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3.2 Private Sector Participation
3.4 Information Sector Promotion
4. POLICY MEASURES
4.5 Market Structure
4.6 Regulating Competition
4.7 Employee Participation in the Privatisation Process
Telecommunications has entered a period ofexplosive, global growth and is evolving as the modern traderoute. The telecommunications revolution is reflected by thetechnological changes, the competitive forces, the privatisationof state monopolies and the emergence of new companies andconsortia of global service providers. In response, Governmentdecided to formulate a new set of policies to ensure that thenation possesses the necessary infrastructure and regulatoryframework to take full advantage of the changing globalenvironment.
Telecommunications is both a vitalunderlying means of transport of all forms of economic activityand a traded service in its own right. Government recognises thata modernised telecommunications system is central to the economicdevelopment of the country and that privatisation and economicliberalisation of telecommunications is a critical condition forattracting the capital needed to achieve the necessary targets.This is highlighted in the White Paper on Privatisation andWorkers’ Participation which was issued by Government in Maythis year.
The Green Paper onTelecommunications "Strategies and Policies forInfo-Communications Sector 1997-2007" presented the broadpolicy issues that had to be considered in order to formulate therequired strategies for the development of the telecommunicationssector over the coming decade. Government is determined to ensurethe widest participation in the formulation of any policy bearingin mind the nation’s interest and the will to push Mauritiusforward as an info-communications hub in the region. I stronglyappreciate the contributions of all stakeholders and the publicin the consultation process that preceded the formulation of thepolicies presented in this White Paper.
These policies proposed in theWhite Paper evolve around the need
For a revised legislative mandate in order that Mauritius can fulfill its commitments under the WTO Agreement on Telecommunications.
For the expansion and upgrading of the national telecommunications infrastructures.
To devise an approach to the new business environment in order to take advantage of the potential economic benefits of open international competition, in terms of investment and entrepreneurial dynamism.
To achieve better access to private capital for needed expansion and development.
To consider the impact of the privatisation of Mauritius Telecom on its employees.
To provide the whole community (both in Mauritius, Rodrigues and the Outer Islands) with access to an affordable universal service.
To create an environment propitious for Mauritius to become the information, financial and services hub in the region.
The characteristics of thetelecommunications sector make it imperative for relevantpolicies to be reviewed regularly thus making the process ofpolicy making exercise a dynamic one.
I fervently hope that the policymeasures outlined in this White Paper will act as the catalyst toset the economic and institutional environment needed for thefostering of the info-communications society.
Sarat Dutt Lallah
Minister of Telecommunications
and Information Technology
Employee Share Ownership Plan
Federal Communications Commission
Global Information Infrastructure
Global Mobile Personal Communications by Satellite
Global System Mobile
Initial Public Opening
Integrated Services Digital Network
International Telecommunication Union
Industrial and Vocational Training Board
Mauritius Telecom Ltd.
Mauritius Telecommunications Authority
National Information Technology Committee
National Information Technology Strategy Plan
Organisation for Economic Co-operation and Development
Office of Telecommunications
Public Switched Telecommunications Network
Rate of Return
Retail Price index
Southern African Development Community
Southern Africa Transport and Communications Commission
Southern African Telecommunications Regional Association
Telecommunications Advisory Council
Telephone Access Communications Systems
Value Added Network
World Trade Organisation
1 Dramatic and far-reaching changes are taking placein the telecommunications sector, as well as in broadcasting andinformation technology. These changes show no sign of abating.Countries around the world that have been able to adapt to thesechanges have achieved rapid social and economic development. As aresult, many countries have recognised that the traditional modelof a state-owned monopoly provider of telecommunications servicesis no longer appropriate. If Mauritius is to maintain and enhanceits competitive advantage and to take its rightful place in thenew technological order, then the telecommunications sector willrequire radical reform to meet nation-wide interests. To achievethis overall objective, Government has decided to:
a) gradually liberalise the telecommunications market;
b) ultimately achieve open competition in the telecommunications sector at all levels and on all services;
c) progressively divest itself of its equity in Mauritius Telecom; and
d) enact new legislation that will promote development of the sector.
2. In September1997, following an extensive review of existing arrangements forprovision of telecommunications services in Mauritius, Governmentissued a Green Paper on telecommunications entitled"Strategies and Policies for the Info-Communications Sector1997-2007". The Green Paper put into perspective the broadpolicy issues that need to be addressed in order to evolveappropriate strategies for the development of thetelecommunications sector over the period 1997 to 2007.Consequently, a whole day seminar was organised by the Ministryof Telecommunications and Information Technology on Saturday 11October 1997. The participants at the seminar represented a widecross-section of the stakeholders in the telecommunicationssector. The views offered and information gathered during theconsultative process have been assimilated and analysed. ThisWhite Paper summarises what Government believes to be the bestpolicy solutions and framework for Mauritius towards developmentof a vibrant and efficient telecommunications sector over thenext decade.
3. The objectivesfor reform of the telecommunications sector are to:
a) provide access to the most modern telecommunications services possible at fair prices;
b) improve Mauritius’ position and competitive edge in global markets;
c) enhance the economic and social life of the nation;
d) progressively divest from Mauritius Telecom by adopting an appropriate privatisation strategy within a liberalised market-place;
e) establish an employee shareholding
f) ensure that essential national interests are protected; and
g) create propitious conditions for Mauritius to become an info-communications hub in the region.
4. The principlesthat will be applied in the achievement of the above objectivesare:
a) the active promotion by Government of an information-based economy;
b) the introduction of competition as circumstances permit;
c) an effective and independent regulatory body with clearly defined powers and responsibilities; and
d) private sector participation to the greatest extent possible.
5. The specificpolicy measures that will be adopted by Government to apply theseprinciples are as follows:
a) new legislation will be introduced in Parliament to replace the Telecommunication Act of 1988;
b) a new regulatory body will be established to replace the existing Telecommunication Authority;
c) a transformation of the Government’s primary role from being owner of the main provider of services to one of policy maker;
d) progressive divestment by Government of its equity shares in Mauritius Telecom to investors; and
e) the gradual introduction of competition and liberalisation of the sector
Dramatic and far-reaching changesin the telecommunications sector as well as in broadcasting, andinformation technology are leading these sectors to converge. Inaddition, the increased frequency and magnitude of change show nosign of abating. Countries around the world that have been ableto adapt to these changes have achieved rapid social and economicdevelopment. This requirement has, in many places, given rise tothe recognition that the traditional model of a state-ownedmonopoly provider of telecommunications services is no longerappropriate. To deliver the level and quality of servicesrequired to meet the changing and varied needs of customers,there must be diversity of choice of telecommunications serviceproviders. These providers must have access to substantialfinancial resources and managerial expertise.
