Telecom Sector Report

19th August, 2007

Highlights

Jordan Telecom Group had a spectacular year and has undergone several changes since
2006. At the start of last year, the Jordan Telecom Company and subsidiaries embarked on
integration of the operations of Jordan Telecom, MobileCom, Wanadoo and e-Dimension into a
single organization with a single management structure: Jordan Telecom Group. Later that year,
the group began its second phase of the privatization process such that the ownership of the
shares was distributed as follows: 51% for JITCO, which is fully owned by France Telecom,
14.65% for the Government of Jordan, 17.5% for the Social Security Corporation, and 10%
owned by Noor Telecom. With France Telecom as the majority shareholder, the group has
adopted the ampersand logo and embraced the Orange brand for its products whereby
Wanadoo, Jordan Telecom and MobileCom re-branded to Orange in June, July and August 2007
respectively.

In June 2006, Bahrain Telecom Co (Batelco) acquired 96% of Umniah Telecom for the
colossal amount of JD295 million which caused a lot of debate and controversy since Umniah
won the license back in 2004 for JD4 million. In August 2006, Umniah won the first 3.5GHz
license for Fixed Broadband Wireless Access (FBWA) for JD8.3 million. Batelco Jordan is
currently in the process of entering the fixed sub-sector of the market ending the monopoly of
Jordan Telecom which will create a fair competitive market.

Fastlink started off the year at a high note when it received the RIM award of Excellence for its
commitment and pace in implementing the network services required for the blackberry wireless
platform. In addition, in June they announced the launch of the Automatic Speech Recognition
(ASR) system which is the first of its kind in the Middle East. Fastlink customers can use this
new system by calling their customer service number 1234 for free and interact with the new
computerized character more commonly known as “Hala”.

In May of this year, XPress Telecommunications, the exclusive iDEN provider of wireless
technologies, announced the completion of the first stage of its network expansion plan for the
year 2007.

For Sales & Trading, Contact: Report Prepared by:

Khaled Zurub Muna Zawaydeh

Securities Unit Research Analyst

Tel: 962 6 5200330 Ext. 324 Tel: 962 6 5200330 Ext. 285
Fax: 962 6 5685508 Fax: 962 6 5692872
E-mail: khaled.zurub@capitalinv.jo Email: muna.zawaydeh@capitalinv.jo
 Table of Contents Page
1. Telecom Sector Overview 2
2. Fixed Line Telephony 3
3. Mobile Telecommunications 8
4. Data Communications 14
5. Pre-Paid Card Market 18
6. Telecommunications Regulatory Commission 20
7. Ministry of Information and Communications Technology 20
8. Future Outlook 21

1. Telecom Sector Overview

The Jordanian Telecom sector has been booming over the past few years. It has witnessed growth and
expansion as it has embraced the mobile technology quickly and has become the only Middle Eastern
country supplied by four carriers.

According to the Information Technology Association of Jordan, or Int@j, telecoms-related sales reached
JD673 million in 2005 and the sector has seen just over JD960 million of investment between the years
2000- 2006. Investments in Mobile and Radio telecommunications contributed to just over 70% of the
total investments in that period.

Volume of Investment in Telecom Sector (JD mn)

200 184.9
152.92 155.3
150 137.604
118.5
105.9 111.4
100

50

0
2000 2001 2002 2003 2004 2005 2006
Source: Telecommunications Regulatory Commission.

Mobile penetration has been growing at an increasing rate in recent years whilst fixed penetration has
been dropping slightly. The main reason behind this trend is the entrance of new mobile operators which
caused tariffs to drop resulting in the substitution of using landlines to mobiles.

Fixed and Mobile Penetration Rates (2000 - 2006)

100%
78%
80%
57%
60%

40% 30%
24% 26%
18%
20% 13% 13% 13% 12% 12% 12% 11%
8%

0%
2000 2001 2002 2003 2004 2005 2006

Fixed Mobile
Source: Telecommunications Regulatory Commission.
2
 2. Fixed Line Telephony

The number of fixed-line telephone subscribers has been gradually dropping over the last couple of
years. The highest number of subscribers was recorded in the year 2002 as it reached 674,000. In 2006
the number of subscribers reached 614,000, a drop of 2.2 percent from the year before.

Number of Subscribers Vs Penetration Rate of Fixed Lines

(2000-2006)
(‘000)
1000 20%
900
800
660 674 15%
700 620 623 638 628 614
600
500 10%
400
300
5%
200
100
0 0%
2000 2001 2002 2003 2004 2005 2006

Subscription Penetration
Source: Telecommunications Regulatory Commission.

Fixed-line penetration rate has been falling over the years as well. In 2002, penetration rates reached a
high of 13.3% and then gradually began to drop over the years reaching 11% in 2006. They are
currently the largest employer in the telecommunications sector; however, in the near future it will lose
its title to the Mobile sector. There has been cut backs in this sub-sector since 2002 and the number of
employees in 2006 reached 2,432, a severe drop of 46% since 2002.

