RESTRICTEDWORLD TRADE
ORGANIZATIONS/L/148
21 November 2003
(03-6216)
Council for Trade in Services Original:  English
IMPLEMENTATION OF SPECIFIC COMMITMENTS IN
TELECOMMUNICATIONS SERVICES
REQUEST FOR A WAIVER
Communication from Albania
The following communication, dated 20 November 2003, from the delegation of Albania is
being circulated to the Members of the Council for Trade in Services.
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1. The Government of Albania hereby submits to the Council for Trade in Services a request for
a waiver to allow Albania to postpone until 1 January 2005 the application of commitmentsundertaken in its GATS Schedule with respect to the exclusivity granted to Albtelecom SH.A
("Albtelecom") for the transmission through its network of international public voice telephony
services.  This request is presented in accordance with paragraphs 3 and 4 of Article IX of the
Marrakesh Agreement Establishing the World Trade Organization.  The exceptional circumstances
justifying the grant of the waiver, which are set out more fully in the communication from theMinister of the Economy attached as Annex III, may be summarized as follows.
2. In moving toward the full liberalization of the telecommunications sector, the Government of
Albania has decided that, to enable Albtelecom to respond to competition in a fully liberalised market,
it should benefit from a two-year period of exclusivity.
3. Although the privatisation of Albtelecom was expected by the end of 2000, it was announced
only in January 2002.  The causes of the delay included investors’ insecurity over the war in Kosovo;
the effects on international financial and telecommunications markets of the 11 September 2001attack in New York;  increasing operator costs fo r third generation cellular technology;  declining
investor interest in expanding into fixed telephony markets;  and a delay in the implementation of a
tariff rebalancing program for Albtelecom planne d for 1999, but which did not begin until September
2001, and will now only conclude in 2005.  So far, there has been no investor interest expressed in the
privatisation of Albtelecom.
4. On 3 July 2003, the Council of Ministers decided that, as a compensation for its investment
commitments, Albtelecom should enjoy an exclusive right to supply international telephony services
based on its own network until December 31, 2004,.  Only exclusivity for international, not national,
telephony services was to be maintained.  The Council of Ministers further specified that international
telephony services should shall be open to competition in 2005.
5. The Government of Albania has already taken measures for further market liberalisation, such
as the removal of Albtelecom's exclusivity in fixed telephony services in urban areas, and introducingS/L/148
Page 2
a third mobile operator in the market.  The experience  of other countries shows that strategic investors
have been granted a minimum period of two years between the privatisation and the liberalisation.
6. Accordingly, the Government of Albania requests the Council to consider favourably its
request for a waiver, of which a proposed draft is attached as Annex I.  An excerpt from Albania's
Schedule of Specific Commitments is reproduced in Annex II.
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ANNEX I
DRAFT DECISION
ALBANIA
IMPLEMENTATION OF SPECIFIC COMMITMENTS IN
TELECOMMUNICATIONS SERVICES
Request for a Waiver
Decision of [   ] 20031
The General Council,
Conducting  the function of the Ministerial Conference in the interval between meetings
pursuant to paragraph 2 of Article IV of the WTO Agreement;
Acting pursuant to paragraphs 3 and 4 of Article IX of the Marrakesh Agreement Establishing
the World Trade Organization (the "WTO Agreement"), and the Decision-Making Procedures underArticles IX and XII of the WTO Agreement agreed by the General Council (WT/L/93);
Taking note  of the request of Albania for a waiver from its commitments under Article XVI
(Market Access) of the GATS, with respect to international public voice telephone services (CPC
75212);
Referring  to the explanatory note presented by Albania on [… ] November 2003;
Taking into account  the particular difficulties faced by Albania in implementing its
commitments;
Considering  that Albania hereby commits itself fully to implement its GATS commitments by
1 January 2005;
Taking note that, in light of the foregoing, the exceptional circumstances justifying a waiver
from Article XVI of the GATS exist;
Decides  as follows:
The commitment undertaken by Albania under GATS Article XVI (Market Access) with
respect to international public voice telephone serv ices (CPC 75212) is, with respect to the exclusivity
granted to Albtelecom for the transmission through its network of these services, waived until 31
December 2004.  The waiver postpones by two years the effective date of termination of Albtelecom's
exclusivity with respect to these services, as specif ied in Albania's Schedule of specific commitments.
