Wataniya finally launches its network, but with limited spectrum

Yesterday, Nov. 1, Wataniya launched its network with 3.8 MHz of spectrum. This is 1 MHz less than the 4.8 MHz the company was promised. The network is currently serving about 40,000 subscribers who had prebooked their numbers. I spoke with Allan Richardson, CEO of Wataniya, today and he said the following:

“The network’s been very robust. We’re very pleased with the operation and it’s a good start. I’d say we’re moving in the right direction….Obviously there’s an awful lot of things going on in the background and I can’t complain. Everybody’s worked very hard and the network is behaving itself.”

According to a Nov. 2 Reuters article, Mashoor Abu Dakka, Palestinian telecommunications minister, said there would be a "long-term battle" for the release of the remaining frequency. "The Israeli side didn't commit to what it had promised. But we wanted the company to become a reality," he said. A statement from Tony Blair's office said, "Mr. Blair urged the Government of Israel to release the remaining 1MHz of frequency as soon as possible."

More to follow. Stay tuned...

Wataniya delays its launch- AGAIN

So the deadline has passed and Wataniya is still holding out hope for a breakthrough. Yesterday I wrote a breaking news article for Ha'aretz about this now very familiar development. Here's the link and here's the text of the article...

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Israeli leaders have highlighted loosened security restrictions, an economic growth rate of 7 percent, and the construction of state-of-the art shopping malls and cinemas in the West Bank as an indication of what Gaza citizens could enjoy— if only Hamas chose to abandon terrorism.

However, the struggles of a multi-national cellular company elucidate the political roadblocks still stifling businesses in the West Bank. On Oct. 15, Palestine’s Wataniya Mobile once again did not launch as planned because it has not received its promised 4.8 MHz of airwave frequency spectrum.

Wataniya hoped to launch last April, but unwittingly became a political pawn in clashes between Israel and the PA. Tensions piqued last week when the Israeli government, which controls the airwaves in the Palestinian Territories, threatened to withhold Wataniya’s spectrum indefinitely unless the PA dropped its demand for IDF officers to be tried at the International Criminal Court. This followed the publication of the controversial Goldstone report, which accuses both Israel and Hamas militants of war crimes.

“[Wataniya has] nothing to do with the Goldstone report—nothing at all,” said Allan Richardson, the Scottish CEO of Wataniya. “We’ve been trying for two and a half years to get this spectrum….We’re just trying to build a network that’s competitive and gives the Palestinian people a choice. That’s it.”

Richardson previously started mobile networks in post-war Iraq and Afghanistan and said in a May 2009 interview that “the obstacles [Wataniya is] suffering from [in the West Bank] are obstacles you’ll never get anywhere else in the world.”

The Israeli government has suddenly backed away from its threat not to give the PA any spectrum for Wataniya and has resumed its position announced last month that it would provide 3.8 MHz. This is less than the 4.8 MHz that Wataniya was promised in a complicated and bitterly disputed contract brokered by Tony Blair and signed by Israel and the PA in July of 2008. Both sides agree that Wataniya was promised 4.8 MHz, but Israeli representatives insist that this allotment was conditioned upon unnamed commitments that the PA has not fulfilled.

In an August press release, Wataniya’s board of directors set Oct. 15 as the final launch deadline and said they would demand compensation from the cash-strapped PA, whom Wataniya paid for its license, if the 4.8 MHz was not received. The PA, in turn, announced its plans to demand compensation from Israel if it failed to follow through on its promise to provide the spectrum.

“3.8 MHz will not support enough subscribers and will not allow us to deliver the quality we need to get into this market,” Richardson said in an Oct. 16 interview. “The PA had an agreement with the Israeli government for 4.8 MHz of spectrum. Based on that agreement, we made our investment.”

He added, “To be quite honest, we haven’t got a lawyer yet….The worst case scenario is we don’t launch. But I don’t see that happening. I’m an optimist. I believe we will launch.”

Richardson’s contention that 3.8 MHz is not enough to operate a viable cellular network is shared by many telecom experts. Most cellular carriers worldwide operate on at least 10 MHz of spectrum, according to Derek Kerton, a principal analyst with Kerton Group, a telecommunications consulting company.