Table: Fixed-Line main Indicators 2000 2001 2002 2003 2004 2005 2006

Number of Subscribers (‘000) 620 660 674 623 638 628 614

Penetration Rates (per 100) 13% 13.40% 13.3% 12% 11.9% 11.6% 11%

Volume of Investments (JD mn) 55.7 90.1 38.2 11.4 10 12.3 12.7

Number of Employees 4,907 4,792 4,548 3,663 3,048 2,701 2,432

Source: Telecommunications Regulatory Commission.

3
• Orange (Fixed) – Previously known as Jordan Telecom

Orange is the fixed line segment of Jordan Telecom Group which is their largest business segment.
They are the only provider of the fixed-line sub-sector even though the market has been open for
competition for the last two years since their exclusivity ended in January 2005. Batelco Jordan could
be a possible competitor in the near future.

The services provided by Orange fixed line include:

o Fixed Telephone Service
o Service for internet services providers (ISPs)
o ADSL service
o Call free service
o Leased line service
o Value added services
o IP connectivity service
o International calls

In the last five years the number of telephone lines has been increasing in Jordan, however, the
growth rate has been slowly declining. In 2003 the number of subscribers grew by 2.3% reaching
633,000 fixed lines, whilst in 2006 the number of subscribers grew by 2.0% reaching 677,100 lines.
Number of Lines (2002-2007H1)
(‘000)

700 677.1 678.3

664
654.2
633
650 618.5

600

550
2002 2003 2004 2005 2006 2007 H1
Source: Jordan Telecom Group Analyst Presentations

When we take a look at what is driving the small rise in the number of fixed lines, it is clear to see
that the main driving force has been the ADSL lines which grew by a tremendous 89% last year. The
reason behind this rise is the increasing demand on high speed Internet services. Residential lines
have been the source of the declining growth rate since people have been substituting the use of
fixed lines to mobiles the number of “residential” fixed lines dropped from 465,000 in 2005 o 428,500
lines in the first half of 2007.

Type of Lines (2005-2007 H1)

(‘000)
465
500 446.1 428.5

400
300
163 168 171.8
200
29 54.8 70
100 6.5
7.7 8
0
Residential Business ADSL Leased

2005 2006 2007H1

Source: Jordan Telecom Group Analyst Presentation

4
 Further proof of the switch from fixed to mobile usage has been the traffic. The number of “Million
minutes” from fixed lines dropped from 553.4 in 2004 to 538.8 in 2005, whereas, the number of
“Million minutes” from mobile phones rose from 250.5 in 2004 to 254.3 in 2005. Unfortunately
Jordan Telecom Group has not published traffic figures for the years 2006 onwards for confidentiality
purposes.

Fixed and Mobile Traffic (2004-2005)

(Million minutes)
600 553.4 538.8
500
400
254.3
300 250.5
200
100
0
Fixed Mobile

2004 2005

Source: Jordan Telecom Group Analyst Presentation

In 2005 national and international telephone calls made from landlines reached 341.7 and 136.9 million
minutes respectively while local telephone minutes reached 33 million. The number of international calls
made from landlines has dropped in the last year due to the entrance of the very popular pre-paid cards
which offer lower tariffs. Internet minutes represents a dial up connection made on the fixed line; the
number of minutes dropped by 17.3% from 7.5 million minutes in 2004 to 6.2 million minutes in 2005
due to the more advanced and cost effective option of having an ADSL subscription.

(Million minutes) Traffic Minutes from landlines (2004-2005)

400
358.3
341.7
350
300
250
200
150 130.3136.9

100
50 34.2 33 23.1 21
7.5 6.2
0
Local National International Mobile Internet

2004 2005

Source: Jordan Telecom Group Analyst Presentation

5
Orange “fixed” offers a wide variety of Value Added Services (VAS) which they update to cater to
their customers’ needs and requirements. They include the following:

Caller ID Toll-free (800)

Wake up Call Prepaid Calling Card
Call Barring Home Country Direct
Hotline Voice Mail
Call Waiting/Call Hold Three Way Conference
Abbreviated Dialing Don’t Disturb

Weinak:
Weinak is Orange’s prepaid calling card which allows you to make your calls from any fixed-line or mobile
phone without billing the line from which the call was made. Weinak cards allow you to control the
international calls that you make and provides you with a very desirable low tariff so you can stay
connected to your friends and family abroad.

Easy access to Weinak service has increased its popularity as the cards can be purchased at a variety of
group shops or if you’re an Orange Mobile subscriber you can simply send an SMS to use this service. To
make life simpler, you can open your own “Weinak” account which is a new service that is offered by
Orange Fixed.

EduFun:
EduFun is a new “local internet portal” offered by Orange. This website is an E-Learning, E-Education,
entertainment, communication and search, information website available in both Arabic and English
targeting school and university students, the Ministry of Education and teachers. The objective of this
website is to enhance the learning process and experience. Subscribers can access broadband internet
through this website and enjoy the following services: Local & International News, E-curricula,
entertainment, chat, search engines and many more.