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1 Adopted in accordance with the Procedures on WTO Decision-Making under Article IX of the WTO
Agreement agreed by the General Council (WT/L/93).S/L/148
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ANNEX II
Excerpts from Albania's Schedule of Specific Commitments
Sector or Subsector Limitations on Market
AccessLimitations on National
TreatmentAdditional Commitments
For all sub-sectors of
telecommunicationservices1) & 3) Albanian Telekom
(AT) has exclusive rights forfixed telephony except in
rural areas. No limitations
from 1 January 2003.
4) Natural persons cannot
provide telecommunicationservices in Albania if theyare not registered as
juridical persons.The Government of
Albania will publish therules and regulatory
policy regarding further
competition in the field ofbasic telecommunicationservices. The attachedreference paper onregulatory principles is
incorporated as additional
commitments by theRepublic of Albania
International public voicetelephone services(75212)1) None.
2) None.3) None as of 1 January
2003.
4) Unbound, except as
indicated in the HorizontalCommitments and thehorizontal section of thetelecommunications sector.1) None.
2) None.3) None.4) None.S/L/148
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ANNEX III
ALBANIA’S REFORMATORY POLICIES TOWARDS FULL LIBERALISATION
OF THE TELECOMMUNICATION SECTOR
1. The Government of Albania is totally committed to carry out deep trade reforms aiming at the
restructuring of Albanian economy, a necessary step  towards the integration of the country in the
international dimension. These reforms are (are bein g strictly implemented with satisfactory results,
especially in terms of trade liberalisation of goods in  the Balkans, with a view to establish a free trade
area in the region. This shall serve as a first step towards the extension of the free trade zone to the
European Union, thus guaranteeing the successful integration of Albanian goods into the Europeanmarket.
2. Somewhat different is presented the situation in trade in services that is less developed owing
to the lack of our experience in this field and to the characteristics and differences of services that
influence the modes of international trade transactions . Nevertheless, even in this field, in cooperation
with international organizations, we are making efforts to further liberalise trade in services, initiallythrough regional integration policies, and in this respect the role of telecommunications is essential for
the economy of a country, not only as a sector on its own right but also as a facility for the
development of other services sector and the entire economy, domestic trade and the enrichment of
citizens’ life.
3. To guarantee successful reforms in the frame of full liberalisation of such an important sector
such as the telecommunication, circumspection and carefully studied steps towards privatisation of the
fixed telephony company Albtelecom SH.A. are required. As the experience of other developed
countries indicates, this sector is characterized by national monopolies privatised afterwards but
before the liberalization. Therefore, the Government strategy related to this sector provides that this
company, after the privatisation process, should enjoy a period of exclusivity, in order to undergo aprocess of modernisation and to become more efficient with a view to respond positively to
competition of a future fully liberalised market.
That is why, by means of this letter I ta ke the opportunity to address the Members of WTO,
the request to grant Albania a waiver for the obligation related to the liberalisation of the
international public voice telephone services based on the network of the company
Albtelecom SH.A. and the implementation  of the commitment in the year 2005. This
request is presented based on Article IX, paragraph 3 and 4 of the Marrakech Agreement
Establishing the World Trade Organisation.