Government recognises that inorder for Mauritius to maintain and enhance its competitiveadvantage and to take its rightful place in the new technologicalorder, the telecommunications sector requires radical reform sothat national needs may be met as quickly and as efficiently aspossible.
To achieve this overall objective,the Government has decided to:
gradually liberalise the telecommunications market;
ultimately achieve open competition in the telecommunications sector at all levels and on all services;
progressively divest itself of its equity in Mauritius Telecom; and
enact new legislation that will promote development of the sector.
The purpose of this White Paper isto set out the Government’s objectives for reform of thetelecommunications sector, to state the policies adopted in eacharea and to elaborate on how the sector reform envisaged will beimplemented in practice.
The recent evolution of thetelecommunications sector in Mauritius has mirrored thatexperienced in many other countries. In May 1988, a decision wastaken to separate the functions of regulation and operation intelecommunications by abolishing the Department ofTelecommunications which until then had been responsible for bothfunctions. The Telecommunication Act 1988 established aTelecommunication Authority to take over the regulatory functionfor the telecommunications sector. A Telecommunication AdvisoryCouncil was simultaneously set up to advise the Ministerresponsible for telecommunications, on all matters relating totelecommunications.
At the same time, theTelecommunication (Transfer) Act 1988 was enacted to transfer theundertaking of the Department of Telecommunications to MauritiusTelecommunications Services Ltd. This company was incorporated inApril 1988 to take over operations of telecommunications inMauritius. In 1992, the company changed its name to MauritiusTelecom, following a merger of the domestic and internationalservice operations. The international services were, until then,being offered by the Overseas Telecommunications Services Ltd.
Since 1988, Government hascontinued to be indirectly involved in the operations oftelecommunications through its majority share holding inMauritius Telecom.
Mauritius Telecom currently holdsa monopoly over the international gateway as well as over basictelephone services, text, data and Internet services. TABLE 1shows the main telecommunications operators in Mauritius.
TABLE 1: CURRENT TELECOMMUNICATIONS OPERATORS
Basic Telephone including International Access;
Payphones and Phonecards;
Telex, X25: Data & Text; Internet
Cellplus Mobile Communications Ltd. (subsidiary of MT)
Cellular Mobile (GSM)
(Joint Venture: MT & Singapore Telecom International)
Cellular Mobile (TACS)
Paging Services Ltd.
The domestic fixed and mobile telephone networks as well as the data network have experienced extensive growth during the past few years. ( TABLE 2)
TABLE 2: GROWTHOF NETWORK USERS
Cellular Mobile Subscribers
ISDN and data based Subscribers
In September 1997, following anextensive review of existing arrangements for provision oftelecommunications services in Mauritius, Government issued aGreen Paper on telecommunications entitled "Strategies andPolicies for the Info-Communications Sector 1997-2007". ThisGreen Paper was published with a view to sensitising thepopulation of the major developments and global changes occurringin the telecommunications sector and their implications forMauritius and to put into perspective the broad policy issuesthat need to be addressed in order to evolve appropriatestrategies for the development of the telecommunications sectorover the period 1997 to 2007.
The Green Paper identified fourpillars of the information economy as follows:
Pillar No 1 -Liberalisation and Sector Efficiency
In February 1997, during the World Trade Organisation (WTO) negotiations, Government offered to open the telecommunications market of Mauritius to full competition by the year 2004. It is against this back drop that sector reform and development must be considered.
Pillar No 2 -Regulatory Framework
An effective independent regulating body with well defined powers and responsibilities is a pre-requisite for sector liberalisation.
Pillar No 3 -Ownership and Investment
In order to liberalise the sector, Government’s role as majority owner of the main operator, Mauritius Telecom, needs to be reviewed. Neither Mauritius Telecom nor Government will be able to fund the capital expenditure levels needed over the next few years to bring the telecommunications infrastructure up to the best international standards.
Pillar No 4 -Promotion of an Information Intensive Society
Because of its particular characteristics such as location and economic structure, Mauritius must continue to strive to maintain its position in the new global competitive market-place and to do so, it must quickly establish an information-based economy.
At the time the Green Paper wasissued, comments were requested on its content, and following itsrelease, further consultations took place with many stakeholdersincluding operators, end-users and the industry trade unions. Aone-day seminar was organised by the Ministry ofTelecommunications and Information Technology on Saturday 11October 1997 and the participants represented a widecross-section of all stakeholders in the telecommunicationssector. The views offered and information gathered during theprocess have been analysed in order to arrive at what Governmentbelieves to be the best policy solutions and framework forMauritius towards development of a vibrant and efficienttelecommunications sector over the next decade.
Mauritius needs atelecommunications sector that will support the overall vision:
|"To develop Mauritius into a modern nation and to enhance the nation’s competitiveness in the global market place so as to improve the quality of life of the people of Mauritius." |
Another objective is to complywith the provisions of the World Trade Organisation (WTO) GeneralAgreement on Trade in Services under which Mauritius is committedto liberalising the telecommunications sector by the year 2004.Such liberalisation shall include allowing competition within thesector and ending all monopoly or exclusive rights in domesticand international telecommunications services.
The objectives for reform of thetelecommunications sector are to:
provide access to the most modern telecommunications services possible at fair prices;
improve Mauritius’ position and competitive edge in global markets;
enhance the economic and social life of the nation;
progressively divest from Mauritius Telecom by adopting an appropriate privatisation strategy within a liberalised market-place;
establish an employee shareholding scheme;
ensure that essential national interests are protected; and
create propitious conditions for Mauritius to become an info-communications hub in the region.