Orange Fixed is facing strong competition from the 4 mobile operators which can be clearly observed in
their revenues. Revenues dropped by 7% from JD262.6 mn in 2002 to JD244.1 mn in 2006.
Fixed Line Revenue (2002-2007H1)
(JD Mn)

300 262.6 258.5 253.1

249.8 244.1
250
200
150 122.6
100
50
0
2002 2003 2004 2005 2006 2007 H1

Source: Jordan Telecom Annual Reports

Taking a closer look at the change between the years 2005 and 2006 we can see that their revenues
dropped by 3.6% in 2006 to reach JD244.1 million compared to JD253.2 million in 2005. Revenues from
traffic fell drastically due to the fact that international traffic volume and rates dropped with the new
“open” market.

6
 Revenues 2005 2006 Change %

Traffic Revenues 180.4 151.5 -16%

Connection, subscription and others 49.6 58.2 17.3%

Leased lines and other data 23.1 34.4 48.9%

Total Revenues 253.2 244.1 -3.6%

Source: JTG Annual Report 2006

“Connection, subscriptions and others” consist of revenues from monthly subscription fees and other
tailored supplementary services. The growth of 17.3% is due to the value added services provided by
Orange Fixed such as the “0900” internet service and the “Weinak” pre-paid cards.

“Leased lines and other data” consist of two segments “PSTN (business, residential and PPT lines)” and
“ADSL, leased line and frame relay”. Even though there was a drop in the PSTN lines by 2.2%, this
segment showed a 48.9% growth as a result of the boost in “ADSL, leased line and frame relay” which
grew by 75.9% due to an increasing demand for internet.

Financial Highlights (JD Million) 2005 2006

Total revenues 253.2 244.1
% Growth/ (Decline) (4.1%) (3.6%)
Operating Expense 125.8 130.2
• Cost of service 84.1 90.0
• Selling, General and administration 39.1 38.4
• Government and Management Fees 2.6 1.8
EBITDA 127.3 113.9
EBITDA Margin (%) 50.3% 46.7%
Source: Jordan Telecom Annual Reports

• As mentioned earlier, the drop in revenues by 3.6% was led by the drop in traffic.

• The Operating Expense has increased by 3.4% due to the 7% increase in the Cost of service
which was affected by the increase in Mobile Interconnection.

• EBITDA dropped by 10.5% in 2006 which in turn affected the EBITDA margin negatively causing
it to drop by 3.6 percentage points.

In terms of the semi annual results, when we compare this year’s revenue to the same period last year;
Orange Fixed witnessed a growth of 5.7% from JD116 million in H1 2006 compared to JD122.6 million in
H1 2007. This revenue growth was driven by wholesale activities.

Financial Highlights (JD Million) 2006 H1 2007 H1

Total revenues 116.0 122.6
% Growth/ (Decline) (7.0%) 5.7%
Operating Expense 60.2 75.3
• Cost of service 39.7 52.4
• Selling, General and administration 19.7 21.8
• Government and Management Fees 0.8 1.1
EBITDA 55.8 47.3
EBITDA Margin (%) 48.2% 38.6%
Source: Jordan Telecom Analyst Presentations

7
3. Mobile Telecommunications

In contrast to the fixed line sub sector, the landscape of the Mobile market has been changing drastically
since MobileCom’s exclusivity ended in 2004. Before the entrance of the competitors, Fastlink and
MobileCom enjoyed a duopoly with market shares of around 70% and 30% respectively. Today, Jordan is
the only country regionally that has three mobile service providers and one “press-to-talk” provider.

XPress Jordan is an Integrated Digital Enhancement Network Technology (IDEN)-based operator - the
only licensed digital radio trunking service provider in Jordan and the Middle-East. They entered the
market in 2004 and launched their unique “Walkie Talkie” service in 2005. In 2005, Jordan saw the
launch of the fourth operator Umniah with a bang. They covered the country with their advertising and
captured everyone’s attention with their unique, young and refreshing style.

The two new entrants ate up from Fastlink’s market share. In 2006, Fastlink’s share dropped to 47%
from 61% in 2005 while MobileCom’s (currently re-branded to Orange) share increased to 34% from
26% in 2005. Umniah managed to capture 17% market share in less than two years. In addition XPress,
with its unique service that caters mostly to the services sector, has had a steady 2% market share.

Mobile Operators' Market Share (2005) Mobile Operators' Market Share (2006)
2% 2%
10%
17%

47%
26%

61%

34%

Fastlink MobileCom Umniah Xpress Fastlink MobileCom Umniah Xpress

Source: Rough estimates from various annual reports

The numbers of Mobile phone subscribers have been on the rise with the entrance of the latest operator
Umniah in 2005. Growth rate in 2001 reached 123% still affected by the entrance of the second operator
MobileCom. Similarly in 2005 the number of subscribers jumped to 3.318 million, an increase of 93%
from 2004, with the arrival of Umniah. In 2006, the total number of subscribers recorded 4.343 million.

Number of Subscribers of Mobile Phones (2000-2006)

5,000
4,343

4,000
3,138
3,000

2,000 1,624
1,200 1,325
866
1,000
389

0
2000 2001 2002 2003 2004 2005 2006
Source: Telecommunications Regulatory Commission. 8
Mobile phone penetration rate has been rising at an extraordinary rate in the last 5 years with the
increase in competition and the introduction of pre-paid lines; in 2006, penetration rates reached a high
of 78%. As this sector has been expanding it had a positive impact on the size of the investments and
number of employees. The volume of investments drastically rose reaching a high in 2005 with a value
of JD137 million due to the entrance of Umniah and then stabilized to JD102 million in 2006. Employment
has been growing at a steady rate reaching 2,251 employees in 2006 placing it as the second largest
employer in this sector.

