Impact of WTO telecom agreement will vary according to region

Government and industry officials today were quick to celebrate the World Trade Organization agreement to liberalize most of the global telecommunications sector as a boon for the world's economy. But industry analysts are warning that the impact of the accord should not be overplayed, as it will vary greatly from region to region and country to country - and the payoff may be some time coming. The IDG News Service provides a comprehensive global roundup of reactions to the agreement.

Government and industry officials today were quick to celebrate the World Trade Organization agreement to liberalize most of the global telecommunications sector as a boon for the world's economy.

However, industry analysts cautioned that the impact of the accord should not be overplayed, as it will vary greatly from region to region and country to country.

The main advantage of the accord once it is ratified will be that it is legally binding, setting up a process for arbitration of violations.

"The agreement puts down in law what kind of market access countries grant to foreign service suppliers," said a spokesman at the WTO in Geneva who asked not to be named. "It will be law meaning countries cannot restrict access that has been granted, they can only improve it," the spokesman said.

The pact also further cements liberalisation efforts already on the way in some regions including Europe and U.S., while also adding potential competition from Asia.

What is certain is that the agreement will boost the world telecom sector as it encourages foreign investments, sets the stage for more competition and eventually will lead to a drop of prices charged for communications services paid by businesses and consumers alike.

Some regions, notably Latin America, Africa and Asia Pacific stand to gain more from the WTO accord then others, observers said.

"Emerging markets could see prices drop dramatically," said Simon Reader, manager of market analysis, CIT Research in London. "However, it could be years before this takes effect."

The expected influx of foreign investments in the telecom infrastructures of emerging markets is bound to lead to a drop in prices while service quality will improve, Reader said.

The pact finalized Saturday in Geneva after three years of talks was negotiated by 68 countries representing more than 90 percent of the world's telecom market, worth an estimated US$600 billion.

Under the WTO pact, participating countries will be obliged to take steps to open up their respective telecom markets to more competition and allow foreign companies to buy a significant stake in domestic communications companies.

The multilateral agreement will not lead to major changes in the European market, but will open investment opportunities for U.S. and European companies in emerging markets.

Telecom equipment manufacturers will gain additional sales as more companies in many markets will be investing in telecom infrastructure.

"The agreement will allow us to get into more markets much faster," said Reiner Schonrock, spokesman for Siemens AG's public networks communications unit, which makes telecom infrastructure equipment. Siemens, one of the top five telecom equipment makers, last year made 80 percent of its sales abroad.

"It will help us to gain more presence in Asia and Eastern Europe faster," Schonrock said.

Telecom carriers around the world today welcomed the agreement as it will make it easier for them to establish an international presence and gain access to other markets.

For France Telecom, the competition introduced by these regulations will grow the "size of the worldwide cake" and force France Telecom to lower prices and improve service, said Gerard Moine director of exterior relations at the carrier's headquarters in Paris.

France Telecom will actively pursue foreign markets, particularly in the developing Asian markets, and look to form partnerships with local businesses, Moine said.

"Having access to the zone of emerging markets in Asia allows us to close the loop on our global activities," Moine said. "With our Global One partnership with Deutsche Telekom and Sprint we can go beyond the transatlantic space."

Meanwhile, Cegetel, a France-based operator owned by BT and General Des Eaux, greeted the inclusion of the international services in the accord, but urged the WTO to extend its regulatory scope to include submarine cables and businesses that charge other operators for international connections, a company spokeswoman said.

Deutsche Telekom AG also believes the WTO agreement "may expand the product portfolio domestically and make it easier to implement Deutsche Telekom's internationalization strategy," said Ron Sommer, company chairman, in a statement.

However, the German telecom company's strategy for international expansion will not change as a result of the WTO agreement, a spokesman at Deutsche Telekom in Bonn said today.

"We welcome the agreement because it gives us greater access to foreign countries," said Jennifer Weller, a spokeswoman for Cable & Wireless PLC, in London. "We are already in 50 countries, but now we will have access to 70 due to the agreement."

Asian telecom analysts were a bit more cautious in their praise for the agreement, as commitments from participating countries varied widely.

"Hongkong Telecom hasn't put anything new on the table," said Fredson Bowers, analyst at W.I. Carr Securities Ltd., Hong Kong.

The liberalization proposal by Hongkong Telecom was no different from the commitment arrived at by the Hong Kong government in 1996, separate from any WTO talks, Bowers said.

Hongkong Telecom retains its monopoly on international voice communications until 2006, a decade after it becomes part of China.

It will allow international simple resale of fax and data services and full fixed-network domestic competition starting in June, 1998.

"We're waiting to see what the meat and potatoes of the agreements are," Bowers said. "We need to see in detail how this will play out."

"This agreement itself does not have vast impact for the Japanese telecommunications market ... it is yet another step," said Richard Kay, a telecommunications analyst at the Tokyo office of Merrill Lynch.

The agreement late last year to split NTT into three companies under one holding company was a larger move toward liberalizing Japan's telecommunications market than the WTO pact, Kay said.

However, the inclusion of new offers from Asian nations - and most of most Latin and Central America with the exception of Argentina - made an agreement possible in the end.