Effective regulation is criticalto management of many infrastructure services. Telecommunicationsregulation was initially associated with the concept oftelecommunications as a "natural monopoly". That is,because of the high cost of building infrastructure to carrytelecommunications traffic, it was not in society’s bestinterest to build duplicate facilities. Without duplicatefacilities, competition was not possible, resulting in monopolyservice providers. Therefore, regulation was introduced into thesector to simulate competition, preventing operators fromexploiting their monopoly status to the detriment of theircaptive customers.
Today, telecommunications is nolonger considered a "natural monopoly". Technologicaladvances (e.g., high capacity cable, wireless local loop) havereduced network construction costs, both financial costsassociated with physical plant and social costs associated withsuch activities as digging up trenches in the roads and repairingsame. Public policy changes allowing for facilities-based resalehave increasingly forced incumbent operators to serve as supplierof facilities to their competitors. As a result, the advantagesof owning infrastructure networks have been greatly reduced,particularly when viewed against their associated costs andcontingent liabilities such as depreciation, maintenance, anduniversal service obligations. Even so, owners of backbonetelecommunications networks still maintain a degree of marketpower that, if not properly regulated, may be used to thedetriment of their competitors.
Based on the dynamic economics ofthe telecommunications sector, the role of regulation has shiftedduring the past fifteen years. In the days when the primary roleof the regulator was to protect the public against abuse ofmonopoly power, regulators mostly concentrated on issues relatingto price setting and analysis of consumers’ disputes withtheir service providers. Today, pricing occupies a smallerproportion of regulatory resources, far outweighed by the need tostimulate competition and to ensure fair play. The complexity ofregulatory issues has grown with the complexity of thetelecommunications business. Today’s regulator is concernedabout interconnection of networks, disputes between operators,wholesale tariffs (including access charges), and keeping up withnew products and services.
Under proper regulatory systems,regulators are answerable to the public. Regulation must be freefrom political interference or influence, transparent, and wellpublicised. In order for the regulator to successfully implementtelecommunications policy by managing the business environmentfaced by operators, it must be independent of both policy-makersand operators. Independence from operators is achieved throughthe establishment of a separate entity to serve as regulator. Theright balance is required to ensure that the role of theregulator does not become so intrusive that the regulator isessentially managing the operator’s business. While policyshould be made without regard to implementation issues, any inputfrom the regulator on the long-term impact of policy optionsneeds to be taken seriously.
In a competitive environment,users who are unhappy with the performance of their operators can"vote with their feet", by switching operators orreducing their consumption of telecommunications services. Thepressure for operators to provide adequate service, is thereforea commercial one, since users provide the financial return thatis the objective of commercial operations. A key responsibilityof the regulator is therefore to ensure that operators feel thepressure to meet the needs of users (e.g., affordability,interconnection, availability and quality of service).
The private sector which is wellestablished in Mauritius is playing an active role in thetelecommunications sector, via Emtel Ltd. and Paging ServicesLtd. The use of Government resources to fund enterprises whichcould be formed on a commercial basis by the private sector isboth inefficient and wasteful. Thus private sector participationin commercial ventures is to be encouraged wherever possible. Inlicensing Emtel Ltd. and Paging Services Ltd., theTelecommunication Authority tacitly acknowledged the desirabilityof both private sector participation and competition.
Increased private investment inthe information sector eventually will give rise to the emergenceof new operators who will compete for market share. The interplayof market forces will achieve a market-focused culture, encourageinnovation and reduce operational costs. This new paradigmcreates the opportunity for creative, efficient andentrepreneurial operators.
There are a variety of approachesto private investment. A mixture of different types of investorsprovides means to realise macro-economic objectives in terms ofemployment, productivity, and earnings from operations (bothlocal and foreign). The range of private investor types includes:
These may be extremely creative in the development of content. Furthermore, they can be very effective as distribution outlets for main suppliers in the diffusion of their services. Finally, they represent a substantial employment potential.
Strategic Equity Partners
Usually these partners are multinational operators whose objective is to improve their share of the information services market in the world. Their strategy is to be present in the local and regional markets, with a longer term view toward profits. They bring in capital, management expertise, technologies and international markets experience to the nation in return for a share of the local market. The advantages of taking a strategic partner are that it rapidly improves the company’s performance in:
market demand analysis
sophisticated costing and management accounting systems
advantageous negotiating position with suppliers
servicing customer needs
strengthening and broadening senior management skills
achieving and maintaining world class technical ability
implementing required systems for customer service, billing and management information.
access to international alliances and markets
c. Financial (or Portfolio) Investors
These investors represent a major source of capital and may consist of both local and foreign investors. They are individuals, banks, investment fund and pension fund, and they can invest either directly or through the stock exchange mechanism. In general, they are not interested in the operational management of business enterprises, remain passive shareholders but, since their single motive is to earn a stable return on their investment, they can impress on management to improve efficiency and profitability. The structuring of investment, as a result, entails divestment of government stocks and its replacement by private capital.
Global experience intelecommunications has assuredly demonstrated many times over thebenefits of allowing competition in the telecommunicationssector. Both the Global Information Infrastructure (GII)initiative and the World Trade Organisation (WTO) emphasisecompetition as a tool for telecommunications infrastructuredevelopment.
As already stated, on 15thFebruary 1997, at the WTO Working Group on basictelecommunications services, Mauritius accepted a commitment toopen up the telecommunications sector to competition and to endall monopoly and exclusive rights in domestic and internationalservices by the year 2004. Mauritius has also offered to allowaccess to satellite-based mobile services as from the date theseservices become commercially available.
Whilst under the terms of the WTOAgreement, Mauritius may defer competition in any segment of themarket until 2004, the following arguments have been adduced infavour of phasing in competition prior to 2004:-
(a) providing adequate time for local operators to prepare for competition with foreign operators, particularly multinationals;
(b) additional competition would encourage the productive efficiency of existing local operators;
(c) competition will drive down costs and prices, allowing for faster diffusion of info-communication services; and
(d) as competition builds up and markets diversify, total employment in the sector progressively increases.
These arguments have beencarefully examined and debated, while taking into account thesocio-economic implications, including the fact that theinternational gateway represents a strategic economic instrumentfor Mauritius. Government has decided that Mauritius Telecom willcontinue to enjoy monopoly position for the operation of theinternational gateway and for providing basic telephony until theyear 2004.
