Tele.Com / February 21, 2000
By Larry Luxner
AMMAN -- The Hashemite Kingdom of Jordan -- ruled by a net-surfing, 38-year-old monarch educated in Massachusetts -- wants to become the Arab world's online capital. At the World Economic Forum earlier this month in Davos, King Abdullah II made it his business to meet not only with President Clinton and Israeli Prime Minister Ehud Barak, but also with Microsoft Corp.'s Bill Gates and CEOs of other leading high-tech firms.
Unlike neighboring Israel, where cellular and Internet penetration is among the world's highest, Jordan -- a desert kingdom of 4.5 million inhabitants -- is a relative newcomer to the online world. Yet its highly skilled workforce, low labor costs and widespread use of English could be enough to lure companies like Microsoft, Cisco Systems Inc. (San Jose, Calif.) and Intel Corp. to outsource their programming here. Furthermore, Jordan's 1994 peace treaty with Israel provides a measure of political stability not seen elsewhere in the Arab world.
The king's primary mission, says Abdulla Shahin, a telecom analyst at the Atlas Investment Group (Amman), isn't so much increasing Internet penetration in Jordan as it is using local skills to provide the infrastructure for companies to come here and set up. "It's not necessarily for Jordan to be the end user, but rather a working station for U.S. companies," he says. "We graduate more programmers every year than Ireland, and labor costs are very minimal compared to Israel. They're closer to levels in China and India. The idea is to have a client service center in the U.S. and development centers in Jordan. This would give those companies a huge cost advantage over other companies."
The success of King Abdullah's online ambitions depends, of course, on a reliable telecom infrastructure. While Jordan undoubtedly has a long way to go, the government last week took a big step towards that goal by selling off a chunk of Jordan Telecommunications Co. (JTC).
Under the deal -- the largest privatization in Jordanian history -- France Telecom and its minority partner, Arab Bank Ltd. (Amman), will buy a 40 percent stake of JTC for $508 million, the minimum price set by the government. The state will retain a 60 percent stake. France Telecom and Arab Bank defeated a second consortia made up of GTE Corp. and Al-Ain Investment Group (Abu Dhabi, United Arab Emirates), which had also bid the minimum $508 million. A third group, SBC and Arab Investment Co. (Riyadh, Saudi Arabia), bid only $275 million.
At the signing ceremony in Amman, France Telecom Chairman Michel Bon said the acquisition would boost his company's regional presence. The French operator already has operations in Egypt and Lebanon. He also said the operator would invest over $400 million between now and 2003 on modernizing and revamping Jordan's inadequate telecom infrastructure.
At the moment, JTC has 510,000 fixed lines and a teledensity of just under 11 per 100. In 1996, the consultancy Arthur Andersen (Chicago) valued the operator at $1.26 billion. But analysts say JTC has become a burden on the government because of the continual need to upgrade and expand the network. In 1999, capital expenditures were estimated at $510 million, with $81 million budgeted for the GSM cellular project and another $15 million on expanding Internet access. JTC, whose monopoly over fixed lines ends in 2003, reported 1999 earnings of $305 million, up from $266 million the previous year.
Even if Jordan's primary goal is to create job's in online programming, the country also offers plenty of opportunities for ISPs to grow their business. Currently the kingdom has around 20,000 subscribers connected to six ISPs -- the largest of them being Global One, the international telecoms venture now owned by France Telecom, and National Equipment Technical Services Ltd. (Amman). But the real number of Internet users is estimated at 100,000. In the last two years, some 300 Internet cafes have cropped up around the kingdom -- from the busy streets of Amman to the ancient ruins of Petra. Some 20 Internet cafes alone are crowded along a single street in Irbid, Jordan's second-largest city