Table: Mobile Phone

2000 2001 2002 2003 2004 2005 2006
Indicators

Number of Subscribers (‘000) 389 866 1200 1325 1624 3138 4343

Penetration Rates (per 100) 8.1% 17.5% 24.1% 25.5% 30.3% 57% 78%

Volume of Investments (JD mn) 92.9 89.2 93.3 91.9 100.3 137 102

Number of Employees 879 1,044 1,168 1,249 1,641 2,124 2,251

Source: Telecommunications Regulatory Commission.

Mobile penetration varies in neighboring countries. In three GCC countries the penetration rate reached
over 100% which is a result of people owning more than one mobile phone; Bahrain, UAE and Qatar had
penetration rates of 120%, 105% and 101% respectively in 2006. Compared to the other countries in the
region, Jordan holds the 7th spot with a 70% penetration rate.

Top ten MENA countries in terms of Mobile penetration (2006)

Country Penetration
1 Bahrain 120%
2 UAE 105%
3 Qatar 101%
4 Kuwait 85%
5 Oman 84%
6 KSA 75%
7 Jordan 70%
8 Tunisia 61%
9 Algeria 58%
10 Morocco 43%

Source: Gulf Capital Group “Mena Mobile Telecom” Feb 2007

9
• Jordan Mobile Telephone Services Company (JMTC) – Fastlink

Fastlink is the largest of all telecommunications networks in Jordan, and was the first operator to offer
mobile phone services in Jordan at the time of its founding in 1995. The company was established as a
joint venture between Motorola, the international Finance Corporation and Jordanian investors.

The shareholder structure changed several times over the years; currently Pella Holding Co. (Jordan)
owns 100% of JMTC. In 2000 Orascom Telecom (Egypt) was the major shareholder owning 92% of Pella
Holding Co. However, in 2003 they sold their stake to the Kuwait based Mobile Telecommunications
Company (MTC) for JD300.3 million taking MTC’s ownership to 96.5%. At that time the acquisition
represented the largest ever single buy out in the Middle East, and the largest private sector investment
in Jordan by a GCC private sector company.

Pella Holding Co. (Jordan)

Private Investor
(Saudi Arabia)
3.5%

MTC Kuwait,
96.5%

Source: MTC Website

The growth in number of Fastlink subscribers has fallen in the last couple of years due to the number of
operators that potential subscribers can choose from. Fastlink witnessed the largest subscriber growth
rate of 225% by the end of 2001 due to the price war with MobileCom. In 2005, Fastlink crossed the 2
million mark however it slowly started to decline to reach 1.941 million subscribers by the end of the first
half of this year due to market maturity and the strategic shift from focusing on customer acquisition to
customer retention.
Fastlink Number of Subscribers
(2004-H12007)
(‘000)
2,500
2,016 1,961 1,941
2,000

1,500
1,139
1,000

500

0
2004 2005 2006 H1 2007

Source: MTC Annual Reports

10
Fastlink’s revenues in 2006 reached JD324 million representing an insignificant increase of 0.3% from the
year before. However, comparing half one figures we can see that revenues dropped from JD167.8
million in H1 2006 by 2.6% to reach JD7163.4 million in H1 2007. Furthermore, due to their focus on
customer retention their Average Revenue Per User rose from JD19 in H12006 to JD17 in H12007.

Table: Fastlink Revenue for the years 2005 - 2006

Year Revenue JD Million Percent Change
2005 323 9.49%
2006 324 0.3%

Source: MTC Annual Reports

• Orange (Mobile) – Previously known as MobileCom

After Fastlink’s exclusivity ended in 1999, MobileCom entered the Jordanian Telecommunications sector
breaking the existing monopoly. MobileCom launched their services in September of 2000 and they
managed to gain 81,000 subscribers by the end of that same year. In August of this year, MobileCom
re-branded to Orange as part of the France Telecom Group strategy.

Orange witnessed the largest subscriber growth rate in their first year reaching 127% by the end of
2001. Orange subscribers reached 1.405 million by the end of 2006 compared to 0.751 million by the
end 2005 which represents a tremendous growth rate of 87%.
Orange Number of Subscribers (2000-H12007)
(‘000)
1,668
1,700

1,405
1,450

1,200

950
751
700
455
450 317 356
183
200 81

-50
2000 2001 2002 2003 2004 2005 2006 H1 2007

Source: Jordan Telecom Group Annual Reports

Orange has been the fastest growing GSM operator in Jordan; The Company witnessed a substantial
growth during 2006 acquiring 34% of the total market share compared to 26% in 2005.

The percent of dropped calls (refers to unintended disconnection of mobile calls by the network during
a 100-second call-holding period for each call) in 2006 reached 1.22% compared to a standard of 2%,
while refused calls (refers to the percentage of unsuccessful calls over the total number of mobile call
attempts) reached 1.89% compared to a standard of 5%. This just shows that MobileCom has a
network much stronger than the standard average.