In 1996, Israel allotted 4.8 MHz to the PA for use by Jawwal, the sole Palestinian cellular provider that now serves 1.5 million subscribers. Jawwal’s parent company, Zain Palestine (formerly Paltel Group), constitutes about 50 percent of the Palestinian stock exchange. Despite this financial success, Jawwal stopped selling SIM cards on multiple occasions because it didn’t have sufficient frequency spectrum to support new customers, according to Jawwal’s CEO Ammar Aker.

By contrast, Israel’s three major cellular companies, which support a larger and denser population of subscribers, have between 20 and 46 MHz of spectrum and are generally satisfied with their allotment, according to company reports.

In addition to its undelivered spectrum, Wataniya has waited more than six months to have some of its equipment cleared through Israeli customs. Jawwal has experienced similar challenges. The average customs holdup for Jawwal base stations and towers is six to 18 months, and some of Jawwal's switch equipment has been held in customs since 2005, according to Aker. Israel recently prohibited Jawwal from importing microcells used to prevent the dropped calls for which Jawwal has become notorious.

Palestinian-American businessman Sam Bahour, who oversaw the establishment of the first Western-style shopping mall in the West Bank, said that Wataniya’s struggles are “a clear example of… Israel, the occupier, continuing to micromanage the Palestinian economy, [which is] the core reason why the Palestinian economy is stunned.”

Tony Blair has not weighed in publically on the details of the political dispute over Wataniya’s frequency allotment, but said through a spokesperson in a June 3 statement that the release of telecommunications frequency was “an important part of the set of [Mr. Blair’s] understandings with the Israelis.” Blair has pressed Israel to release all 4.8 MHz of frequency, arguing that this will bolster the moderate government of Mahmoud Abbas and grow the Palestinian economy.

The impact of Wataniya on the Palestinian economy would likely be powerful and lasting. The competition posed by Wataniya could improve the quality and cost of Palestinians’ phone service. Richardson reports that about 20,000 have already registered to receive Wataniya numbers. While Wataniya currently has 250 employees, the company predicts it would create more than 2000 direct and indirect West Bank jobs after its launch.

However, Wataniya’s continued paralysis at the whims of political battles could jeopardize the West Bank’s fragile growth and scare off future investors. Bahour said that these investors are “willing and ready to build a true Palestinian economy the second Israel ends its military occupation.”

Nati Schubert, senior deputy director general of spectrum management at the Israeli Ministry of Communications, said that when Wataniya is still in its launching phase, 3.8 MHz should be “enough.” He insisted that Israel has committed to give the PA 4.8 MHz “over time.”

“Wataniya is good for Israel. It’s a win-win situation,” Schubert said. “Israel losses [if Wataniya fails] because [Israel] wishes to improve the relations with the PA first by improving the commercial situation.”

It's Wataniya's Final Deadline Day...

But it looks like the waiting will continue until tomorrow.

I spoke with Allan Richardson, CEO of Wataniya, at 9 a.m. Palestine time for about 45 seconds today, Oct. 15. He sounded busy and somewhat chipper, but declined to comment on whether he thought Wataniya would receive 4.8 MHz by the end of today.

“We have a number of meetings going on today and we’re not in a position to say anything right now,” he said. “But if you call me back tomorrow, I should be able to tell you exactly what’s going to happen.”

While both sides have been ramping up dialogues behind the scenes, there have not yet been any public indications of progress. Last week, a Reuters article reported that the Palestinian Authority has sought assistance from the International Telecommunication Union, which is responsible for defining and adopting worldwide telecom standards.

The public response from the ITU doesn’t inspire much hope for a breakthrough. The ITU said only that it had received the Palestinian request and “asked both parties to cooperate.”

Israel Threatens to Halt Wataniya's Launch Unless PA Drops Demands for War Crimes Inquiry

The Sept. 15 deadline passed without any headway, and Wataniya Palestine has still been allotted only 3.8 MHz of the 4.8 MHz of frequency spectrum it was promised. Nevertheless, the company’s CEO, Allan Richardson, is forging ahead with plans to launch mobile phone operations on Oct. 15, assuming that the Israeli government allots 4.8 MHz by this time. In a Sept. 30 email, Richardson wrote:

“Right now there is no major movement on the spectrum issue. There is a lot of activity of a political nature at a high level in the background. My focus right now is to get the company ready for launch by mid October and we are on target. We have 250 employees + vendors working incredibly hard to get this company ready for launch. When I have something more for you I will let you know.”