I. WHAT IS THE ALBANIAN GOVERNMENT STRATEGY AIMING AT IN THE
FRAMEWORK OF THIS SECTOR
(a) The Government of Albania puts the development of this sector on the basis of the
Policy Paper for the Development of the Telecommunication Sector aiming at:
(i) The sustainable and long-term development as well as the growth of the
economic efficiency, through the restructuring of the sector.S/L/148
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(ii) Increase of market efficiency through the promotion of the competition – as a
power for an optimal utilisation of capitals - and through a number of
deregulations, market liberalisation and the institutionalisation of regulatory
entities.
(iii) Attraction of foreign private capitals as an important factor for the economic
growth, through investment not just in monetary terms, but also in terms of
managerial skills, international financial and capital market access, as well as
strategic alliances in the world market.
(b) The Policy Paper for the Development of the Telecommunication Sector in the
Republic of Albania constitutes the first step in materialising the Government’s
objectives for the privatisation of mobile phone company Albanian Mobile
Communication – AMC and of the Albtelecom SH.A., and it establishes deadlines forthe conclusion of this process.
(c) The privatisation of these companies is an objective of the strategy of the
privatisation, approved by law No. 8306 dated 14.03.1998: “On the strategy for the
privatisation of the sectors of special importance”, a process carried out by
international consultancy, in the framework of the World Bank project “Consultancyfor the privatisation of strategic sectors”.
4. The abovementioned Policy Paper provides that the privatisation process of AMC should
begin as soon as possible and finish within 1999. Immediately afterwards within 2000 the
privatisation of Albtelecom SH.A. should terminate too.
5. Concerning the issue of exclusivity, the Policy Paper for the Development of the
Telecommunication Sector in the Republic of Alba nia specified that Albtelecom SH.A. should be
given an exclusive right to offer national and international telephony services and local telephony
services in the urban zones based on its own network, until December 31, 2002, thus around three
years and a half from the time the document was appr oved; or bearing in mind that according to this
document, the privatisation of Albtelecom SH.A. should terminate within 2000, the strategic partner
would enjoy a two-years period of exclusivity.
II. EVOLUTION OF PRIVATISATION AND RESTRUCTURING PROCESS OF THE
SECTOR
(a) As a result of investors’ insecurity due to  the Kosovo war, the privatisation of the
AMC was postponed and was in fact finalised in July 2000. At this moment the bid
on the second cellular license was announced, a process that was finalised in January
2001.
(b) The postponement of the privatisation of the AMC brought about the postponement
of the privatisation for Albtelecom SH.A. and the bid projected to finish within 2000,
was announced only in January 2002.
(c) In addition, Albtelecom SH.A. did not go through a privatisation procedure for other
reasons related to the bad situation in the international market of telecommunicationsas a result of:
(i) September 11-th 2001 attack in New York that had a effect on the breakdown
of the international financial market in general and on that of
telecommunications in particular;S/L/148
Page 7
(ii) Increase of expenses of international companies in the systems of third
cellular generation and their concentration on these technologies during this
period coupled with a lower interest of the international telecommunication
operators in the extension of their fixed telephony market. (Bankruptcy or the
way towards bankruptcy of some global operators of telecommunications wasthe consequence of these factors).
(d) Moreover, the tariffs re-balancing program did not begin until September 2001,
although projected in 1999 and it will therefore conclude only in 2005.
Under these circumstances, and considering that no interest is expressed so far in the privatisation
process of Albtelecom SH.A., we esteem that the postponement of exclusivity will increase the
interest of potential operators, who at this moment would feel protected from an eventual
competition and be encouraged to invest.
III. MEDIUM-TERMS TARGETS AND STEPS TO BE UNDERTAKEN FOR THEIR
FULFILMENT
(a) Increase of the number of fix line telephony to 450.000 – 500.000 subscribers in
2005, corresponding to approximately 15% of telephonic penetration. Actually, thetelephonic penetration counts for 220.000 subscribers or approximately 8%.
(b) Extension of access in telecommunication services for rural areas through private
operators’ investments.
(c) Improvement of quality of the service to the level of international standards.