An important consideration in thetiming of competition is the critical aspect of re-balancingtariffs before introducing competition. As competition isintroduced in a market segment, Mauritius Telecom will probablylose some of its share of that market. The extent of its loss ofmarket share will be dependent, in part, on its ability to pricecompetitively. In an unbalanced tariff regime, competitivepricing not only reduces margins on competitive service, but italso eliminates the subsidy of non-competitive services andimpedes universal service objectives. Once the subsidisedservices have been re-priced to align with costs, thencompetitive pricing becomes an organisational challenge, ratherthan a threat to the network.
It is acknowledged that rapidadvances in technology are contributing to the convergence oftelecommunications, broadcasting and information technology. Theissues associated with such convergence are broad andwide-ranging and need to be examined in depth. Advanced economieshave over the past years been assessing the multiple facets andimplications of different regulatory models and there is yet nopractical model that has been clearly established. A policydecision on these issues will be taken after the relevant studiesare completed.
As already noted, if Mauritius isto maintain its competitive position in the new globalmarket-place it must quickly establish an information-basedeconomy. It needs to do so because of its geographic remotenessfrom its markets. Since it cannot indefinitely rely upon low costlabour advantage in manufacturing, it must instead seekproductivity gains in this sector. Similarly, tourism which isanother mainstay of the economy is also becoming increasinglycompetitive. If Mauritius is to maintain its enviable position,better customer information gathering and analysis, market dataanalysis and information processing, as well as bettertelecommunications infrastructure will be essential.
On the other hand, Mauritius is insome respects very strongly placed to take advantage of theopportunities presented by technological advances intelecommunications. Falling costs mean that remoteness is lessimportant and in the near future may be immaterial. Secondly,being a small island country Mauritius can move more rapidly thanmany of its competitors to acquire and disseminate the mostrecent computer-based technological innovations intelecommunications and across all related sectors such asinformation technology. Thirdly, it has a highly educatedworkforce capable of being trained in the required newdisciplines and skills and one outcome of the adoption of newtechnology is that telecommuting will probably become easier andmore common, which will bring into the sector, people who for onereason or another were absent before. Finally, in the past fewyears Mauritius has, with a considerable measure of success,concentrated on developing its banking and financial services;this sector is one of the main users of information technology.
To realise its vision of aninformation-based economy in Mauritius, Government has alreadygiven the greenlight for drawing up a comprehensive NationalInformation Technology Strategy Plan (NITSP) with the support ofNational Computer Systems Pte. Ltd. of Singapore.
Within the framework of the NITSP,it is proposed to create a Government Information Infrastructurewhich will seamlessly interface with the evolving National andultimately with the Global Information Infrastructure.
A National Information TechnologyCommittee (NITC) has been set up under the Chairmanship of theMinister of Telecommunications and Information Technology. TheCommittee will monitor closely the overall implementation of theNITSP and will provide policy guidance to the NITSP ManagementCommittee which has been set up to organise, plan and co-ordinatethe NITSP planning effort. The National Computer Board has beenassigned the key role of integrated Programme Management for theNITSP.
Government attaches very highpriority to Human Resource Development with the objective ofcreating a skilled workforce. The Industrial and VocationalTraining Board (IVTB) is mandated to plan, co-ordinate and toregulate all vocational training efforts. In the 1997-98 Budget,provision has been made for the creation of a special "SkillDevelopment Fund" to spearhead development of skills inupcoming areas such as Automation and Information Technology.
The University of Mauritius willcontinue to offer undergraduate courses in electrical engineeringand computer science. In fact Human Resources Development in thetelecommunications and information technology sectors is one ofthe building blocks of our NITSP, and it will be given its dueconsideration in our strategy.
All operators will be encouragedto promote In-House-Training programmes.
The legal framework governing thetelecommunications sector stems largely from the prevailingTelecommunication Act. This Act dates back to 1988 and its mainprovisions addressed the establishment of:
the Telecommunication Authority (TA), to serve as sector regulator;
the Telecommunication Advisory Council, to advise the Minister on telecommunications sector policy; and
Mauritius Telecommunications Services Ltd., a state-owned company, to provide domestic telecommunications services. Prior to 1988, domestic telecommunications services were provided by the Department of Telecommunications.
In response to changing views ofbest practices for telecommunications development around theworld, the provisions of the 1988 Act must now be updated. Newlegislation will inter alia modify the legal framework fortelecommunications in several critical ways. It will:
expand the jurisdiction, powers, and autonomy of the Mauritius Telecommunications Authority (MTA);
specify the composition and functions of the Telecommunications Advisory Council (TAC);
promote competition and network interconnection;
repeal the Telecommunication Act of 1988;
provide for transition to a different legislative regime; and
preclude any exclusivity provisions from extending beyond the year 2004.
The proposed new legislation willestablish the Mauritius Telecommunications Authority as primaryarbiter of the sector. In fact, the Mauritius TelecommunicationsAuthority will be tasked with regulating the sector in such a wayas to be consistent with the policy of Government. Two importantpoints also relate to the legal framework for thetelecommunications sector. Firstly, telecommunications operatorswill be bound to comply with Civil and Commercial Laws whereapplicable. Examples of how Civil Law contributes to the legalframework for telecommunications include taxation, securitieslaw, foreign investment code and labour laws. Secondly, therewill be an appeal mechanism for decisions made by the MauritiusTelecommunications Authority. Appeals will be made to theMinister. This form of early arbitration and settlement ofdispute in a speedy and reliable manner has been preferred as theregular judicial system might not be equipped to provide a quickresponse, thereby causing undue delays and penalising theapplicants in the process. Unsatisfied appellants will still befree to resort to a Court of Justice.
The Telecommunication Authorityestablished under the 1988 Act will be reconstituted, and the newMauritius Telecommunications Authority will be responsible foroverall regulation of the telecommunications sector in Mauritius.The Mauritius Telecommunications Authority’s principalpurpose will be to ensure the development of the sector to meetnational economic and social needs and enable Mauritius to haveavailable the most modern telecommunications services possible atfair prices; to improve its position and competitive-edge inglobal markets.
The Mauritius TelecommunicationsAuthority (MTA) will be managed by a Board, consisting of aChairman and four other members. The Chairman will be appointedby the Prime Minister after consultation with the Leader of theOpposition. The Members will be appointed by the Minister afterconsultation with the Telecommunications Advisory Council. TheBoard Chairman and Members will be appointed for a three-yearterm of office.