Richardson declined to comment on a controversial story recently published in Ha’aretz, which reports that the Palestinian Authority has called on the International Court to investigate "war crimes" allegedly committed by the IDF during last winter’s Gaza War. In response, Israel said that it would not allow Wataniya to operate unless the Palestinian Authority drops its demands for a war crimes inquiry.

While they blame each other for this debacle, my sources on both sides agree that the failure of the Wataniya project would be catastrophic for the West Bank economy. As a multi-national company with more than $300 million invested in the West Bank, Wataniya's failure could scare off future investors, not to mention cost Palestinians more than 2000 jobs. It could also be a cataclysmic financial blow to the Palestinian Authority, which Wataniya would invariably sue for at least $300 million in damages.

Most worrisome is the reality that Wataniya’s failure could derail the West Bank’s surprisingly positive economic growth as well as behind-the-scenes progress in peace negotiations. In the past two years, state-of-the-art shopping malls and movie theatres have been constructed and Israeli-imposed security restrictions have been lifted. Many western leaders, including Israeli ambassador to the United States Michael Oren, have publicized this prosperity as an example of “economic peace” and an indication of what Gaza citizens could enjoy, if only their leadership decided to abandon terrorism.

But all of this growth hinges on the confidence of the investment community. In a Sept. 4 email exchange, Palestinian-American entrepreneur and businessman Sam Bahour, who lives in the West Bank and wrote a recent editorial in the WSJ, said the following:

“[The Wataniya situation] is a clear example of… Israel (the occupier) continuing to micro manage the Palestinian economy, the core reason why the Palestinian economy is stunned…The investment community, in Palestine and abroad, is able, willing and ready to build a true Palestinian economy the second Israel ends its military occupation.”

I’m currently pitching the story of this ongoing controversy to major U.S. newspapers, and hope to publish the story after Wataniya’s planned Oct. 15 launch date. Stay tuned…

An Update on Wataniya’s Situation

The Wataniya controversy has reached a boiling point and the story has now been covered by Reuters and mentioned on the op-ed page of the Wall Street Journal.

In a recent statement, Wataniya's CEO said that his company will sue for millions in damages on Sept. 15 unless the Israeli government, which controls the airwaves in Israel and the Palestinian Territories, immediately provides 4.8 MHz of promised frequency spectrum.

After multiple delays, the Israeli government has provided the Palestinian government with 3.8 MHz of frequency for Wataniya’s use. This is less than the 4.8 MHz it was promised in an intricate contract signed between the Israeli government and the Palestinian Authority in July of 2008.

Both the Israeli government and the Palestinian Authority insist that they have fulfilled their contractual obligations, and a Sept. 2 meeting in Tel Aviv between the two sides yielded no breakthroughs.

Middle East Envoy and former British Prime Minister Tony Blair has pressed Israel to release the full 4.8 MHz, arguing that this will bolster the more moderate government of Mahmoud Abbas and grow the fragile Palestinian economy.

A Long-Awaited Interview with a Telecom Expert and a Rejection from the World Bank

My single most difficult interview to nail down was the one I thought would be the simplest. I wanted to find a telecommunications expert who could explain, in plain English, the fairness or unfairness of the frequency spectrum allotted to Jawwal and Wataniya as compared to Israeli providers.

In general, the more spectrum a telecommunications operator has, the more subscribers it can serve. Lower band frequencies of 800-900 MHz generally travel farther and penetrate walls better, and thus are more desirable than higher band frequencies of 1800-2100 MHz. However, spectrum is also a hotly contested scarce resource and must be divided between military, science, government and companies that naturally seek to maximize their allotment.

Jawwal’s 1996 license gave it 4.8 MHz in the 900 band for a target of 120,000 subscribers. The company now has 1.5 million subscribers but the same amount of frequency. For multiple periods over the past ten years, Jawwal stopped selling SIM cards because its network was running overcapacity due to lack of frequency, according to Jaber.

By comparison, Israel’s leading cellular company, Cellcom Israel Ltd., which has about 3.2 million subscribers, is satisfied with its total spectrum allotment of 27 MHz. In its 2008 annual report, Cellcom states: “We believe that our available spectrum is sufficient for our needs.” Another Israeli company, Orange, states in its 2008 annual report: “We have built an extensive, resilient and advanced network system in Israel, allowing us to offer our services with extensive coverage and consistent high quality.”