(d) Prices for public telecommunication services should go towards the real values.
(e) In the medium-term, promotion of the supply of new services such as Internet; the
objective is to offer it initially to around 100.000 subscribers, the long-term objective
being 300.000 subscribers.
IV. CONCRETE STEPS
6. The new Decision of the Council of Ministers No.464 dated July 3, 2003 “On some changes
to the Decision No.288 dated June 18,1999 “On the approval of Policy Paper for the Development of
the Telecommunications in the Republic of Albania, in the paragraph “Privatisation”, it is  stated:
“Albtelecom SH.A. shall enjoy an exclusive right to supply international telephony
services based on its own network until December 31, 2004 as a compensation for
its investment commitments.”
In the paragraph “Liberalisation” it is  specified that “International telephony
services shall be open to competition in 2005”.
7. This decision takes away from Albtelecom SH .A. exclusivity rights for national telephony
services, which, by the Decision of the Council of Ministers No.692 dated December 27, 2002 was
extended at least until June 30, 2003. Only exclusivity for international telephony services will bemaintained.S/L/148
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8. Albtelecom SH.A. will be given the third GSM cellular license, to be supplied by a new
company whose sole shareholder shall be Albtelecom  SH.A. According to the law, this company will
conclude an agreement with Albtelecom SH.A. in e qual conditions with other operators in the market.
V. CURRENT SITUATION IN THE ALBANIAN MARKET
9. This last couple of years, the telecommunication market structure has changed quite a lot,
especially in the mobile telephony sector. In real figures, from June 2000 (when the state cellular
company Albanian Mobile Communication – AMC, was privatised) until July 2001 (when the second
cellular operator Vodafone entered the market) the mobile telephony market has increased
considerably: from 20.000 subscribers to a number of 800.000 (both companies together), whereas
Albtelecom SH.A. has only 220.000 subscribers.
VI. REASONS LEADING TO THIS SOLUTION
10. The Policy Paper for the Telecommunications Development considers the privatisation of
Albtelecom SH.A. a key element to the development of the fix line telephony. This process will be
implemented in combination with the market liberalisation process, aiming not only at the
privatisation of the company but also at the development of the whole national market. Due to
unfavourable conditions in the international market of telecommunications, this process could not be
carried out; that is why exclusivity is intended to create conditions for a potential augmentation of the
efficiency of Albtelecom SH.A., which will be offered to the strategic partner.
11. Extension of exclusivity is a compensation offe red to Albtelecom SH.A. in exchange for its
obligation to invest, imposed on this operator by the Government, according to which Albtelecom
SH.A. is obliged to install by the end of 2005, 450.000 – 500.000 fix telephony lines; not less than 5%
of these lines must be installed in rural areas. Furthermore, within 2005, it has to install in everycommune centre at least 30 telephony lines instead of 4 operating today.
12. Some tasks and processes directly influencing social effects of market openness have been
postponed i.e. the tariffs re-balance the conclusion of which was postponed by the end of 2005. This
process obliges Albtelecom SH.A. to maintain a certain tariff scheme defined by the Government
according to a price cap formula. Under these circum stances, it is proved indispensable that until the
conclusion of the tariff re-balance process Albtelecom SH.A. should maintain its exclusivity in the
international telephony, a considerable part of its incomes. Actually, incoming and outgoing
international cellular traffic generates 30% of th e total income of Albtelecom SH.A. while 78% of
total traffic mobile – fix and fix – mobile, is international.
13. According to an analysis effectuated by privatisation consultants, market liberalisation of long
distance service would have a double impact on the performance of Albtelecom SH.A. causing:
(a) Price reduction
(b) Loss of capitals market
14. This analysis points out that liberalisation will lead to about 6% price reduction per year,
during the first and the second year, over the general reduction of 5% estimated from the tariff re-
balance plans. As far as the capital market is concerned, a 15% loss is foreseen during the first year
and a 60% the second year following liberalisation.
