VZCZCXRO6263
PP RUEHDE RUEHDH RUEHDIR
DE RUEHYN #0934/01 1371218
ZNR UUUUU ZZH
P 171218Z MAY 09
FM AMEMBASSY SANAA
TO RUEHC/SECSTATE WASHDC PRIORITY 1929
INFO RUEHZM/GULF COOPERATION COUNCIL COLLECTIVE
RUEKJCS/SECDEF WASHINGTON DC
RUEAFCC/FCC WASHINGTON DC

UNCLAS SECTION 01 OF 02 SANAA 000934 
 
SIPDIS 
 
NEA/ARP FOR ANDREW MACDONALD 
EEB/CIP/BA FOR CAROLINE DOW 
 
E.O. 12958: N/A 
TAGS: ECPS ECON ETRD YM
SUBJECT: YEMENI TELECOMMUNICATIONS SECTOR: LOWEST 
PENETRATION IN REGION 
 
REF: STATE 27310 
 
¶1.  SUMMARY.  The Yemeni telecommunications sector still 
suffers from the lowest penetration in the region.  The lack 
of both mobile and internet coverage is largely due to 
government monopoly, policies that emphasize government 
revenue over encouraging investment, and an outdated 
infrastructure.  According to private mobile providers, the 
ROYG continues to challenge expansion of the mobile network 
via a draft telecommunications law, while retaining control 
of fixed lines and internet services.  Even as mobile 
services expand ever-so-slowly, internet coverage will remain 
limited due to restricted connectivity to the global 
infrastructure.  END SUMMARY. 
 
TELECOMMUNICATIONS SECTOR 
------------------------- 
 
¶2.  Yemen still has one of the least developed 
telecommunications markets in the Middle East.  According to 
Yaseen Mahmoud Ali, Deputy Minister at the Ministry of 
Telecommunications and Information Technology, there are 
approximately one million fixed lines and six million mobile 
users in a country with over 22 million inhabitants.  (Note: 
The actual number of mobile users is much fewer as many users 
have multiple cell phones, which operate on different 
networks.   End Note.)  Imad Hamed, CEO of Y Mobile, told 
EconOff on May 5 that Yemen has the lowest penetration rate 
of mobile technology in the region, estimating it at 9 
percent.  Ali gave a much higher number on May 3, estimating 
that the mobile network has penetrated 31.8 percent of the 
population*-up from only 0.4 percent six years ago (2003). 
Internet penetration is, comparatively, even lower. 
According to Dr. Ali Naji Nosary, Director General of the 
Public Telecommunications Corporation (PTC), there are only 
30,000 internet ports in private residences and 100,000 in 
internet cafes.  The PTC estimates the number of internet 
users at one million (5 percent of the population).  The 
World Bank, however, estimates the subscriber base at only 
1.4 percent of the population. 
 
¶3. The lack of mobile and internet penetration is largely due 
to an inefficient regulatory framework in the 
telecommunications sector.  The PTC,s Nosary told EconOff on 
April 26 that although the PTC was established in 1982, the 
first mobile providers did not enter the market until 2000, 
and the ROYG did not offer internet services until 2001. 
Since then, the ROYG (via the PTC) has remained completely in 
control of internet service in Yemen.  In 2004, the ROYG 
offered mobile internet and, in 2005, introduced broadband 
IDSL (digital subscriber line).  The government has been 
unwilling to grant tenders and maintains a monopoly on the 
internet market, in spite of interest from investors. 
 
MOBILE PHONE MARKET 
------------------- 
 
¶4.  The mobile phone market in Yemen is relatively 
diversified.  Yemen is currently served by four cell phone 
companies: Yemen Mobile, MTN, Sabafon, and Y Mobile.  A 
government-owned and operated company, Yemen Mobile, uses 
CDMA (code division multiple access) technology, a 
first-generation cell phone technology.  The private 
companies--MTN, Sabafon, and Y Mobile--use GSM (global system 
for mobile communications) technology, a second-generation 
mobile technology.  Y Mobile,s Hamed told EconOff on May 5 
that due to governmental restrictions, Yemen still does not 
have UMD (ultra mobile device) technology, a third-generation 
mobile technology that offers more services including 
internet access.  All four mobile providers plan to increase 
their coverage in Yemen.  Sadek Mousleh, CEO of Yemen Mobile, 
told EconOff on April 28 that his company plans to be in 95 
new areas in 2009, 40 percent in rural areas and 60 percent 
in urban locations.  Currently, the mobile network is 
available in 70 percent of inhabited areas. 
 