After over a month of more than 40 email and telephone exchanges with the World Bank PR Office, their experts agreed to give me a one-page written statement on the matter that did not once mention the words “Israel” or “Palestinian Territories.” They also told me that I could not use the statement unless I quoted it in full, which was impossible.

I then posted a query on Profnet.com and found Derek Kerton, a principal analyst with Kerton Group, a telecommunications consulting company. He told me that most major carriers in the world have at least 10 MHz, and that Jawwal’s frequency allotment of only 4.8 MHz is likely to either unduly impede their growth or cause service disruptions.

“I’m not aware of any successful cellular companies with just [4.8MHz] in a competitive market,” he said. “It may ‘work’ in the rare case of a monopoly, only because the logical choice of the monopolist is higher price and constricted supply, which negates the constraint of limited spectrum. But whichever the cause, the communication needs of the populace are underserved.”

He continued, “If the carrier does succeed at market, and utilizes all 4.8MHz, it becomes the victim of its own success. The crowded network drops calls, but it cannot install additional channels, nor properly serve the demand they worked so hard to create.”

Since I knew the credibility of my article hinged on getting an expert quote like this, I felt exhilarated and relieved that that Kerton was willing to speak with me on the record. Kerton’s frankness also left me with lingering questions about my interactions with the World Bank PR office. I suspect that the World Bank seeks to maintain its non-political role as a “neutral” group of technical advisors, and perhaps avoids quotation in articles that might appear to take a political stance.

Mobile Phone Usage by Israeli Customers Versus Jawwal Customers*

Mobile Company	Number of subscribers	Monthly revenue per user	Average minutes of use per user	Frequency spectrum (MHz X 2)
Jawwal (Paltel Group)	1.5 million	71 NIS	130 minutes	4.8 MHz (900 bandwidth)
Cellcom Israel Ltd.	3.2 million	140 NIS	323 minutes	37 MHz (850 and 1800 bandwidth)
Orange (Partner Communications Ltd.)	2.9 million	145 NIS	358 minutes	20.4 MHz (900 and 1800 bandwidth)
Pelephone Communications Ltd.	2.7 million	128 NIS	323 minutes	46 MHz (800, 1900 and 2000 bandwidth)

*According to 2008 company reports and interviews with company representatives.

An Interview with Ammar Aker, CEO of Jawwal

A 50-meter telecom tower, one of the tallest in the area, sits right outside the office of Ammar Aker, CEO of Jawwal. Aker positioned his office here because Palestinian villagers sometimes believe that telecom towers caused cancer, and he wanted to demonstrate that it was safe.

Like the Wataniya headquarters a few kilometers away, the Jawwal headquarters boasted the sharp, immaculate and professional facilities that one would expect of any major company. This was a sharp contrast to the drab, humble building that houses the Palestinian Ministry of Telecom and Information Technology.

Inside Aker’s office was a large jar full of Israeli SIM cards, which he declined to have me photograph. These cards were collected at one of many recent community campaigns designed to convince civilians to give up their Israeli phones and use Jawwal instead. The campaigns, Aker said, are more about convincing people of Jawwal’s better service and calling plans than invoking purely nationalist reasons to switch.

When asked about Wataniya’s current difficulties, Aker, like Jaber, said that this all sounded very familiar. Jawwal has had a shipment microcells used to mitigate dropped calls sitting in Israeli customs since October of 2008, according to Aker.

Recently, the Israeli government told Jawwal that they are no longer allowed to import these microcells. “We’ve been using these microcells for the past eight years and now we cannot use them?” Aker asked.

Aker also echoed Jaber’s comment that Wataniya’s entrance into the market would cause consumers to be more appreciative of the service that Jawwal has been able to provide under the crushing weight of Israeli restrictions.

He made the analogy of the wrongness of judging an Israeli civilian who “lives in Tel Aviv and within a few minutes can run to the airport and travel all around the world” against a Palestinian civilian who “faces all these difficulties with checkpoints and travel restrictions.” The same, he said, is true when comparing mobile service providers. For this reason, he is “waiting for [Wataniya] to start, praying for them to start.”