The Board will appoint anExecutive Director, who will be the Chief Executive Officer ofthe MTA. The Executive Director will be responsible for executionof the Authority’s policy and for the day-to-day control andmanagement of the Authority’s business. The ExecutiveDirector will be supported by appropriately skilled andexperienced staff. In addition to traditional telecommunicationstechnical skills, the Authority will require a mix of otherskills and expertise - including economics, legal, financial,consumer affairs, and business management.
The staff of the Authority,including the Executive Director, will be employed on terms andconditions of service determined by the Authority. It will be acontractual condition of employment that all staff may not haveany interest in any entity licensed by the Authority.
The Authority will derive itsincome from any charges or fees levied on telecommunicationsoperators or licensees that may be prescribed. It may benecessary for initial funding of the Authority to be appropriatedfrom the Consolidated Fund, or any other such source as may beapproved by the Minister. The Authority will be required tosubmit to the Minister, not later than three months before thecommencement of every financial year, an estimate of its incomeand expenditure for that year.
The Mauritius TelecommunicationsAuthority will have jurisdiction over telecommunications in allparts of Mauritius and its associated Outer Islands. TheAuthority will have sole jurisdiction to allocate theelectromagnetic spectrum, including allocating frequency forbroadcast purposes, for which it may charge a fee. Other thanspectrum allocation, the Mauritius Telecommunications Authoritywill have no jurisdiction over broadcast matters, but is expectedto work closely with its counterpart organisation for broadcast,once the latter is established.
The Mauritius TelecommunicationsAuthority will represent Mauritius in regional and internationaltelecommunications regulatory matters. This includes forumsconvened by:
the International Telecommunication Union (ITU).
the Southern African Development Community (SADC);
the Southern African Telecommunications Regional Association (SATRA);
the Southern Africa Transport and Communications Commission (SATCC); and
The functions of the MauritiusTelecommunications Authority will include:
implementation of the Government’s policy relating to the telecommunications sector;
consideration of applications for licences to operate telecommunications services, conducting public consultation, and subsequently issuing licences;
where appropriate varying, suspending or revoking operators’ licences,
monitoring of the conduct of organisations operating within the telecommunications sector in accordance with recognised international practices, including the promotion of fair competition, utilisation of cost-based tariffs, and fair interconnection arrangements;
assisting in the formulation of national telecommunications sector policies, providing advice to Government on the basis of its monitoring of the sector and taking account of evolving global trends in telecommunications;
ensuring that the new legislation is implemented with due regard to the public interest and so as to prevent any unfair or anti-competitive practices by licensees;
establishing, for public telecommunications operators, performance standards in relation to provision of domestic and international services, and monitor compliance with these standards;
ensuring the safety and quality of all telecommunications services and, for that purpose, determining technical standards for telecommunications networks and the connection of customers’ premises equipment to networks;
implementing frequency allocation policy formulated by this Ministry, monitoring, and control of radio frequencies (including a broadcasting frequency to the Mauritius Broadcasting Corporation or any other duly authorised broadcasting station), in accordance with national, regional, and international agreements, including conducting and issuing certificates of competency for operation of transmitters and receivers to be used for telecommunications purposes, inspection and licensing of ship and aircraft radio and telecommunications equipment;
implementing the national telephone numbering system policy formulated by this Ministry, allocating number ranges to operators; from time to time reviewing the national numbering system and making any necessary changes to ensure the most effective utilisation of the system;
overseeing the fulfillment by public operators of their obligations set out in their licences, in any directions they receive under the new or other relevant legislation;
recommending charging principles to the Minister, and regulating all tariffs as defined by the new legislation;
granting authorisation to any person to conduct such technical tests or evaluations that it deems appropriate;
controlling the importation of any equipment capable of being used to intercept telecommunication messages;
overseeing the general level of consumer complaints in relation to telecommunication services and, where appropriate, receiving and enquiring into major complaints either from consumers or operators; and
reporting to the Minister and, where appropriate to other persons, on any matters within the scope of its operations, such as the performance of public telecommunications operators, the quality of services provided by these operators, and the level of consumer satisfaction.
In carrying out its functions, theMauritius Telecommunications Authority will have the followingpowers:
to require a licensee to produce his licence;
to require licensees to provide information on their services and their financial and technical performance;
to arbitrate upon any conflict between telecommunications licensees;
to hear appeals from, and award compensation to, persons aggrieved by certain acts of operators of telecommunications services which may interfere with the enjoyment of their property;
at all reasonable times to inspect any installation, apparatus or premises relating to a licence; and
where reasonable grounds exist to suspect contravention of the new legislation or any associated regulations, to seek a Magistrate’s warrant to enter and search any premises or persons thereon, inspect, remove and take copies of any relevant documents found therein, and inspect and remove any installation or apparatus found therein.
In undertaking its functions andexercising its powers, the Mauritius Telecommunications Authoritywill have regard to:
the public interest and any likelihood of unfair or anti-competitive practice;
any element of national security;
the technical compatibility of all licensed services;
any national, regional or international agreements on telecommunications; and
the importance of guarding privileged or commercial information provided to it by licensees.
To promote transparency in itsoperations, the Mauritius Telecommunications Authority will:
hold meetings on a regular basis;
except as required to protect confidentiality, make available to the public its rules of procedure, a register of licences granted-including any modifications of licence conditions and determinations, directions or orders made under licences, applications for new licences, operators and tariff structures; and
establish procedures for requesting and considering the comments of industry and the affected public in the development of new policies or consideration of any other decisions of general applicability and effect, including, but not limited to, public oral hearings, closed hearings and written comments.
Telecommunications sector bestpractices around the world dictate that the functions of theGovernment, the regulator and the operators be distinct and haveto be separate. As stated in the Green Paper we have thefollowing stances regarding the role of Government in theTelecommunications Sector:
The Southern Africa Development Community (SADC)
Emphasises development and modernisation of telecommunication networks. Accordingly, the SADC Protocol on Transport and Communications adopted by Member States in August 1996 provides guidelines for governments to adopt a policy role and for operation to be pursued by private investors under the supervision of an independent regulatory institution.
