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Algeria has received no bids for two fixed-line telephone licences, as investors shied away from the country’s uncompetitive, congested market.

Failure to sell the licences, one for national calls and one for international ones, is a setback to the North African country’s efforts to kick-start the privatisation of the former Soviet-style economy.

Regulator ARPT had required US$1bn from bidders to pay for equipment and installations.

“I think foreign investors were not ready to put over US$1bn in this. We need to find a better way to attract them here,” ARPT general manager Ahmed Gaceb comments.

ARPT’s official reason for the failure was a lack of offers but it was seen to have to do with an uncompetitive local market controlled by state operator Algerie Telecom.

Algeria’s fixed-line telecoms market is highly congested and suffers regular breakdowns with the sole operator, Algerie Telecom, holding 2.2mn customers and unable to cope with growing demand in a country with 32mn inhabitants.

The government says that the sale of the two licences would have enabled it to boost subscriber numbers to 2.6mn by the end of the year and 3mn by the end of 2005.

ARPT claims there had been more than five potential clients, including some from Europe. The licences sale has been postponed indefinitely, it says.

“We are not ready yet. We should review our prices before going forward in calling foreigners to come here,” says Algerie Telecom general manager Messaoud Chetih.

“One minute of a local phone call in Morocco costs the equivalent of eight Algerian dinars (US$0.1), in Tunisia it costs the eqivalent of 11 dinars and here in Algeria it costs one dinar,” he says.

Oil and gas-rich Algeria has forecast mobile and fixed-line subscribers will reach 5.6mn by the end of the year and 8mn by the end of 2005 but it is unclear whether these targets are attainable. The country is also in the process of liberalising the mobile phone market, which is also highly congested and suffers inter-connection problems. Kuwait’s National Mobile Telecommunications Co won the country’s third GSM mobile phone licence last year with a bid of US$421mn and is currently building its network.

Egyptian operator Orascom obtained the second licence in 2002 for US$737mn and is Algeria’s largest wireless operator with 1.3mn customers.

Algerie Telecom has less than 200,000 GSM clients.