An Interview with Abdel Malik Jaber, Outgoing CEO of Paltel Group

I met with Abdel Malik Jaber, the outgoing CEO of Paltel Group of which Jawwal is a subsidiary, on the day after he returned from Jordan, where the historic merger agreement between Zain Group and Paltel Group had been signed.

Our interview had originally been scheduled for the day before, but when he got tied up in Jordan, he graciously instructed his secretary to give me his cell phone number and have me contact him directly. Jaber’s spacious office included an artistic rendering of a fruitless olive tree superimposed on the picture of a young girl.

“Definitely nobody can accuse the business community of being anti-peace,” Jaber said. “The business community not only aspires, but works hard for peace because it has a vested interest in having peace in the region. But we are the main losers out of the continuation of the conflict.”

When I asked about Wataniya’s difficulties getting its frequencies released and its equipment cleared through customs, Jaber said the Israeli government regularly used the guise of “security” to renege on commitments. His company encountered difficulties similar to Wataniya’s in trying to get more frequency for its use.

“Since 1996, we have asked for frequencies from the Israeli side and all the time we are having difficulties,” he said. “How come we get about a tenth of the spectrum [that the Israelis get]?” Jaber said that the Israelis’ failure to implement what they have signed on is “a clear indication that the Israelis don’t want to see private sector development in Palestine.”

He continued, “The Israelis have plenty of frequency in the 1800 range. It doesn’t make sense that they are not giving frequencies because of shortages or the army or something like that. No one can convince me of that.”

Jaber also challenged the notion that Jawwal was a monopoly. “When we started in the Palestinian market, we were 25 percent of the market,” he said. “We were efficient. We were effective. And we competed with the Israeli operators on our own.”

A Lively Interview with Allan Richardson, CEO of Wataniya

Before beginning our interview, Allan Richardson, the Scottish CEO of Wataniya’s operation in the Palestinian Territories, showed me the view from his office window.

“You see these houses?” he said, pointing to a new Palestinian housing community. “They weren’t here two years ago. There was nothing here, just a field. They’ve been here a year now. They funded them, built them—it’s all Palestinian money.”

He then brought me to an adjacent room, where we looked out another window. “That’s the settlement,” Richardson said, “That’s how close they are. And you see these towers there? That is a Jawwal, CellCom and Orange [tower]. Cellcom is now selling 3G packages into Palestine from there and from all around the West Bank. So if you’re going to ask about competition with Israelis, there is competition. It’s not big, and the Israelis will deny it. But the fact of the matter is that’s a 3G tower there.”

Opposite the window in this same room was a large paper map that’s taped onto the wall. Richardson pointed to the dozens of marks where Wataniya’s towers are being built or will one day be built, and how Area C, which is reserved for Israeli settlements and military posts, crisscrosses the entire West Bank.

“We have an operation in the Maldives and the guy who runs it… talks about the archipelago of the Maldives and I talk about the archipelago of Palestine,” Richardson said. “I said ‘you’ve got water between yours and I don’t—I’ve got Area C.’ He’s got sea. I’ve got Area C!”

After the tour, we sat down in Richardson’s neat, polished office and talked for about 40 minutes. Richardson peppered the conversation with colorful jokes and analogies, but he repeatedly returned to the serious point: His company was losing millions every month because the spectrum agreement had not been carried out as planned.

Richardson, who started mobile networks in post-war Iraq and Afghanistan, said the obstacles Wataniya faced in those countries were “nothing like” those confronted in the Palestinian Territories. “Everybody makes lots of promises. But I’m still sitting here with no [frequency] spectrum and not all my equipment,” he said. “From my perspective, it’s a very simple thing. We didn’t get it. We were promised, and [the Israelis] didn’t deliver.”

In addition to the undelivered frequency spectrum, Richardson reported that some of Wataniya’s essential equipment has been awaiting inspection at Israel’s Ben Gurion Airport for more than five months. Israeli officials, he said, promised him the equipment would be released by the end of May. However, I contacted Richardson’s press secretary in early June, and the equipment was still stuck in customs.

At the conclusion of the interview, I asked Richardson if he believed that Wataniya would launch soon. “I’ve got to be optimistic,” he replied. “I know it’s being dealt with at the highest levels. And it’s viewed as a bellwether of what can be accomplished with this size of investment in Palestine.”