Telecommunication market in Morocco

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  • Autor: Soumaya Amassaghrou
  • Director/es: Carlos Guitérrez Hita
  • Defensa: 11/11/2022 - Universidad Miguel Hernández de Elche
  • Tribunal: Nikolaos Georgantzis, Vicente Royuela Mora, José Antonio García Martínez
  • Calificación: Sobresaliente cum laude
  • Ver publicaciones relacionadas

Abstract

Overview

The development and expansion of telecommunication services is crucial for sustained economic growth, especially for developing countries such as African countries. Indeed, to keep up the pace of growth behind developed countries, African countries are supposed to increase competitiveness and adopt the new technological progress in the industry sector as well as in the telecommunications sector. In this sector, the privatization of the state-owned company (the incumbent), along with an efficient liberalization sector under clear regulatory rules, are necessary measures to achieve a sustained economic growth.
The Moroccan telecommunications market has undergone profound changes due to a deep technological progress in the last twenty years. This progress is the result of a downward trend of costs, which put in doubt the utility of the natural monopoly of the state-owned company. The liberalization of the market was also the response to huge demand increases and the new challenges of the internet society. Moroccan authorities were aware of the necessity of privatization, launching the Law 24/96 1997, the first stone in this process. The main aspects of the law were the creation of two public companies: the telecommunication operator IAM (Itissalat Al-Maghrib), and the postal operator BAM (Barid al Maghrib), as well as the creation of the Agence National de Réglementations des Télécommunication (ANRT) the national regulatory authority of the Moroccan telecommunications market. The next step of the liberalization process was the privatization of IAM, the state-owned operator. The process of liberalization was gradual over two decades. The other channel aiming at fostering competitiveness in the market is the reduction of entry barriers, which may allow that new competitors offer fixed and mobile services.
There are three operators in the Moroccan telecommunications market: Etisalat al Maghrib (IAM), Medi Telecom (MEDITEL), recently branded Orange, and WANA. IAM ´s shareholders are Etisalat, which owns 53% of the total equities. Moroccan treasury, which represents the Moroccan state, holds 22%. The rest of 17% are owned by IAM´s staff and listed on Casablanca and Paris stock exchange. MEDI is owned by ORANGE group, which holds 49% of equity. The rest of the shareholders are hold by CDG, and Finance Com, a private investor. Both of them own 25,5%. Finally, WANA is a subsidiary of Al Mada and the Kuwaiti group Zain. The former owns 31% of equity and the latter the remaining 69%.
The social impact of the development of the telecommunications market is reflected in the direct consequence of the development of ICT sector. Morocco case illustrates the extent to which policy measures may support the ICTs sector, aiming at the creation of employment among the young population and stimulate firms to be in the forefront of technological progress.
Economic analysis of the Morocco telecommunications market.
Despite the upsurge of mobile services, fixed infrastructure would never disappear, because mobile infrastructure also depends on it. Furthermore, new technological progress such as fiber connections is provided through fixed infrastructure. This raises the question of the relationship that have to exist between mobile and fixed infrastructure in order to enhance competitiveness and innovation. The most interesting impact is how the mobile network affected the evolution of the fixed network. The relationship between these two technologies becomes explicit in 2002, when the mobile subscribers overcame fixed line subscribers. Thus, in a decade customers’ preferences moved to the mobile network from the fixed line network. This trend stems from the lower cost and rapid deployment of mobile infrastructure, which in turns spur the interest of new entrants to invest in it. As a result, the competitiveness was lower and private fixed line operators found it impossible to compete by lowering the tariff. Nevertheless, some countries where the penetration rate of fixed infrastructure was higher, tried to integrate both technologies in order to gain more market share or maintain its customers’ loyalty in an attempt to stop the migration to other mobile competitors.
In the second chapter of this is work, I analyse the overall evolution of the telecommunications market. I use concentration indexes to study the extent to which the market evolves towards a somehow competitive market. First, I focus in the fixed and mobile market. Second, I present an econometric study where socioeconomic indicators and microeconomic variables are used as determinants of the Herfindhal-Hirshman index. The main conclusion of this chapter is that the mobile market is the sector that has introduced competition in the telecommunications market. However, the fixed market remains almost monopolized in hands of the former state-owned company.