11
 Table: Orange’s Performance Indicators (2006)
Traffic Standards Orange
Dropped calls 1.22%
Refused calls 1.89%
Network availability 99.8%
Population covered 99%
Source: JTG Analysts Presentation

Orange’s 2006 financial results were impressive recording JD140 million in revenues, which represents
a 21% growth from 2005. This rise has been driven by increased airtime led by the expansion in the
subscribers’ base and consequently usage increase. Revenues from Value Added Services also
contributed to the growth and will continue to do so in the future. (An example of a growing VAS is the
increase in roaming revenue).

Table: Orange Revenue for the years 2003 - 2006

Year Revenue JD Million Percent Change
2003 75.8 35.3%
2004 99.7 31.5%
2005 115.7 16.1%
2006 140.0 21.0%
Source: JTG Analysts Presentations

In addition, when we compare their semi annual results of 2006 and 2007 it shows a significant growth
of 36.2% in terms of revenues from JD63.3 million in 2006 to JD86.2 million in 2007. Their subscriber
acquisition costs per gross new subscriber have dropped in the first half of this year to JD11.9 from
JD19.3 in 2006 as pre-paid customers, which is their bulk, are less costly than post-paid customers.

• Umniah Mobile Company - Umniah

Umniah was granted the third GSM license in August 2004 issued by the Telecommunications
Regulatory Commission for JD4 million. They launched their services in June 2005 as the first mobile
operator in Jordan to offer per second billing. In June 2006, the Bahrain- based Batelco acquired a
96% stake in Umniah for JD295 million.

In their first six months they managed to attract 300,000 subscribers capturing 10% of the telecom
sector’s market share. By the end of 2006 their subscriber base grew by a remarkable 133.3%
reaching 700,000 subscribers gaining control of 17% of the market share. In the first quarter of this
year they announced an increase of 50,000 subscribers since the end of 2006. It is important to
mention that Umniah played a key role in increasing the mobile market penetration rate from 30% in
2004 to 57% in 2005.

Umniah: Number of Subscribers (2005-Q12007)

(‘000)

800 750
700
700
600
500
400 300
300
200
100
0
2005 2006 Q1 2007

Source: Zawya website company Information

12
 The reason behind their success in this highly competitive market has been their concentration on
being the “Low-Cost” provider. They recently started offering their new “free line” which has been a
great success. Their main target group has been the youth market which comprises of over 45% of the
population in Jordan and they are the driving force for their increase in subscribers.

In their constant effort to increase their competitive advantage they have placed a great deal of effort
in the development of services in order to meet the dynamic needs of its customers.

They were the first GSM Company to provide the following:

1. Per second billing for both pre-paid and post-paid

2. Edge technology
3. Recharge your account without the need for prepaid scratch cards
4. Introduce lower denomination scratch cards to the market
5. Offer Voice SMS services for its customers

With Umniah’s NGN network, this will enable them to offer Latest Technology and Value Added
Services, which in turn will continue to increase both their customer base and also the volume of
service product functionality.

• XPress Telecommunications – XPress

XPress Telecommunications launched its services in June 2004, soon after MobileCom’s exclusivity
ended, as Jordan’s third mobile and latest wireless operator. XPress offers a new form of
telecommunications solutions based on the Integrated Digital Enhanced Network (iDEN) technology.
They were the first Arab company in the Middle East to introduce this technology, which combines the
abilities of ordinary mobile phones with the instantaneous Direct Connect (walkie-talkie) service also
known as Push-to-Talk (PTT).

By the end of 2005, XPress had 65,000 subscribers and in 2006 this figure grew by 38.5% reaching
90,000 subscribers. They have had a consistent market share of 2% due to their niche product and
target of mostly corporate clients with focus on transportation, construction and security.

In their latest press release XPress announced that their corporate client base had reached 100,000.
The company’s CEO Marwan Jumaa stated that their aim is to provide “optimum business
communication solutions” therefore they invested vastly in expanding their network by adding 20 new
cell sites which cover 20 new business locations in the Kingdom.

13
 4. Data Communications

The ISP market first began in February 1996 when Global One Communication (Jordan) Ltd. was
established in Jordan (Later known as Wanadoo); currently there are 12 ISP operators. The Data
Communication Services sub-sector has changed drastically over the last ten years with more people
“accepting” the concept of accessing the World Wide Web.

In the early years, the growth rate of internet subscriptions was extremely high reaching 200% in
1997. The number of subscriptions continued to grow throughout the years to achieve 206,000
subscribers in 2006, a growth of 32% since 2005.
(‘000) Number of Internet Subscribers (1996-2006)

300

250
206
197
200

150
111
92
100
66 62
50 29 32
20
3 9
0
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
“Internet Subscribers” comprise of Dial Up, ADSL, Leased lines and Pre-paid cards.
Source: Telecommunications Regulatory Commission.

Wanadoo, which has been recently re-branded to Orange, has been the main market player and
currently holds a market share of over 50% with almost 39,000 subscribers by the end of 2006. In
second place comes Batelco Jordan with roughly 20% market share followed by TE Data and Cyberia
holding 6% market share each.