The World Bank
Addressed the role of government in infrastructure in its annual World Development Report of 1994. The Report emphasised the growing inadequacy of public monopolies or public control of infrastructure creation and development. It identified the need to give much more freedom of operation to private investors, including multinational investors. The World Bank Report advocated a growing role for government as a facilitator of private investment instead of a direct investor in physical infrastructure.
The G-7 Ministerial Conference on the Information Society
Endorsed the following principles, including encouraging private investment and defining an adaptable regulatory framework, in Brussels in February 1995:
Providing open access to networks.
Ensuring universal provision of, and access to, services.
Encouraging private investment.
Promoting diversity of content.
Promoting equality of opportunity.
Promoting dynamic competition.
Defining an adaptable regulatory framework.
Recognising the necessity of world-wide cooperation with particular attention to less developed countries.
The current structure of theinformation sector, however, favours a concentration around thegovernment-owned institutions, which are providers oftelecommunications, computer and broadcasting services, arisingout of direct or indirect government investment. The role ofgovernment will have to be adapted to the liberal economicenvironment to impact positively on the attitude of privateinvestors in the sector. The top concern of an investor is thesecurity of the investment and adequate protection is usuallysolicited from government before any major commitment is made.
In shifting from a primary role ofoperator (as the majority shareholder in Mauritius Telecom) to aprimary role of policy maker, Government will proceed through atransitional phase. Divestiture and an increase of privatecapital in the sector can have significant effects on thedevelopment of the national infrastructure and services. In somedeveloping regions of the world, countries that have introducedprivatisation have experienced a faster expansion andmodernisation (measured by the percentage of digitalisation) ofthe public network than those that have remained under stateownership and control. This strategy is supported by Governmentin the White Paper on Privatisation and Workers’Participation, published in May 1997.
Although Government supportsprivate sector ownership and management of Mauritius Telecom, itwill retain the right to veto changes to the Memorandum andArticles of Association or actions of the company or shareholdersrelating to:
alterations to the scope or objectives of the business
sale of investor shares
increase or reduction in capital of the company
merger with another entity
disposal of a substantial portion of the company’s assets
any declaration of dividends greater than a defined percentage of profits
The various policy optionsregarding the privatisation process, as printed in the GreenPaper have been carefully examined and debated. The optionsconsidered were:-
Ownership of Mauritius Telecom
A choice between local and a mixture of foreign and local capital.
The type of investors
Strategic Equity Investors and/or Equity Market Investors.
The degree of divestment
The amount of ownership that government will retain and its impact on investors.
The timing of divestment
The determination of a time-frame using 2004 as reference, followed by a schedule of divestment.
The decision has been taken toinvite both foreign and local capital investors to participate inMauritius Telecom. Foreign capital may be introduced through aStrategic Investor; local capital will be introduced through anInitial Public Offering (IPO) on the stock market. Timing of theIPO, as well as the share percentage to be offered will bedetermined based on market conditions and in conjunction with afinancial advisor.
The Government is attentive to theconsensus of international organisations regarding privateownership of telecommunications resources and operations. To thatend, private ownership of other operators is encouraged to thegreatest extent possible. Private owners of other operators wouldbe subject to all applicable provisions of Civil and CommercialLaws, in addition to the new legislation.
Both local and foreign funds canbe the sources of private investment in the info-communicationssector. To date, the largest portion of local funds has come fromgovernment or state-owned institutions (e.g., the State Bank ofMauritius, the National Pension Fund). The private sector hasparticipated in the telecommunications sector since 1985 but itsinvestment is small relative to the total requirements. With theeventual withdrawal of government as owner, private sectorinvestment will have to increase substantially.
Globalisation of economies iscausing larger movements of funds between countries and enablesinvestment to be directed to an attractive info-communicationssector. The increased level of transactions provides theopportunity for the net recipient of foreign direct investment tocreate national comparative advantage and national wealth at afaster rate. This growth results from the benefits of receivingforeign direct investment. These benefits are not only limited tofunds that are brought into the country, but they also lead toimprovement of capital formation and employment creation. Theyalso bring in the latest technology for productivity improvement,modern services for users and a potential overseas market.
The involvement of an experiencedoperator as a strategic investor in Mauritius Telecom would helpthe company to address its positioning in the light of a changingpolicy environment. For example, an experienced operator wouldhelp Mauritius Telecom build strategies to meet its universalservice/access obligation, to develop its relationship with theAuthority, and to maximise its incumbent position in facing newcompetition.
It is likely that a strategicinvestor will seek some level of involvement in the management ofMauritius Telecom; perhaps full management control. However, thecircumstances which lead to strategic investors seeking thislevel of control do not prevail in Mauritius.
It should be noted that currentlyin Mauritius, Singapore Telecom, France Telecom and MillicomCorporation are working in strategic partnership with localtelecommunications operators.
The foreign investment option mustbe weighed particularly in the light of the opening of thetelecommunications services market to international competitionby 2004. In this context, foreign investment may be a usefulstrategic instrument to consolidate the competitive ability oflocal firms and may allow them to operate on a larger marketscale, thereby protecting employment. Nevertheless, the rightbalance between foreign and local participation will bedetermined so as to develop local entrepreneurs and safeguardlong term national interests.
The market structure in Mauritiuswill change with the introduction of competition and expansion ofprivate sector participation. While market structure decisionsmust be made by market segment, certain trends have a bearing onthe long-term definition of market segments. Policy for theinfo-communications sector must provide for the impact of thesetrends.
First, because telecommunicationstechnologies are adaptable to different purposes, differentmarket segments may begin to merge. For example, there is somequestion as to whether voice service provided over the Internetshould be viewed as voice or Internet service. Second, there area number of international trends that change the value driverswithin given markets, including:
reduction in international settlement rates;
implementation of WTO agreements;
growth of call-back services; and
introduction of Global Mobile Personal Communications by Satellite (GMPCS) services.
These trends have a significantimpact on the economics of various market segments which cannotbe ignored when looking forward. In addition, the convergence ofcontent, delivery channels, and technology affects marketstructure. It is already becoming much more difficult to definetelecommunications as an independent sector from media,information technology, and entertainment. The anticipated impactof these trends as well as other emerging trends will be mirroredin the policy and regulatory framework as it evolves.