The situation in the fixed market motivates chapter 3, where I present an oligopoly model to investigate the access to the broadband market in the fixed sector. Indeed, the access to the broadband market is crucial to introduce dynamism in the sector because penetration rate is low. As new customers show interest in accessing fixed broadband connections, the market may reduce the concentration. One of the features that determines the evolution of this market is the new generation technologies (NGA), mainly fiber connections. In the model, I assume that a new entrant may offer broadband connections by accessing the unbundled local loop or investing in NGA. An important feature in the model is that these two types of connections can be viewed as perfect substitutes when the affordability of the service is the main concern of the consumers. Overall, I found that the entrant competitor might find profitable to invest in NGA when the access fee to the local loop is higher enough and the fixed costs to deploy the new technology can be spread over a sufficient period. Moreover, consumer surplus is larger when the new entrant invest. Finally, these results strongly depends on the privatization decision of the state-owned company.
Finally, in chapter 4 I empirically study the evolution of the mobile market, which is the most dynamic sector. In this chapter, I investigate the extent to which the Moroccan mobile market is a competitive market and its evolution during the period 2004III-2020IV. Our findings suggest that, after almost 20 years of the liberalization process, the Moroccan mobile market exhibits an increasing degree of competitiveness, where three active companies operate. The former monopolist, the state-owned firm IAM, has been largely privatized. By 2020, 78% of the total equities were in private hands. Market shares of the three operators tend to be similar. It was mainly because of the continuous market share losses of IAM in favor of INWI, which seems to be more aggressive when capturing customers. Moreover, the evolution of concentration indexes and results of the econometric analysis have shed light on the degree of competitiveness.
I found that the evolution of operators’ competitive behavior during the period under study seems to be determined by the technology access, the regulatory body of rules, the evolution of the demand, and the level of privatization of the state-owned operator. As the technology is widely spread and the demand is continuously increasing, the only way to increase profits is to compete for attracting customers, which yields to lower prices. Indeed, as the market share increases off-net prices decrease because the termination rates payment also decreases, yielding to overall lower prices. As long as all the companies follow this behavior, market power cannot be exerted largely, keeping operators’ profitability in relative normal levels and thus, enhancing consumer surplus. Moreover, policy measures of privatization of the state-owned company, as well as market forces, such as the increase of the penetration rate, have incentivized companies to capture new customers contributing to become the market more competitive, especially with regard to prepaid programs

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Our database ranges from 2004 to the end of 2020. First, operators’ market shares are presented and analysed. Second, we build concentration indexes and other indicators of competitiveness. Finally, we conduct an econometric analysis to determine the extent to which regulatory measures, privatization, market structure and the population dimension determine market shares. Overall, we can argue that, although concentration remains high, the market has become more competitive since the liberalization process began. The statistical analysis and the econometric assessment show that the entrance of the third operator made the market more competitive. Indeed, there is evidence that operator companies competed to capture customers from each other during the period under study. These features suggest that mobile operators did not follow anticompetitive practices in order to restrain competition. 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Our database ranges from 2004 to the end of 2020. First, operators’ market shares are presented and analysed. Second, we build concentration indexes and other indicators of competitiveness. Finally, we conduct an econometric analysis to determine the extent to which regulatory measures, privatization, market structure and the population dimension determine market shares. Overall, we can argue that, although concentration remains high, the market has become more competitive since the liberalization process began. The statistical analysis and the econometric assessment show that the entrance of the third operator made the market more competitive. Indeed, there is evidence that operator companies competed to capture customers from each other during the period under study. These features suggest that mobile operators did not follow anticompetitive practices in order to restrain competition. 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