Internet Operators' Market Share (2006)

18%

6%
50%
6%

20%

Wanadoo Batelco Cyberia TE Data Others

Source: Rough estimated from Zawya Website and Company Information

14
 Internet penetration rate has been rising gradually in the last 5 years with penetration rates reaching
4% in 2006 representing a growth of 3.34% since 2000. As this sector is relatively new in Jordan, it
has been taking its time to evolve. The volume of investments rose in a similar trend as the mobile
sector reaching a high in 2005 with a value of JD5.6 million and then dropping by 54% to JD2.3 million
in 2006. Employment has been growing at a steady rate however dropping slightly by 7% in 2006 to
reach 415 probably affected by the restructuring of Jordan Telecom Group of which Wanadoo is their
internet subsidiary.

Table: Internet Indicators 2000 2001 2002 2003 2004 2005 2006

Number of Subscribers (‘000) 32 66 62 92 111 197 206

Penetration Rates (per 100) 0.66% 1.33% 1.23% 1.84% 2.07% 3.6% 4%

Volume of Investments (JD mn) 4.3 5.5 3.5 1.5 0.7 5.6 2.3

Number of Employees 370 457 408 294 353 450 415

Personal Computers (‘000) 150 N/A N/A N/A 315 390 465

Internet Users (‘000) 127 220 457 N/A N/A 600 N/A

Source: Telecommunications Regulatory Commission.

There are a variety of ways to access the internet here in Jordan. In the last few years dial up and
ADSL have proven to be the most popular means of access. In 2005 they held 88% of the subscriber
base; however, it dropped to 77% in 2006. The reason behind this drop is that in the last year, the
number of ways that people could access the internet has increased drastically. For those who don’t
have internet at home, they can simply access the internet at work, school and universities. Pre-paid
cards and PRS (0900 numbers) have become very popular due to their convenience. Internet Cafes are
available in every area, Irbid in particular has a street dubbed ‘Internet Road’ and was entered in the
Guinness Book of World Records in 2002 for hosting the most internet cafes in the world.

Forms of Internet Access (2005) Forms of Internet Access (2006)

12%
23%

50% 49%

38%

28%

ADSL Dial Up Others ADSL Dial Up Others

Source: Telecommunications Regulatory Commission (rough estimates).

15
 The trend over the last few years has been moving from Dial Up towards ADSL. Most of the players
have been increasing focus on broadband services and cutting prices for ADSL to encourage
subscribers. For the last few years there has been a huge difference between Dial Up and ADSL with a
ratio of 3:1 in 2005. In 2006 this ratio narrowed to almost 1:1 and it is expected for ADSL subscribers
to outnumber Dial Up by the end of 2008.

ADSL Vs Dial Up (2001-2006)

90,000 98,000
100,000

80,000
60,000 74,101
60,000 58,600
35,000
47,886
40,000
23,551
20,000 8,524
385 1,900 3,000
0
2001 2002 2003 2004 2005 2006

ADSL Dial Up
Source: Telecommunications Regulatory Commission.

• Orange (Internet) - previously known as Wanadoo

It all began in 1996 when Global One Communications (Jordan) Ltd was the first ISP operator in
Jordan. Additionally, in December 2000, e-Dimension was established as a “Digital Development of
Data” company. In May 2001, Global One was fully acquired by Jordan Telecom for JD9.07 million and
then following a strategic partnership with France Telecom, Wanadoo emerged into the market place.

Wanadoo entered the market with strength and vitality providing ‘first to market’ services such as
ADSL, CoolNet pre-paid internet cards, Internet through 0900 service, data communication and
internet roaming. In their first year they managed to gain 13,000 subscribers. The number of
subscribers has been growing at an increasing rate reaching 48,400 subscribers by the end of June
2007. In 2005 they witnessed the largest growth rate of 47% most probably influenced by their new
campaign “PC @ every home” which was part of their internet penetration initiative.
Number of Orange Subscribers (2002-2007H1)

(‘000) 48
50
39
40

30 28

19
20 15
13
10

0
2002 2003 2004 2005 2006 H1 2007

Source: JTG Analysts Presentations

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 In June 2007, Wanadoo was re-branded to Orange; they were the first Jordan Telecom Group
subsidiary to re-brand to the global brand Orange. Wanadoo’s current 49,000 (up to June 07) internet
and data services subscribers have joined the 9.7 million Orange ADSL Broadband family. Orange
Internet Services include ADSL and Dial Up subscriptions as well as the following:

o Easy Dial Up
This service has no monthly subscription, no user name and password and no pre-paid internet cards.
All you have to do is dial 090007000 and connect to the internet for only 2 piasters a minute.
o Pay As You Go (previously known and CoolNet)
Internet pre-paid cards with several denominations
o Internet Roaming
Enables you to access your email and browse the Internet from almost anywhere around the world
using special dial-up telephone numbers)
o Internet Faxaway
Internet faxaway is the premier, world-wide, low-cost, e-mail-to-fax service, enabling you to fax an e-
mail message to any fax machine in the world.

