German-Jordanian University

Talal Abu-Ghazaleh College of Business

Jordan’s Telecommunications
Industry
A look at the forces of the sector
January, 2009.

Done By:
Osama Zaidiah 2008 40 80 17
Esam Noufal 2007 xx xx xx
Safwat Shibly 2007 40 18 32
Wasef Takrouri 2008 40 80 02

Supervised by:
Dr. Talah Arabiyat
Jordan’s Telecommunication Industry
January, 2009

Contents
Contents.......................................................................................................................................... 2

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Jordan’s Telecommunication Industry
January, 2009

1.Executive Summary

Jordan is a thriving developing country. In spite of an obvious scarcity of natural

resources such as oil, agricultural lands, or even sufficient water resources the
country is considered one of the most promising growth opportunities in the region.
Jordan thrives mainly based on its demographical strength reflected in the high
percentage of youth in the population in addition to one of the best educational
systems in the region.

The ICT sector in Jordan has been growing rapidly in the last one and a half
decades. Starting in 1996 with the courageous entrepreneurship with Fastlink, the
sector has grown ever since with an impressive rate, exceeding the expectations of
everyone involved. This has led to new companies trying to take part in this sector,
and has witnessed the entrance of other competitive firms like Mobilecom (recently
acquired by Orange), Umniah, and Zain (Zain acquired Fastlink recently). This study
tries to look at the macroeconomic environment in Jordan, and then focuses on the
ICT sector using Porter’s five forces analysis. Finally it draws conclusions on the
market potential of the sector.

Based on our findings here, it is clear that the ICT sector in Jordan is an oligopoly
dominated by a few firms. This means that suppliers have a lot of power to
influence the market. In that light, it is government’s regulations and high
competition that is keeping the rights of the customers in place. Our research
concludes that government policies and licenses to the telecommunications
companies were very successful at preserving the rights of the customers and
keeping the market competitive at the same time.

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Jordan’s Telecommunication Industry
January, 2009