"The fact that Singapore, Malaysia, Indonesia submitted offers helped a lot," a spokesman at the WTO in Geneva said. In the round of negotiations in April last year, a lot of Asian countries had not made any offers, he added.

Meanwhile, regulatory agencies said they hope the agreement will enhance competition, lead to general growth of the telecom sector and create more jobs.

"We anticipate that the agreement will provide a needed impulse for economic growth and employment," said Christian Hopp, spokesman at Germany's Telecommunications Ministry.

"Japan made active contributions to the success of the negotiations," said Hisao Horinouchi, Japan's minister of posts and telecommunications. He cited the removal of all limitations on foreign investment in Type I telecommunications carriers, excluding the country's major telecom providers KDD and NTT.

Japan's offer had been a major obstacle to ensuring US agreement to the accord.

The WTO considers the agreement a win-for-all deal.

"We have always said that you don't lose when you liberalize trade and let the private sector do what governments can't do. What you may give up in lost revenues as a result of falling prices you win back through additional equipment sales," the WTO spokesman said.

Individual Offers

Following are some details on specific offers submitted by some individual countries, supplied by the WTO and government officials.


-- Committed itself to open essentially all market segments, including local, long-distance, international mobile and satellite services and earth stations, international switching, mobile services. Retained limitations to ownership of radio stations to 20 percent and limits access to cable and satellite TV broadcast to countries with most favored nation trading partner status.

European Union

-- The 15 members will open basic telecom services, including satellite networks and services and all mobile and personal communications services and systems by January 1998, but some countries retain the right to delay full liberalization until 2003. France and Portugal retain a 20 percent foreign equity limit on radio-based services. Germany has no limit on foreign ownership.


-- Limits foreign ownership of facilities-based services to 20 percent direct and 46.7 percent indirect, while foreign equity limits on many other services will be phased out by 2000. Also phases out Teleglobe's monopoly on international calls by October 1998.


-- Will allow 100 percent foreign ownership of new domestic companies but keeps a 20 percent foreign equity on NTT and KDD.


-- Will allow for two mobile phone operators and four paging operators by April. Up to two new basic telecom operators will be licensed in 1998 to offer commercial services from April 2000. More operators can be licensed thereafter. Singapore will allow a cumulative total of 73.99 percent foreign equity shareholding consisting of 49 percent direct shareholding and 24.99 percent indirect shareholding.

Ratification Still Pending

The WTO agreement is scheduled to go into effect by Jan 1, 1998, the same date when telecom monopolies will fall within the European Union.

Legislative bodies and the governments of each of the participating countries have until Nov. 30, 1997, to accept the agreement, before countries can officially sign the pact made by acclamation on Saturday, a WTO spokesman said.

After ratification the agreement becomes legally binding for signatory countries, which gain the right to launch a WTO dispute settlement procedure in case of violations, the spokesman said. A document outlining the procedures for settling disputes will be attached to the agreement.

Individual countries may increase their offers and liberalize their markets even more after signing the pact -- for example increase the percentage of foreign ownership in domestic communications companies -- but they cannot go backwards and lower their offers, the WTO spokesman said.

Participating Countries

Sixty-eight countries will sign the WTO telecom agreement.

The European Union negotiated as one entity for all its 15 members in the WTO, but countries are counted individually as the degree of market access varies from country to country within the EU.

Argentina is expected to joint the WTO agreement at a later date. Other countries can still join the agreement, the WTO spokesman said. Switzerland wants to change the character of its national telecommunications company and requested more time to hold a national referendum on the liberalization of its sector, the spokesman added.

China and Taiwan are not members of the WTO and are not included in this agreement. The Taiwanese government, however, is doing its utmost to achieve WTO membership ahead and independent of its political rival mainland China, and would be likely to adjust any existing regulations to reach this goal, observers said.

Taiwan, meanwhile, is committed to a "full" liberalization of its telecommunications market by July, 2001, including both domestic and international fixed line services. Last month, for example, Taiwan issued the first eight mobile phone network licenses for consortia including foreign partners.

Following is a list of countries included in the telecom pact:

Antigua and Barbuda, Australia, Bangladesh, Belize, Bolivia, Brazil, Brunei Darussalam, Bulgaria, Canada, Chile, Colombia, Czech Republic, Dominica, Dominican Republic, Ecuador, El Salvador, European Union (Austria, Belgium, Britain, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands, Portugal, Spain, Sweden), Ghana, Grenada, Guatemala, Hong Kong, Hungary, Iceland, India, Indonesia, Israel, Ivory Coast, Jamaica, Japan, South Korea, Malaysia, Mauritius, Mexico, Morocco, New Zealand, Norway, Pakistan, Papua-New Guinea, Peru, Philippines, Poland, Romania, Senegal, Singapore, Slovak Republic, South Africa, Sri Lanka, Switzerland, Thailand, Trinidad and Tobago, Tunisia, Turkey, United States, Venezuela.

(Kristi Essick in London, Rob Guth in Tokyo, Terho Uimonen in Taipei, Joy Dietrich in Paris and Jon Skillings in Hong Kong contributed to this report.)

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