US embassy cable - 04DJIBOUTI898

C O N F I D E N T I A L DJIBOUTI 000898 
 
SIPDIS 
 
E.O. 12958: DECL: 06/30/2014 
TAGS: PREL, PGOV, ECON, ECPS, EINV, DJ 
SUBJECT: THE NEW DJIBOUTI TELECOM 
 
 
Classified By: Pol/Econ Erinn C. Reed. 
For reasons 1.4 (b) and (d). 
 
1. (U) SUMMARY: Djibouti Telecom announced the completion of 
its infrastructure extension on 21 June 2004.  The extension 
is part of the new look that foreign management is bringing 
to Djibouti Telecom over the course of its two-year 
transitional period before privatization.  This step is part 
of a system upgrade, which includes the eventual offering of 
DSL speed Internet and the use of fiber optics in the 
telephone switches.  The latest upgrade has increased the 
Internet capacity to 47 Mbps, which is eleven times the 
previous bandwidth and allows greater access to international 
sites.  END SUMMARY. 
 
2. (U) Djibouti Telecom (DT) has a brand new look.  Starting 
late May this year, enigmatic billboards started appearing 
around town telling of a new start for Djibouti Telecom to be 
revealed in June.  The mystery behind these billboards was 
revealed shortly after: a new look and logo for the company 
and its affiliate services for mobile phone and Internet. 
Pol/Econ and Econ assistant met with Djama Aouled Djama, 
Director of International and Legal Affairs to find out more 
about the "new" Djibouti Telecom.  The change in image is 
being accompanied by an increase in capacity for the Internet 
and an eventual move to fiberoptics for the main switching 
center.  This increase brings the Internet bandwidth 
available to Djibouti's users up to 47 Mbps from 4Mbps.  The 
end goal for DT is to provide DSL service to commercial and 
residential clients.  They hope to unveil this new service at 
the end of June, though realistically it can be expected 
sometime this fall.  DT will also soon begin installing fiber 
optics for use in the switching of telephone lines. 
 
3. (C) Privatization looks to be a long process for Djibouti 
Telecom.  According to a law passed in 1998, which sets forth 
key steps for privatization, the company will go through a 
two-year transition period followed by an open tender in 
order to decentralize shares.  DT's two-year transition 
period, which started November 2003, has brought in foreign 
management contracted for the specific task of reorganizing 
the company, improving the company's operations and restoring 
financial credibility.  The new management team brought in 
includes a French telecom specialist as the Director General 
and a Tunisian specialist as the Director of Finance.  Djama 
commented that while the new team is certainly changing 
things, the changes are not in the right areas.  The team has 
been spending large sums to overhaul the look of DT, purchase 
cars and equipment, and improve the superficial face of DT. 
Djama noted that the new management has not made a move to 
focus changes on the efficiency and training of staff, both 
current and potential.  The current make-up of Djibouti's 
workforce has few trained technicians in telecom specialties, 
necessitating the contracting of more expensive foreign 
workers. 
 
4. (C) After the transitional period, an open tender will 
sell the bulk of the company's shares creating a Strategic 
Equity Partnership between the Government of Djibouti (GODJ) 
and the purchasing company.  The goal for the GODJ is selling 
49 percent of shares to private investment, though Djama 
commented realistically the government does not want to sell 
more than 30 percent.  He said he was doubtful about the 
success of the 1998 privatization law's implementation, 
citing the lack of interest so far and the fact that there 
are more problems to fix in Djibouti before it can attract 
the kind of company needed to successfully privatize the 
telecom sector.  Djama said most often the reasons government 
utilities are privatized are fiscal constraints, industry 
liberalization, improving quality of services, reducing 
costs, and complete overhaul of a sector of industry.  For 
Djibouti, the motivation appears to be a little of each as 
the government strives to update its industries to modern 
technology.  Djama said he believed that the privatization 
would succeed, it would just take much more time than 
planned. 
 
5. (C) COMMENT: Post feels the privatization of the telecom 
industry in Djibouti will take time, but will eventually 
succeed.  Outside influences, especially foreign investment 
and the GODJ desire to connect to the transoceanic cable 
SEA-ME-WE4, will have positive effects on the reorganization 
and recreation of the telecom industry in Djibouti. 
RAGSDALE