In most countries, the telecommunications sector was traditionally owned and operated by a state entity and regulated by a ministerial department or agency. In countries with market economies, the main argument provided for such an arrangement was that the sector was a natural monopoly. As such, and considering the magnitude of telecommunications revenues, most governments chose to own the telecommunications operator rather than allow a private firm to run the sector and regulate its activities.

However, a number of developments that took place over the last two decades have led to major reforms in the telecommunications sector across the world. In developed countries, several sectors were deregulated and liberalized. In developing countries, macroeconomic reforms were broad-based and included infrastructure. This liberalization was driven by the need to enlarge the customer base and improve the quality of services provided in a context of limited government resources. Furthermore, rapid technological innovations in telecommunications have facilitated private sector participation. Izaguirre (1999) reports that more than 90 developing countries have liberalized their telecommunications sector and opened it up to private participation over the period 1990-1998, which resulted in transactions amounting to 214 billion U.S. dollars. In addition, the World Trade Organization (WTO) agreement on trade in basic telecommunications services reached by 69 countries in 1997 was expected to lead to further liberalization of the sector worldwide.

Historically, the structure of the telecommunications sector in most Arab countries was similar to that of other developing countries; that is, the state was both the operator and the regulator of the sector. The tables presented in the appendix at the end of the paper provide some telecommunications indicators for a large number of Arab countries. From the figures in the tables, it shows that the level of development of the telecommunications sector is not similar across Arab countries. For instance, telecommunications density ranges from 0.60 in Sudan to 33.19 in the United Arab Emirates (UAE) in 1999. In the same year, the size of investments in the sector ranges from 3 million U.S. dollars in Mauritania to 565 million U.S. dollars in the UAE.

In recent years, Arab countries have followed the world trend in telecommunications which consisted of liberalizing and privatizing the sector. The objective of this paper is to provide an overview of the privatization efforts undertaken by Arab countries in the telecommunications sector. The discussion will be limited to telephone services, both fixed and mobile. In this respect, Arab countries can be classified into three main groups: countries in which the government provides both fixed and mobile telephone services (fixed public - mobile public); countries in which the government provides fixed services but in which the private sector provides mobile services (fixed public - mobile private); and countries in which the private sector is involved in both fixed and mobile services (fixed privatized - mobile private). Although this classification does not exactly reflect the various ownership combinations encountered in the telecommunications sector across Arab countries, it does serve the purpose of the present paper.