US embassy cable - 05SANAA892

C O N F I D E N T I A L SECTION 01 OF 02 SANAA 000892 
 
SIPDIS 
 
PLEASE PASS TO AMBASSADOR GROSS AND EB/CIP/SP; USAID ANE 
TS-METZGER 
 
SIPDIS 
 
E.O. 12958: DECL: 04/04/2015 
TAGS: PREL, PGOV, EFIN, ECPS, EIND, EINV, ETTC, KMPI, PINR, YM, ECON/COM, ENVIRONMENT/S&T 
SUBJECT: EB ECT DAS AMBASSADOR GROSS'S YEMENI TELECOM 
MEETINGS WITH PRIVATE SECTOR 
 
REF: SANAA 196 
 
Classified By: DCM Nabeel Khoury for reasons 1.4 (b) and (d). 
 
1. (C) Summary.  EB ICT DAS Ambassador David Gross's March 
24-26 visit to Yemen came at a crucial juncture for the 
development of information and communications technology 
(ICT).  With the introduction of GSM technology four years 
ago, the ROYG opened the wireless sector to private 
investment.  More recently, the ROYG has moved away from 
liberalization policies and instead strengthened the 
state-owned Public Telecommunications Corporation (PTC). 
Technology neutrality was compromised by the ROYG's 
regulatory practices in support of its own CDMA wireless 
company, Yemen Mobile (reftel).  In a series of meetings, 
Ambassador Gross discussed these controversial ICT issues 
with local CEOs and Sheikh Hamid al-Ahmar, a powerful Yemeni 
businessman and politician.  Al-Ahmar raised the possibility 
of partnering on key issues which, while promising, is 
fraught with political implications.  End summary. 
 
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For Private Sector, Wireless a Rough Business 
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2. (C) On March 25, Ambassador Gross met with Raed Ahmad, 
Managing Director of Spacetel, and Tarik al-Haidary, CEO of 
Sabafon.  Sabafon and Spacetel are both privately owned GSM 
operators.  Ahmad and Haidary reiterated many of their 
earlier charges of unfair practices by the ROYG and its CDMA 
operator Yemen Mobile in the wireless sector (reftel).  They 
also accused the ROYG of using official press to manipulate 
the public--even going so far as to imprison journalists who 
criticize Yemen Mobile.  The CEOs contended that Yemen Mobile 
is not paying its interconnection fees to the GSM system, and 
currently owes over one billion Yemeni Riyals (approximately 
USD 5,350,000).  Both complained of being prevented from 
introducing "3G-third generation technology" or VOIP because 
of current regulations.  (Note:  Ahmad charged that officials 
at the Ministry of Telecommunications and Information 
Technology (MOTIT) are operating illegal VOIP businesses 
themselves.  End note.) 
 
3. (C) According to the GSM executives, ROYG claims that GSM 
neglects rural areas are false.  Yemen has better wireless 
coverage and lower prices than most other countries in the 
region, they pointed out.  Haidary argued for taking a 
tougher line with the ROYG, and said he is ready to exclude 
Yemen Mobile from the GSM network.  Ahmad was more 
conciliatory, contending there is little choice but to work 
within the current system.  Haidary shared his belief that 
the ROYG actively lobbied against Sabafon's bid to provide 
wireless service in Sudan.  (Note:  Sabafon is owned by the 
al-Ahmar Group, the business interest of Sheikh Abdullah 
al-Ahmar, Speaker of Parliament and head of the opposition 
Islah party.  End note.) 
 
4. (U) The CEOs agreed that the upcoming November World 
Summit on the Information Society (WSIS) in Tunis will offer 
an opportunity to make the case for ICT investment in Yemen. 
Haidary and Ahmad supported Yemen's participation at WSIS, 
with the hope that such international exposure will lead to 
liberalization of the telecom sector and the creation of new 
market potential.  They are specifically interested in 
expanding their businesses into internet and long-distance 
services, both currently controlled by the PTC monopoly. 
 
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Sheikh Hamid al-Ahmar Welcomes Partnership 
------------------------------------------- 
 
5. (C) Ambassador Gross met Sheikh Hamid al-Ahmar, head of 
the al-Ahmar group which includes Sabafon, and son of Sheikh 
Abdullah al-Ahmar, Speaker of Parliament, and powerful leader 
of the Hashid tribal federation.  The Sheikh admitted that 
Sabafon has benefited from political connections, but 
defended his company's record, saying no normal private 
sector company could have succeeded under Yemeni 
circumstances.  Hamid cited security as one example of the 
ROYG's hypocrisy on telecom.  MOTIT accused Sabafon of 
violating customer privacy and attempted to block the 
introduction of new services charging a lack of security, 
while Yemen Mobile has no security system.  Despite these 
obstacles, Hamid boasted of Sabafon's growth, the jobs it has 
created, and plans to expand in the region. 
 
6. (U) Hamid suggested that the U.S. could work directly with 
Parliament on telecom policy.  He recommended an educational 
program for MPs on the benefits of telecom and the role that 
legislators can play in fostering its growth.  Sabafon could 
help finance such a program, he continued, but would welcome 
U.S. expertise.  He suggested a cooperative process including 
European donors. 
7. (U) Hamid told Ambassador Gross he believed educating the 
government would lead to support for the creation of an 
independent telecom regulatory body.  Ambassador Gross noted 
that independent regulators can be created in a variety of 
ways, and in some countries they answer directly to 
parliament.  Hamid argued Parliament can play a key role in 
raising awareness in Yemen about WSIS and pressing the ROYG 
for specific advances in ICT. 
 
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Comment 
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8. (C) Sheikh Hamid's offer to work with Parliament on ICT 
and the establishment of regulatory body, if successful, 
might well to serve to strengthen democratic institutions and 
improve Yemen's investment climate and should be considered 
fully.  A cooperative program with Parliament that focuses on 
ICT must, however, contend with government institutions and 
telecom companies that are intertwined, and considered the 
personal fiefdoms of powerful tribal and political leaders. 
The general perception in Yemen is that GSM belongs to 
Parliament, and that Yemen Mobile is President Saleh's family 
company.  An independent regulatory framework would help 
remove the critical telecom sector from pervasive corruption 
and personal intrigue, but might encounter political mines 
and rivalries that could doom the effort to failure. 
Cooperation with Hamid al-Ahmar also requires careful 
consideration.  Despite the Sheikh's professional business 
style, he is believed to be deeply involved in a number of 
corrupt business dealings. 
 
9. (U) Note: Ambassador Gross did not have the opportunity to 
clear this message.  End note. 
Krajeski