2.Macroeconomic Climate: P.E.S.T Analysis

1)Political Factors establishing the Qualified Industrial Zones “QIZ”
that enter the US tariff and quota free. Also a
Jordan is a
growth in exporting domestic commodities to
constitutional
USA, since the two countries agreed a bilateral
monarchy
US-Jordan free trade agreement.
based
country. The The effort of the king of Jordan lead to strategic
king assigns domestic and local economic initiatives, the
the ministers heavy investment in IT field encourage the
team and the foreign investments to grow up in the kingdom,
prime which provided thousands of vacancies which
minister, increased and supported the buying force, and
whom are this somehow changes the buying behavior of
shaping the the local residents.
executive Hence the heavy investments in the tourism
authority. The sector attracted large numbers of foreign tourist
sentences are and this elevates the economic growth
distributed dramatically. The investments in IT and tourism
field and other factors such as the relative
political stability in the area, aroused the low tax
and low regulation Aqaba Specialized Economic
Zones “ASEZA” is considered a model of a
government provided framework for private
sector-led to economic growth. Jordan is
constitutionally into three specialized courts: classified by the World Bank as a “lower-middle”
Civil, Religious, & Special. Administratively income, but it’s expected that the GDP per
capita to increase dramatically according to the
current economical growth.
Jordan includes 12 governesses, each one ruled
by a local governor who is responsible in 3)Social Factors
regulating his area, and the king is the The population of Jordan is estimated to be
authorized to assign each one of them. around 6,100,000, around 96% of those are
Arabs, the remaining non-Arabs are mainly
Circassian, Chechens, Armenians, and Kurds,
Legal System and Legislation:- Jordan’s legal but they are well melt in the Arab society.
system is based on Islamic law and French
codes. The judgmental authority works Around 50% of the Arabs are Palestinians in
separately to make sure that all the judges and their origins, who are either live in Jordan by
sues run transparently and objectively, but the their choice, or forced to leave their lands, and
king must approve all the appointments and live as a refugee although they have the
judges. Jordanian nationality.
In general the Jordanian legal system is affected The main religion is Islam which constitute more
by domestic traditions as long as Islamic rules. than 92%, around 7% are Christians, and 1%
others, however all of them live coordinately
2)Economic Factors and peacefully.
Jordan is a limited The population is increased dramatically in 2003
General Facts on
natural resources due to the invasion of the US army to Iraq, this
Jordan
country, it is one forced more than 700,000 Iraqi people to
Capital Amman
of the poorest immigrate to Jordan and settle there, this made
Area
89,342 km2 countries in the unusual pressure and load on the domestic
Total
Water water supply, also infrastructure
0.8 it lacks the
(%)
petroleum wells According to labor ministry, the number of
Populati
on
6,198,677
contrary to its foreign workers in Jordan is around 300,000
GDP neighbors, so workers, and most of them ‘’230,000’’ are
$28.079 billion Egyptians.
(PPP) most of their oil
Currenc Jordanian dinar supplies are out- The official language is Arabs, but English is
y (JOD) sources, but widely understood, especially between educated
these supplies in most cases come with people.
countenance prices.
Around 80% of the population live in 3 main
Many supportive initiatives pushed the cities; Amman, Irbid, and Al-Zarqa’, most of the
economic growth ironically, for example foreigners settled in the capital, Amman.
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Jordan’s Telecommunication Industry
4)Technological Factors
Information Technology “IT” is consider among
the promising sectors in Jordan as well as a
gateway to opening up the country socially and
economically.
Jordan has invested a lot in technological and IT
sectors, which is leading step in pushing the
economic growth forward. Due to its
membership in the WTO, Jordan assigned a
special agreement that support technology and
IT in Jordan, which aroused a specialized areas
for IT, so to make this sector and these
investments active, and in order to accelerate
3. Industry Analysis
1)Industry Development and Overview
The Telecommunication industry has been
regulated and initiated by the government since
the beginning in 1921 when the Department of
Post and Telegraph (DPT) was established to
provide telegraph and post services to Trans
Jordan Emirate.
In 1992 the Ministry of Post, Telegraph and
Telephony (MoPTT) was renamed as The Ministry
of Post & Communications. In 1993 Jordan
initiated a national development program to
increase the penetration of telephony services
from 7.8 to 12 lines per 100 inhabitants. Jordan’s
telecommunications sector reform was launched
in 1994, where Jordan was the first Arab country
to do so.
In 1994 Fastlink was granted the first mobile
cellular license in Jordan, and the new
telecommunication environment in Jordan raised
the demand to regulate the industry. Therefore,
in 1995 new Telecommunications Law issued
providing the legal basis for reform. As a result,
the Telecommunications Regulatory Commission
(TRC) was established.
In 1997, the Telecommunications Corporation
(TCC) was transformed into a Government-
owned company operating on a commercial
basis, as a first step towards its privatization,
and was then renamed Jordan
Telecommunications Company (JTC).
To break the monopoly in the industry,
MobileCom Company was granted a license in
1999 to provide mobile cellular services in the
Kingdom.
Jordan became a full member of the WTO in
2000. Where Jordan has provided its obligations
regarding the telecommunications sector within
the presentations made to join the organization,
which included fully liberalizing the
telecommunications sector by the end of 2004.
In 2000, 40% of JTC shares were soled to a
consortium led by France Telecom and the Arab
Bank, and 8% to the Social Security Corporation,
and 1% to the Jordan Telecom Company
employees.
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January, 2009
the promotion of this sector, and to ease the
managerial and governmental activities, Jordan
adapt the e-government initiative, which
transform all the institutions which belong to the
government to be computerized, so due to
these steps, Jordan ranked in the 9th place out
of 104 countries, in term of governmental
success in ICT promotion.
According to the national statistics, 86% of the
Jordanian families have a mobile, and 40% have
a computer, these results show how the country
is progressing in the last 6 years, and the future
is promising for further development in this
sector.
General Information at the end of 2007
Telecommunications revenue 7.8% of GDP
Information and communications technology
11% of GDP
Companies operating in the
telecommunications sector earned a total of JD
920 million, which is 9.8 percent higher than
the amount generated in 2006.
No. of subscribers 4.90 million in total, or a
83% penetration rate.
Internet users reached 1.2 million
Volume of investments in this industry totalled
JD 967 million over the last seven years (2001–
2007).
In 2002 the Ministry of Post and Communications
was renamed as the "Ministry of Information and
Communications Technology (MoICT)". Also, the
2002 Telecom Law and its amendments
emphasized on the independence of TRC, in
addition to entrusting the TRC with regulating
the Telecommunications and Information
Technology services in the Kingdom.
In 2003 the Government Policy statement on the
Information & Communications Technology
sectors & Postal sector was issued, in pursuit of
the implementation of Government obligations
towards the WTO to liberalize the
Telecommunications sector, which confirmed the
government's intention to liberalize the fixed
telecommunications sub-sector by the end of
2004 and put an end to the duopoly of the two
mobile providers by the beginning of 2004.
In April 2003 XPress Company was granted the
first license to provide Radio Trunking services.
In the same year, the TRC has published its
Program for Further Licensing within the Mobile
Telecommunications Sub-sector, presented
pursuant to the Statement of
Government Policy on the ICT
Sectors and Postal Sector.
In June 2004 the TRC published
a public consultation on the
Jordan’s Telecommunication Industry
future licensing in the fixed telecom sub-sector
after its liberalization at the end of 2004. Based
on this, Umniah Company was granted a license
to provide mobile telephone services in the
same year.
In October 2004, the Program of Licensing in
compliance with the Government Policy on the
ICT sectors and Postal Sector was issued,
whereby the program clarified the two
categories of licenses: individual and class,
which will be granted to those willing to invest in
the kingdom.
In the beginning of 2005 the last stages of the
National Numbering Plan were implemented in
regards to mobile telecommunications services
by adding a new (8th) digit and by unifying the
code for all mobile services to be (07).
In the beginning of 2005, the monopoly of Jordan
Telecom Company in providing fixed telecom
services was ended; and the fixed market was
fully opened. Consequently, Batelco company
was granted the first individual license allowing
the company to provide fixed
telecommunications services. In the same year
(26) licensees were transitioned into the new
form of Class license in accordance with the
Integrated Licensing and Regulatory Regime.
In 2006, Fastlink, Umniah, and XPress companies
transitioned to the Integrated Licensing and
Regulatory Regime.
2)Porter’s Five Forces Competitive
Analysis
January, 2009
Porter’s Five Forces Competitive Analysis is a
tool that was developed in 1979 by Micheal
Porter. The tool’s main goal is analyzing the
competitive environment in which a firm finds
itself. The tool includes 5 main forces that should
be considered when analyzing a market. These
five forces are:
1) Competitive Rivalry: This force indicator
considers the nature of suppliers in the
market. Are they all well developed and
provide similar products or services of equal
quality? If so, the market is said to be
competitive. In this indicator we consider
points like number of competitors, quality
differences, customer loyalty and good well…
etc
2) Supplier Power: This force indicator looks
at suppliers. Do they have great power over
their customers? Can they change prices and
supply curves easily? If so, these suppliers are
a force in the market.
3) Threat of Substitution: This force indicator
considers the services themselves. Are these
services easy to substitute? Do customers
have other equally attractive options to
consider? Would customers change the
product to cheaper ones?
4) Buyer Power: This force indicator considers
the demand side of a market. Are there only a
few powerful buyers in the market? Could
these buyers greatly affect prices and
consumption rates?
5) Threat of New Entry: This force indicator
considers new suppliers. Is it easy for them to
enter the market? Are entry costs
manageable enough to allow a great number
of suppliers to enter the market?

