On January 11, Mustapha Terrab, the head of Morocco's telecoms regulator ANRT, tendered his resignation after nearly four years as Morocco's top watchdog. The resignation was the culmination of a yearlong conflict between Terrab and the government over the role and powers of the ANRT.
The Moroccan government had been planning a review of Law 24/96, which established the ANRT (Agence Nationale de Réglementation des Télécommunications), to adjust it to convergence trends and to clarify the responsibilities of the ANRT in the sector. In the process, however, the government's initiatives are threatening to damage the positive image enjoyed by the country's regulator, this, ahead of a much-awaited liberalization of the fixed communications market.
While Terrab's resignation is not yet effective—the king, who appointed the regulator, has yet to accept it—the move itself is a sign that the government is tampering with a successful regulatory formula.
THE PYRAMID PERSPECTIVE
Proposed changes will make a bad situation worse
• The main stumbling block in ANRT's conflict with the government is the regulator's wish to have the power to make legally binding rules for market players and to sanction those who do not abide by those rules. At present, the ANRT can only send cases to the courts and abide by their rulings.
The regulator's current influence in the market comes from its relative independence—it reports to the prime minister's office, rather than an oversight ministry—a power to make binding regulations and a past success at designing sensible operating frameworks. But the ANRT still lacks teeth when it comes to enforcement—unable, for instance, to influence incumbent carrier Maroc Telecom into changing anti-competitive practices.
Terrab is presumably resigning because the changes proposed by the ministry overseeing the sector, the SEPTI, will make a bad situation worse. Under the proposed amendment to Law 24/96, the ANRT would report to the SEPTI and would lose its power to make binding regulations, let alone enforce those regulations. Under such a structure, the ANRT would merely be an oversight body with few meaningful powers.
The Moroccan government is reluctant to make the critical regulatory choices that liberalization of the telecoms sector requires
• Why would the government take the risk of dismantling a relatively successful framework and weaken the regulator? The answer is not simple. A major reason is the government's vision of how government institutions should operate. The government frowns at what it perceives as an American-inspired regulatory model, where an independent regulator operates outside government control.
The ANRT's right to make binding regulations is also questioned; the SEPTI argues that it alone should make such regulations, with law-making remaining the preserve of the parliament. In the end, it certainly appears that the Moroccan government is reluctant to take the strong steps that opening the market to competition would entail, despite its stated commitment to market liberalization.
A weaker ANRT is unlikely to deter investors; however, we believe they should be more cautious
• So what does this all mean? If the historical behavior of foreign investors in the region is any indication, not much. Investors certainly call for independent regulators, and the prospect of a weaker ANRT casts a shadow on the ongoing liberalization of the Moroccan market. Nonetheless, the absence of independent regulators has not stopped substantial investments in markets such as Algeria, Tunisia and Egypt. To the extent that regulation is relatively evenhanded and market prospects are strong, foreign investors are likely to take their chances.
• In the case of Morocco, however, we believe that the regulatory risk is substantial enough to warrant a higher level of caution as the government prepares to sell three fixed telephony licenses. We argue that incumbent and state-owned carrier Maroc Telecom is strengthening its market position ahead of the introduction of competition. A weaker ANRT is unlikely to have much influence on Maroc Telecom as the incumbent strives to see off the competition. Indeed, it increases the prospect that Maroc Telecom would successfully preserve market share, reducing the attractiveness of the fixed licenses.
The fate of the ANRT does not bode well for the future of regulation in the region
• At a broader level, the ANRT's travails are symptomatic of a wider issue that stretches well beyond Morocco. Most African governments are naturally suspicious of independent bodies and display regulatory instincts that are at odds with their stated commitments to market liberalization.
As a result, few regulators—if any—have meaningful powers, even in more advanced markets. South Africa's regulator, for instance, is often bullied by the incumbent carrier, thanks to a law that gives it few meaningful powers. In an environment where market monopolies continue to dominate—as is generally the case in Africa—weak regulators can be tolerated. As African markets are liberalized, however, a weak regulatory body is a recipe for ineffective competition, a worrying prospect for the throngs of investors that African governments hope to attract.
Guy Engon Zibi, Pyramid Research
This Perspective provides Pyramid’s view on a significant development in the communications industry. Perspectives are a component of Pyramid’s Advisory Services.
© 2001 The Economist Intelligence Unit Ltd. All rights reserved. Pyramid Research is a division of the Economist Intelligence Unit
© 2002 Mena Report (www.menareport.com)