At present, Mauritius Telecom isthe only provider of local wireline services, although localcalling is also provided by the cellular mobile operators.Competition may be introduced in either the backbone or theaccess portion of the network. Local wireline service is subjectto the competition policy to be implemented under the WTOagreement. Thus, it will be opened to full competition by 2004.
At present, the internationalgateway in Mauritius is run by a single operator, MauritiusTelecom. It is a lucrative part of the telecommunicationsbusiness, and represents a major source of revenue and profit forMauritius Telecom. As a result, international services will be aprimary target for competitors and investors. The tariffstructure traditionally used by national operators, results inthe high revenue generating capacity of international gatewaysand this is true in Mauritius. However, the international gatewayrepresents a strategic economic instrument for Mauritius. Accessto international services which, because of high tariff levelshas largely been restricted to the business community, wealthyindividuals and tourists, must be made available at reasonablecost to all of the country’s population as soon aspracticable. Government recognises that high revenues frominternational services currently subsidise other loss-makingservices. In order to ensure fair competition in the sector,cross subsidisation will be eliminated through tariffre-balancing.
In any case, even withoutlegitimate competition introduced in a measured and regulatedmanner, the current high profits earned from internationalservices are most unlikely to be maintained under the jointthreats of technological changes and other competitors such ascall back operators or voice on the Internet.
Tariff re-balancing will thereforehave to be introduced progressively and is expected to becompleted by 31 December 2004.
Competition presently exists inthe mobile cellular service market, although each cellularlicence included an initial exclusivity period. Emtel Ltd.’sexclusivity in the mobile cellular market expired in December,1995; Cellplus’ exclusivity in the GSM market will continueon through 1999. The extent to which additional competitors maybe licensed will be left to the discretion of the MauritiusTelecommunications Authority.
New technologies offer newnumerous opportunities for the supply of innovative services thatcontribute to the improvement and competitiveness of the economicoperators. They also serve in the development of totally newservices that can bring in additional export revenue whilesimultaneously providing employment opportunities. Suchinitiatives are in line with the national strategy to develop theservices sector and Government policy is to encourage value addednetwork (VAN) service providers in areas such as electronic datainterchange, database creation and access, and management of datanetworks.
The very nature of the servicerequires VANs to reach a large number of customers.Interconnection to the PSTN is therefore a critical componentwhich will be made available to the service providers. Theseservices may, in some areas, compete directly with those offeredby Mauritius Telecom. In such cases a level playing field will beestablished to ensure that fair competition prevails. One of thepractices that will facilitate the growth of such services thatinterconnect to Mauritius Telecom is the unbundling of customisedpackages or offerings such that less extensive connections arereflected in lower interconnection charges. The MauritiusTelecommunications Authority will oversee such practices.
In situations where MauritiusTelecom is unwilling or unable to provide the necessary networkaccess or links to Mauritius Telecom infrastructure to serviceproviders within a reasonable amount of time, service providersmay elect to provide their own links under conditions specifiedby the Mauritius Telecommunications Authority. Mauritius Telecomwill therefore have the right of first refusal after which anyother licensee may offer such services. The links which becomeavailable must be accessible by Mauritius Telecom and theMauritius Telecommunications Authority will oversee theinterconnection agreement to ensure fairness to all partiesconcerned, including the end-user.
The Internet represents vastopportunities for businesses, education and the nation at large.In this context, usage of the Internet in Mauritius is beingstrongly encouraged. Competition in this market segment hasproven to be a powerful strategy to reduce prices and stimulatedemand. In doing so, the Mauritius Telecommunications Authoritymust evaluate the potential benefits and threats of voicetelephony over the Internet in determining the conditionsattached to licensees and in order to regulate the market.Government will open Internet services to competition by the endof 1998.
Global Mobile PersonalCommunications by Satellite also offers great potential for thelocal market.. In spite of the threats to local wireline andcellular mobile operators, benefits outweigh the costs.Government will allow competition in the GMPCS market.
One of the roles of the MauritiusTelecommunications Authority, is to promote competition inkeeping with the policies of Government. Most elements associatedwith regulation of a competitive sector are therefore within theprovince of the Authority. Critical elements include licensing,interconnection, pricing, universal service/access, numbering,structural separation, spectrum management and type-approval.
The new legislation will providefor licensing of telecommunications operators by the Authority inkeeping with the interests of the public, national security,technical compatibility, and agreements between Mauritius and anyother State. Any dispute of licence terms may be appealed to theMinister. Licensing must take into account the services which theState believes must be in place to accommodate the needs of thenation. Provision may be made in the licence for mandatoryresearch and development, human resources development, universalservice funding, or other service and performance targets.
In keeping with Mauritius’commitments to the WTO, exclusivity provisions in licences maynot extend beyond the year 2004. The new Act will also providefor a transitional licence to be granted to Mauritius Telecom toallow its operations to be uninterrupted between the time the Actis passed until the time the Authority can issue it with a properlicence.
It is within the province of theAuthority to regulate interconnection. It is an objective ofGovernment policy for telecommunications infrastructure todevelop as a network of interconnected networks. Thus it isincumbent upon all operators to negotiate in good faith with eachother to establish reasonable and equitable interconnectionagreements. All interconnection agreements will be provided tothe Authority, which will review them to ensure that competingoperators have comparable interconnection terms. The Authoritywill also preside over any dispute between operators regardinginterconnection and will regulate access charges following theterms of charging policy as established by the Minister.
The new legislation will requirethat every operator provide to the Authority tariffs for eachtelecommunications service supplied and whatever additionaldocumentation the Authority requests for purposes of monitoringcompliance with tariff provisions. These tariffs will be publicinformation and must be available for review by consumers at theoperators’ offices.
Tariff rates must be approved bythe Authority for the time period during which they will beeffective. The Green Paper on Telecommunications described thetwo most commonly used forms of rate regulation: Rate-of-Return(ROR) and Price-Cap.
Rate-of-return regulation iscumbersome in its analytical requirements and is quite regimentedin terms of allowing the operator pricing flexibility. Price-capregulation is the more commonly accepted approach around theworld, since it requires less administration on the part ofregulators, allows operators the flexibility to respond to marketforces, and provides an incentive for increased efficiency. TheMauritius Telecommunications Authority will determine the pricingregime to be adopted while issuing any licence.
