libya has an estimated 51,000 broadband subscribers; another 170,000 still depend on much slower dial-up service. WiMax, however, doesn't come cheap. The new service — to be deployed by Alcatel-Lucent — requires a one-year advance payment of around $400 (including the cost of a USB device) plus $30 a month.
"We want to provide our residential and business customers a wide range of beneficial, easy-to-use wireless broadband services," said Abdul Majeed Husain, planning and projects department manager at Libya Telecom and Technology. "Alcatel's unique expertise and ability to set up a wireless broadband network quickly and economically will enable us to begin offering these new services to our cusomters in just a few months."