15. As a result, the combination of market liberalisation of incoming and outgoing international
cellular traffic and the market of long-distance services, may lead up to a reduction of Albtelecom
SH.A. incomes by 8% during the first year and by more than 30% on the second.S/L/148
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16. Termination of Albtelecom SH. A. exclusivity in urban and national fix telephony and the
extension of its exclusivity in international telephony service does not impede domestic and direct
foreign private investments; they only channel those investments towards construction of local
infrastructure. The overcome of the current stage where the country is actually, with only 8%
penetration of fix telephony, requires considerable investment on local networks.
17. Taking into account that the Government took measures for further market liberalisation
(removal of Albtelecom SH.A. exclusivity in fix telephony services in urban areas), aiming at a step
by step liberalisation of international traffic, introduction of a third mobile operator in the market shall
bring new values to the company and shall ensure  its better representation in the telecommunication
market – fixed and cellular service – raising thus the interest of foreign strategic investors.
18. At the same time, granting of this license will increase competition that serves as an engine
for the further development of the cellular market  and will prepare the company during the exclusivity
period to face the competition of two other cellular operators.
19. According to law, the new company will also be part of the sale package of Albtelecom
SH.A. Not less than 51 but not more than 76% of  the shares of this new company providing ground
mobile public telephony service shall be offered for sale to the strategic partner. The cellular service
will be offered by a new company in order to separate the fix telephony activity from the cellulartelephony one, avoiding thus subsidization for cellular and fixed services and assuring that operators
in the market will operate on the same conditions.
20. The experience of other countries shows that strategic investors have been granted a
minimum period of two years between the privatisation and the liberalisation. For example, the
telecom companies of Montenegro and Macedonia, have been privatised in July 2002 (51% of thepackage); for the first the exclusivity period is no t defined yet, as for the second, the termination of
exclusivity date is December 31, 2004 and the liberalisation of fix telephony services is set on January
1, 2005. In addition, Bulgarian Telecom company was privatised in August 2000 (65% of the
package) and Bulgaria has not provided any expiry date for the exclusivity and liberalisation of fix
telephony services in the Specific Commitments Schedule in the WTO, document GATS/SC/122.
21. Based on these arguments and on the new developments concerning gradual elimination of
exclusivity for Albtelecom SH.A., and taking into acc ount that liberalisation is an irreversible process
that generates great benefits for our economy, I w ould like to clarify that the term “modification of
commitment” that is used in the letter addressed to the Director General of the WTO, does not refer to
changes of the commitments that Albania has undertaken in the telecommunication sector, it does
really mean “a temporary freeze” of these commitments to implement them in the year 2005.
To summarise, the Government of Albania has not any intention to modify or to withdraw
the commitment for the liberalisation of the telecommunication services in the Schedule of
Specific Commitments;  it only requests a temporary freezing of its implementation.
22. In spite of the actual progress of the privatisation process, the final objective of the
Government for the telecommunications, as defined not only in the Policy Paper but also in the Law“On telecommunications in Albania”, is the full liberalisation of telecommunication sector. This is
clearly presented by the gradual liberalisation policy of telecommunication sub-sectors such as
cellular telephone services, public local telephone service in rural areas, internet services, and finally
removal of exclusivity rights of Albtelecom SH.A. for public voice telephone services in urban areas
and public long distance voice telephone services thereby paving the way for liberalisation even forthose services.S/L/148
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23. The Albanian Government, determined to continue the liberalisation reforms towards the
integration of the country in the global interna tional trade, expresses its confidence that, in
compliance with its own legal framework and rules, the World Trade Organization will understand
and will approve its request.
24. On this occasion, please allow me to express my highest appreciation for the continuous
support and the cooperation that the World Trade Organization has provided to Albania.
Sincerely,
ARBEN MALAJ
MINISTER
HEAD OF NEGOTIATING TEAM TO THE WTO
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