We will limit our analysis to the Communications Industry in Jordan due to space limitations. The following
table summarizes our observations of the market:
Force Indicator Strength Comments
Competitive Very high All suppliers are well developed and highly competitive with a wide range of
Rivalry qualities
Supplier Power High Suppliers are really powerful in this industry. There strength is undermined due to
government regulations and competition.
Threat of Low Few services have the capability to substitute the mobile industry.
Substitution
Buyer Power Low/Mediu Buyers have very limited effects on demand since their numbers are huge and
m mobile have become a vital tool in the society.
Threat of new Low Also entry costs are high and costly.
entry

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Jordan’s Telecommunication Industry
4. Recommendations
In this study we went through the main factors
underlying the ICT sector in Jordan. We started
by going through a PEST analysis of Jordan,
coupled with vivid concentration on the ICT
sector. We then moved in into the sector, tracing
in its development throughout the years.
Finally, we conducted a rational Porter’s Analysis
of the sector while concentrating on the
Telecommunications part of the sector. Our
analysis of the sector indicates that the sector is
mainly an oligopoly, with few powerful firms that
control most of its markets, these firms are Zain,
Orange, Umniah and the currently under
shutting down Express. These firms face small to
5. References
1) A personal visit to the Department of Statistics (DOS)
2) Int@j reports on the ICT sector, 2004-2007
3) Internet Website of Ministry of Information and Communications Technology, MoICT ,
www.moict.gov.jo/
4) Telecommunication Regulatory Commission, The TRC, www.trc.gov.jo/
5) http://en.wikipedia.org/wiki/Porter_5_forces_analysis
6) http://www.quickmba.com/strategy/porter.shtml
January, 2009
no competition, and mainly have great power of
the market.
The market is, however, very closely monitored
by the government. The regulation system from
the government, in other words the licenses
given out by the government to the companies,
is the mainly the customers only shield against
abuse. In that light it is clear that the Jordanian
government has contributed greatly to the
sector’s growth and stability.
The sector however still includes the IT section.
In expansion to this study one could analyze the
IT sector as well, however, that is almost
impossible to do here due to space limitations.