Orange Internet revenues have been increasing at a tremendous rate. In 2006, their revenues grew by
41.6% reaching JD10.9 million compared to JD7.7 million in 2005. Similarly, in the first half of 2007
their revenues rose by 41.3% to reach JD6.5 million.

Table: Orange Revenue for the years 2004 - 2006

Year Revenue JD Million Percent Change
2004 4.80 69.6%
2005 7.70 60.4%
2006 10.90 41.6%
Source: JTG Annual Report 2006 and JTG Analyst Presentations

Looking at last years revenues in more detail we can see that the reason behind the 41.6% increase in
revenues was due to the following:

o A 52.6% increase in ISP services revenues due to the increasing demand on ADSL, increasing
awareness of the internet which was supported by government-sponsored initiatives such as “PC @
Every Home” as well as a drop in prices.

o A 10% increase in international data services due to increasing sales of international IPVPN
services to multinational customers.

Table: Orange Revenue for the years 2005 - 2006

Year 2005 2006 Percent Change
ISP Services and Content (JD mn) 5.7 8.7 52.6%
International Data Service (JD mn) 2.0 2.2 10.0%
Total Revenues (JD mn) 7.7 10.9 41.6%
Source: JTG Annual Report 2006 and JTG Analyst Presentations

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• Batelco Jordan

Bahraini- Jordanian Telecommunications Company (Batelco Jordan) entered the Jordanian market in
2000 as the second largest ISP provider. Batelco Jordan is 20% owned by Jordanian Investors and
80% owned by Batelco Bahrain.

Batelco Jordan is striving to be the “Leading provider of innovative integrated communication solutions
in Jordan”. They currently offer a wide range of solutions from voice services, IP solutions, Internet
services, Satellite services and Managed Data services for residential, national and multinational
corporations.

Since its establishment, Batelco Jordan’s subscriber base has been growing however the company has
not been disclosing their figures. Their steady growth has been due to various strong efforts to
increase internet penetration by offering its customers a free second connection when subscribing to
give to anyone they please and providing Internet Broadband ADSL Services free of installation fees.

Batelco Jordan’s revenues has been increasing over the years reaching JD7.49 million in 2006
compared to JD4.83 million in 2005, which represents a remarkable growth rate of 55.3%. In addition,
when we take a look at this year’s semi annual results Batelco Jordan reported revenues of JD5.39
million compared to JD3.12 million during the same period last year. However, in the last few years the
company has not been making any profits; in 2006 they reported a loss of JD726 thousand and in the
first half of this year they similarly had a loss of JD394 thousand.

Table: Batelco Revenue for the years 2004 - 2006

Year Revenue JD Million Percent Change
2004 3.84 41.8%
2005 4.83 25.8%
2006 7.49 55.3%
Source: ASE Disclosures

5. Pre-paid Card Market

The pre-paid market has been booming and overtaking the post paid market quickly. In the last few
years, the percentage of the pre-paid mobile subscribers rose from 80% to 90% of total mobile
subscribers. This is due to the lower tariff rates from increased competition in this segment of the
market. The most recent and most popular phenomenon has been the pre-paid international and
internet cards which had the highest growth in terms of volume of investment between the years 2005
and 2006; it grew by 275% from JD400,000 in 2005 to JD1.5 million in 2006.
Volume of Investments in Pre-Paid Cards (2004-2006)

1.5
1.5
(JD mn)

0.5 0.4 0.4

0
2004 2005 2006

Source: Telecommunications Regulatory Commission.

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 The number of different pre-paid cards has increased drastically over the years as the tariffs to call
internationally and to use the internet have been dropping. The reason behind their popularity has
been because they ensure “control” and are very cost effective. Revenues from international calls
made from fixed lines have been dropping significantly from JD79.6 million in 2004 to JD33.3 million in
2005 due to the cheaper option of the pre-paid cards.

Taking a look at the international pre-paid cards; we compared their tariff to Orange’s fixed line tariff
to calling two countries; Egypt and the USA. It was clear that it is much more affordable to use these
cards rather than making a call from your landline.

Table: Tariffs Egypt (Fixed) USA (Fixed and Mobile)

Fixed Line Peak (piaster per min) Off Peak (piaster per min) Peak (piaster per min) Off Peak (piaster per min)
Orange Fixed 24 17 12 9

Owned by Egypt USA

Pre-Paid Cards Piaster per min Piaster per min
Weinak Orange 14 5
Dunya Batelco 14.8 6.9
FarahTel Next 16 3
Source: Related company websites

With the growing number of foreigners coming into the country to live here, there has been a rising
demand for “cheap” international tariffs; especially to Egypt and Iraq. In addition to the new residents
there are the escalating numbers of tourists visiting Jordan.

