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Cablegate: Maldivian Mobile Telecommunications Market: In

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DE RUEHLM #0102/01 0400313
ZNR UUUUU ZZH
R 090313Z FEB 10 ZDK
FM AMEMBASSY COLOMBO
TO RUEHC/SECSTATE WASHDC 1280
INFO RUEHKA/AMEMBASSY DHAKA 2401
RUEHIL/AMEMBASSY ISLAMABAD 9423
RUEHKT/AMEMBASSY KATHMANDU 7678
RUEHKU/AMEMBASSY KUWAIT 0515
RUEHNE/AMEMBASSY NEW DELHI 3839
RUEHPL/AMEMBASSY PORT LOUIS 0527
RUEHCG/AMCONSUL CHENNAI 9983
RUEHKP/AMCONSUL KARACHI 2699
RUEHCI/AMCONSUL KOLKATA 0519
RUEHLH/AMCONSUL LAHORE 0145
RUEHBI/AMCONSUL MUMBAI 7218
RUEHPW/AMCONSUL PESHAWAR 0405
RUCPDOC/DEPT OF COMMERCE WASHDC

UNCLAS SECTION 01 OF 02 COLOMBO 000102

SIPDIS

DEPARTMENT FOR SCA/INSB

E.O. 12958: N/A
TAGS: MV ECON PGOV EINV ECPS
SUBJECT: MALDIVIAN MOBILE TELECOMMUNICATIONS MARKET: IN
NEED OF COMPETITION AND LOWER PRICES

REF: NONE.

COLOMBO 00000102 001.2 OF 002


1. (SBU) SUMMARY. Telecommunications in the small island
country of the Maldives is dominated by one company, which is
partially state-owned, while the other competitor is a minor
player. The dominant telecom company is abetted by a lack of
a telecommunications law and a compliant competitor. As a
result of the lack of competition, the Maldives has very high
telecommunications rates. A third competitor could drive
down rates, but no such champion has appeared on the horizon.
End Summary.

CURRENT TELECOMMUNICATIONS MARKET

2. (U) Dhiraagu Telecom Maldives is the leading player in
the Maldivian telecommunications sector. The company
controls 100 percent of the fixed-line network and between
70-85 percent of the country's mobile network. The company
has been in existence for more than 20 years. Cable and
Wireless PLC owns 52 percent of Dhiraagu while the Government
of the Maldives (GOM) owns the remaining 48 percent.
According to Dhiraagu executives, the GOM plans to sell 30
percent (of its 48 percent stake) in an Initial Public
Offering (IPO) in summer 2010. Dhiraagu's lone competitor in
the mobile market is Wataniya Telecom Maldives, a
Kuwaiti-owned entity. Various sources place Wataniya's
market share between 15-30 percent of the mobile Market. By
all definitions, however, Wataniya is a small fish in a small
pond and the company does not represent a significant threat
to Dhiraagu in the near-medium term.

3. (U) Between Dhiraagu and Wataniya, there are currently
more than 400,000 mobile subscribers nationwide. This number
is actually more than the total population of the country, as
a number of subscribers maintain multiple hand-sets and/or
SIMs. Additionally, the Maldives welcome more than 700,000
roaming users per year, mostly tourists who visit resort
islands or come to Male on business. Due to demand, Dhiraagu
recently began offering Blackberry services through a
user-agreement contract with Sri Lankan Dialog Mobile.
Dhiraagu hopes this service will generate additional income
via robust connection, roaming, and termination charges.

4. (SBU) Despite Wataniya's entry into the Maldivian
Telecommunications market in 2005, calling charges have not
dropped. Dhiraagu executives admit that calling rates are
high compared to neighboring countries and roaming and
termination charges are some of the highest in Asia.
Dhiraagu contends that high rates are necessary in order to
cover the costs of bringing reliable mobile and fixed-line
connections to the widely dispersed atolls of the country.
This argument does not seem logical, however, given that
fixed-line infrastructure has not been upgraded in many years
due to dwindling public demand and the cost of expanding and
maintaining mobile networks can be more than covered with
reasonable connection charges. Dhiraagu also does not feel
compelled to reduce calling and roaming rates because
Wataniya has not instituted a low-fee billing scheme to
attract customers. In the near-term, customers will continue
to live with costly calling services and expensive roaming
charges.

5. (SBU) While it would seem, given the small size and
population of the Maldives, that the market is at capacity,
the country could use another entry into the mobile market.
The GOM has left open the possibility of adding another
mobile carrier to the mix. Dhiraagu executives do not
believe there is room for a third operator although Wataniya
believes that the market could be an open playing field.
Profitability is an issue. Between its fixed and mobile line
businesses, Dhiraagu continues to turn a profit. Wataniya
has yet to turn a profit although it is approaching the
break-even point in FY2010. The profitability factor may
force other companies to look hard at making an entry into
the Maldivian market. On the other hand, the Maldives could
be an enticing location for major international player who
might attempt to expand their brand regionally. In that

COLOMBO 00000102 002 OF 002


case, it would matter less whether their operation in the
Maldives was profitable and more on branding and obtaining
regional name recognition. In the near-term, however, there
are few foreign operators interested in entering the
Maldivian telecom market.

NO TELECOMMUNICATIONS LAW

6. (SBU) Despite the existence of a robust mobile telecom
market in the Maldives, the country does not yet have a
telecommunications law. A draft law is with the Maldivian
Majlis (Parliament) for debate, although there is no timeline
for its passage. In the absence of specific law, the GOM
uses an informal regulator to oversee the sector. According
to Dhiraagu, the regulator is transparent and involved with
the affairs of the sector. This theoretically ensures that
neither Dhiraagu or Wataniya enters into predatory practices
or collude with one another. In practice, the mobile market
remains not overly customer friendly, which puts into
question how much the regulator is involved with the public.
The regulator has instituted a regulation that ensures that
both Dhiraagu and Wataniya share their towers on various
resort islands or population centers. This reduces the
potential blight of massive mobile towers on the skyline.

7. (SBU) COMMENT: At least for customers, the Maldives is
an expensive proposition. The country could use a third
mobile telecom provider, which would ideally drive prices
towards reasonable levels for consumers and ensure robust
competition in the market. Unfortunately, there do not seem
to be any changes on the horizon. Business as usual will be
the rule of the day. While Wataniya is a major international
telecom player, it seems content to maintain its 15-30
percent of the market and not make waves for Dhiraagu. This
approach places no pressure on Dhiraagu to reduce rates or
become more customer-friendly. Passage of a
telecommunications law may change the status quo, though this
remains to be seen. Over the medium term, customers will
have to put up with whatever Dhiraagu and, to a lesser
extent Wataniya, have to offer. END COMMENT.
FOWLER

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