Another issue pertaining topricing is Government’s policy of no cross-subsidisation. Itis common for tariffs to be established in such a way thatinternational calls subsidise the national network. Thus,international call tariffs tend to be substantially higher thanthe cost of providing the service, while national tariffs aresubstantially below cost. While this has historically been viewedas an appropriate mechanism for funding local networkdevelopment, it has left the higher margin international marketopen to cream skimmers, such as call-back operators. To complywith Government policy of no cross-subsidisation, MauritiusTelecom will re-balance its tariffs.
Government’s objective is toprovide access to basic telecommunications services at reasonablecosts throughout Mauritius , Rodrigues and the Outer Islands.Government policy will be to ensure that a universal service isoffered to meet this end. This measure will be important in thefuture for the population in remote areas in determiningopportunities for work, education and leisure.
In order to relieve any singleoperator from having to bear the full cost of providing suchservice, the new legislation will require that all operatorscontribute towards the provision of this service. All operatorsin the country will have a universal service obligation whichwill be incorporated in the licence to be issued by the MauritiusTelecommunications Authority. The universal service obligationwill be structured as a contribution to a Universal Service Fundwhich will be managed by the Mauritius TelecommunicationsAuthority. The universal service requirements will be determinedby the Authority in accordance with Government policy and thecontributions collected from operators will be used to supportprojects bringing service to users in remote areas.
Numbering is a critical issue inpromoting fair competition. The numbering plan must be allocatedequitably across operators, since favourable numberingarrangements will provide a competitive advantage. Another issuepertaining to numbering is number portability, which would enablea user to migrate from one operator to another without changinghis telephone number. Consequently, numbering is a serious policyissue, to be addressed by this Ministry. The Authority will beresponsible for implementing numbering policy formulated by thisMinistry.
It will be necessary for theAuthority to have access to detailed accounting information fromthe companies it regulates. Separation of network development andservice provision costs in this information is essential forcomputing interconnection charges as well as reviewing pricescharged to service re-sellers. The Authority will be responsiblefor developing the accounting principles to support such rateanalysis. Such accounting principles may, at the discretion ofthe Authority, be based on the principles implemented bytelecommunications regulators in other countries with welldeveloped regulatory regimes.
The Authority will continue tohave responsibility for implementing Government’s policy onspectrum management. Such responsibility includes broadcastfrequencies. The Authority will further determine means offrequency allocation (e.g. frequency auctions).
The Authority will be required toensure the safety and quality of every telecommunications serviceand, for that purpose, determine technical standards fortelecommunications network matters, the connection of customerequipment to telecommunications networks and the performance ofcabling. The Authority will provide type approvals fortelecommunications equipment in keeping with this function. Tosimplify this process, the Authority will accept equipmentapproved elsewhere by legitimate standardisation organisations.
In privatising Mauritius Telecom,one of the most important considerations is its impact onMauritius Telecom’s employees. Experience has shown thatstaff usually have a number of concerns, the main ones being:
threats represented by the changes in environment and the increased level of uncertainty;
possible reduction in job security;
doubts about their ability to perform in a more challenging and different environment;
risk of skills redundancy; and
perceived threat to their pension or other employment terms.
Because the proposed changes areradical, if inevitable, and will entail a period of flux for thecompany and its staff, such concerns are understandable. Theremay, however, be misconceptions about the outcome of sectorreform for staff. Experience has shown that:
Once full market liberalisation arrives, overall employment in the sector tends to increase due to more operators being in the market and to general expansion of telecommunications services. Any reduction in staff employed by main service providers arises not from privatisation or competition but from technological advances.
Growth levels in telecommunications have been and will continue to be high, and therefore, there is considerable scope for improvement in productivity arising from increases in business activity.
Under conditions of competition in the private sector, the employment terms and conditions of staff in the industry, including salaries, pensions and benefits, tend to improve overall. This happens because of increased competition for experienced staff, the emergence of a system of meritocracy and improvements in efficiency and profitability which lead to improved workers compensation packages.
Increased diversity in the industry leads to better career development opportunities and greater job satisfaction.
Staff have the opportunity to participate in the profits of the company by acquiring shares.
There are a number of differentways in which employees may acquire shares:
shares could be offered at a discount
preferential allocation of shares could be granted within a public offering
bonus shares issued under a profit sharing scheme
participation in an employee shareholding (saving) scheme by setting aside an amount from their wages to purchase shares at an attractive rate, or an Employee Share Ownership Plan (ESOP) where a loan is made to an employee benefits trust, which acquires shares and allocates them through periodic payments to each employee’s ESOP account.
When divesting its shares in Mauritius Telecom, Government will give consideration to those of the above options which are thought appropriate.
The impact on staff of theprivatisation of Mauritius Telecom and market liberalisation willbe extensive. Government will ensure that Mauritius Telecominforms and consults with its employees and their unionrepresentatives at all stages. Mauritius Telecom will need todesign and implement a programme, some of the key features being:
a review of the company’s manpower requirements in order to "right size" the organisation;
communication of the review results to staff and explanation of its implications to all staff and their union representatives;
implementation of training for new skills which will be required in several important functions in order for the company to operate effectively in its new environment; for example, new skills in marketing and finance will be needed as well as those required to install and maintain new technology;
in addition to training for new skills, consideration will need to be given to re-training and re-deploying staff as and when their present skills are no longer required; and
a well designed "right sizing" scheme which will include:
Early retirement for some staff approaching normal retirement with enhanced pension and redundancy payments based upon length of service.
Exploration of external employment opportunities with reserved pension entitlement.
Optional voluntary retirement on reasonable and favourable terms.
The major milestones in the policy implementationschedule are:
1998 - Completion of initial phase of privatisation of Mauritius Telecom
2005 - Markets must be open to full competition
Policy implementation overthe 1997-2007 time frame will be in three phases:
From 1997through year-end 1998
establishment of the new Mauritius Telecommunications Authority
establishment of the new Telecommunications Advisory Council
intensive initial policy and regulatory decision-making
intensive activity toward the initial partial privatisation of Mauritius Telecom.
opening up of some additional services to competition;
From 1999 to2004
gradual sector liberalisation
the advent of competition across other market segment
From 2005 andbeyond
full compliance with WTO obligations.