Internet Pre-paid cards have been very well accepted as well; you could experience the joys of the
internet without committing to a billing schedule. We took Jordan Telecom Group’s offers as an
example to compare the tariffs of a Dial Up subscription to Next’s internet cards. Orange, Jordan
Telecom Group’s internet subsidiary, has several dial up packages with the cheapest being the
“Internet Basic” which has a monthly rate of JD4.9 or a yearly rate of JD49 that offers you 50 free
hours on the internet. Now, looking at the small print it mentions that this rate does not include the
following:

1. Set up fee of JD10 (waived with credit card payments)

2. Extra usage cost of JD0.6 with a maximum of 20 hours
3. Does not include 16% sales tax

Next is one of many companies that offer prepaid internet cards in different denominations which are
very popular in Jordan. Next’s card is called “Farah” and offers cards for JD2 up to JD8 (excluding sales
tax); With the JD2 card you have up to 30 hours of internet and with the JD8 you have 100 hours of
Internet per year. So if you take the most expensive card JD8 you get twice as many hours on the net
compared to the basic dial up offer and at a lower cost.

There are various internet prepaid cards available in the country with similar rates to Next’s Farah card
such as Orange’s “Pay as you go Internet” card (Previously known as CoolNet) and Middle East
Communications Corporation’s “Just Click” card which present great competition to the post paid
internet market due to their cost and convenience.

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6. Telecommunications Regulatory Commission

The Telecommunications Regulatory Commission (TRC) was established in 1995 as an independent

jurisdictional body tasked with regulating the telecommunications and information technology sectors.

Their vision for the future is to have “An advanced environment of ICT and Postal services that is
efficient, competitive and accessible to all; supporting effectively the economic and social development
of Jordan”.

The TRC’s main roles are to ensure the provision of high quality telecommunication and information
technology services at reasonable prices, to stimulate competition in the telecommunication and
information technology sectors as well as establish and adopt the conditions and criteria for the
granting of licenses for telecommunication networks and services. These are just some of the many
responsibilities that the TRC has.

Through the guidance of His Majesty King Abdullah II and the role of the TRC in this sector, Jordan has
seen the liberalization of the fixed telecommunications market and the expansion of the mobile
communications market. The TRC created an environment which encouraged investment, competition
and benefits to the public by adopting an integrated licensing and regulatory regime.

7. Ministry of Information and Communications Technology

The Ministry of Information and Communications Technology (MoICT) was established in 2002 as the
policy maker of information technology, telecommunications, and post in Jordan. The MoICT
encourages many initiatives that encourage the development of the ICT sector in the Kingdom.

One of their major accomplishments is the e-Government program which is a National Program
initiated by his Majesty King Abdullah II which aims to support the government’s transformation
towards a more "customer-centric”- by using more ICT tools and technology. Therefore the role of the
MoICT is to transfer knowledge and provide training on the methodologies, tools, templates and
processes to the e-Government Program stakeholders at all levels.

There are many more initiatives undertaken by the MoICT in cooperation with other Ministries and non
Government organizations which are aimed at increasing awareness of the benefits of using ICT and
improving access to technology to bridge the digital gap.

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8. Future Outlook

In the last few years we have seen drastic changes in the telecom sector here in Jordan especially in
the mobile sub sector. The market currently has four mobile operators and it is not expected that any
more would enter in the near future. This market has matured and more focus will be placed on
competitive prices and services provided by the players in the market. The market share will be
restructured and even though Fastlink will still be the operator with the largest number of subscribers
due to their first to market advantage, Orange and Umniah are gaining their fair share of the market.

Orange, in the fixed line sub sector, will face some competition from Batelco in the near future when
they start offering similar services (Voice, Data and High Speed Internet) through WiMAX (broadband
wireless technology). At this stage, Orange Fixed will have limited competition by this new entrant as
the WiMAX technology is still not mature and in its early stage of development as a fixed broadband
wireless solution. However, WiMAX standards, specification and testing are being finalized to support
nomadic application and full mobility which in turn will create hype for this new form of
communication.

The internet sub sector is to witness the most changes in the next few years with the vast number of
new licenses being granted. Umniah is a potential new competitor in internet market as they won the
first 3.5GHz Fixed Broadband Wireless Access license in Jordan for JD8.3 million in December 2006;
they are expected to launch their services in the fourth quarter of this year. Similarly in January of this
year ATCO Clearwire, a joint venture between Saudi ATCO and the U.S Company Clearwire, were
granted a 3.6GHz FBWA for JD5.3 million and are expected to launch by the second quarter of 2008.
With these two new big entrants, the internet landscape is expected to expand with internet
penetration growth.

In the last Information and Communications Technology Forum, the ministries had set some very
ambitious targets for the Jordanian ICT industry. They are aiming to increase the current internet
penetration of 11.4% to an amazing 50% by the end of 2011. They are also aiming to boost revenues
from $500 million to a whopping $3 billion during the same period by embracing all the latest
technologies the industry has to offer. With all these developments and expansions taking place they
are also anticipating that employment in this sector will move in parallel and increase to occupy 35,000
people.

Disclaimer: The information and opinions contained in this document have been compiled in good faith from sources believed to
be reliable, but Capital Investments (The “Company”) makes no warranty as to the truth and accuracy of the information
contained herein. All opinions expressed herein are subject to change without notice, and they are not to be regarded as
investment advice, and are only for informative purposes. Therefore, the Company accepts no liability whatsoever for any loss of
any kind arising out of the use of all or any part of this report. This document may not be reproduced, copied, distributed, and
republished, in any way, without the expressed written permission of the Company.

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