MOBILE PROVIDERS OPPOSE DRAFT TELECOM LAW 
----------------------------------------- 
 
¶5.  Ostensibly an attempt to clarify the relationship between 
the service providers and the regulatory body, a draft 
telecom law proposes to place a number of fees on private 
mobile phone companies, including universal access (2 percent 
of revenue) and revenue sharing (10-15 percent).  The 
Ministry of Telecommunications says it has consulted the 
International Telecommunications Union (ITU) as well as the 
World Bank and a Jordanian expert for help in drafting the 
 
SANAA 00000934  002 OF 002 
 
 
law.  All three private mobile companies oppose the draft 
law.  Raed Ahmed, CEO of MTN, told EconOff on May 3 that the 
price of revenue sharing will change his company,s business 
model enough that it will have to raise prices and fire 
employees.  Similarly, Sabafon CEO Hamid al-Ahmar said to 
EconOff on May 4, "Sabafon has joined with MTN in opposing 
the draft telecommunication legislation*an absurd power grab 
that combines the ROYG,s worst security instincts with its 
worst economic instincts."  Hamed of Y Mobile, the newest and 
smallest mobile provider in the market, told EconOff on May 5 
that his company objects to the draft law because it does not 
provide mobile companies any additional services, but takes a 
large swath of revenue.  If passed, the draft law will also 
allow the ROYG unconditional access to eavesdropping, 
according to MTN,s Ahmed.  It will also disallow mobile 
providers from disconnecting lines unless they go to 
court--even if the subscriber does not pay. 
 
CHALLENGES TO INCREASING TELECOM PENETRATION 
-------------------------------------------- 
 
¶6.  Currently, the ROYG has a monopoly on providing both 
fixed lines (through PTC) and internet services (through 
Yemen Net).  While the PTC has plans to increase the number 
of internet lines in 2009 to 150,000 (from 35,000), the ROYG 
remains unwilling to open the market for either fixed lines 
or internet services to private sector competition.  The PTC 
plan to expand the number of internet lines will target 
municipalities and secondary towns, but not rural areas.  The 
PTC,s Nosary told EconOff on April 26 that the PTC has plans 
to institute an e-Caravan, a car equipped with internet, 
which would provide additional, if intermittent, coverage to 
rural areas.  Ultimately, broadband internet is limited as 
Yemen has a restricted amount of international fiber optic 
cable and relies on connectivity to the internet via 
satellite. 
 
¶7.  Further, the ROYG restricts the ability of mobile 
providers to expand.  Ali told EconOff on May 3 that the 
Ministry of Telecommunications would like to issue new 
licenses and allow private companies to bring in the next 
generation of mobile services, but it is unlikely to happen 
until 2010.  While relations between mobile providers are 
competitive, they work together in expanding into rural 
areas, which often requires negotiating with tribes and 
sharing infrastructure and maintenance costs.  In rural 
areas, high rental prices and intermittent power remain major 
issues, according to Yemen Mobile,s Mousleh. 
 
COMMENT 
------- 
 
¶8.  While mobile services are expanding slowly into rural 
areas, internet usage remains limited, even by developing 
world standards, across the country.  In addition to an 
outdated infrastructure and inefficient regulatory framework, 
potential internet providers must face the challenges of 
covering remote areas while attracting a population with low 
income and high illiteracy.  Yemen has also maximized its 
broadband connectivity to the global infrastructure.  These 
challenges will effectively limit the Yemeni population,s 
access to internet for the foreseeable future.  END COMMENT. 
SECHE