The extent to which foreign companies are allowed to participate in telecommunications similarly differs by segment and country. More countries allow foreign investment in mobile telephony than in fixed line telephony, partly because it has been easier to introduce competition in the former (ITU, 2007b), and because technological capabilities are not sufficiently developed by domestic firms.
The first privatization of an incumbent telecommunications provider took
place in the United Kingdom in 1981 with the sale
of Cable and Wireless. Among developing countries,
the Government of Chile was the first to privatize
when, in 1988, it divested its shares in CTC and
ENTEL. In most developing countries, incumbent
telecommunications operators have rarely been
fully privatized.
Instead, part of the operators have
been sold through private sales, public offerings
or a combination of the two, with the government
retaining some ownership. By the end of 2006, about
half of all developing countries had sold all or part
of their incumbent operators, often to TNCs. Of the
78 developing countries that partly or fully privatized
their telecom operators, 82% sold significant stakes
to a strategic foreign investor, while the remaining
18% divested shares through initial public offerings
(Minges, 2008).
In general, there is greater openness to TNC
involvement in this industry in developed countries
than in developing and transition economies (OECD,
2003; UNCTAD, 2006d). The number of countries
without TNC involvement is shrinking. Today, it is
estimated that only 10 developing countries lack any
form of TNC involvement in telecommunications,
and only a few countries have outright prohibition of
foreign investment. In Ethiopia, Proclamation No.
281/2002 identifies government owned Ethiopian
Telecommunications Corporation as the sole
telecommunications service provider.
In Costa Rica, telecommunications has also been regarded as a natural
monopoly. However, following the ratification of the
Central American Free Trade Agreement in October
2007, a Government bill was adopted in May 2008
that will allow private companies to offer wireless
services.
In other countries, there are caps on foreign
investment (table V.1). India, for example, has
imposed a ceiling on the level of foreign ownership
in telecommunications, which was raised from 49%
to 74% in 2005 with the aim of attracting more
foreign investment. In Bolivia, by contrast, the
country's President announced in May 2008 that
the Government would take immediate control of
ENTEL, in which Telecom Italia then held a 50%
stake.
c. Water remains highly restricted
The water industry remains relatively closed
to foreign investment. As the costs of production are
low relative to the transportation costs, unbundling is
not especially attractive (chapter III). Unsurprisingly,
more than 90% of all water utilities are run by public
entities, either at the national or local level (World
Bank, 2007c; Hall and Lobina, 2006.
Most contracts with TNC participation are concessions
or operation and management contracts (chapter
III). During the period 1985-2008, in developing
countries, TNCs have been involved in the provision
of water to at least 184 million people. Apart from
Chile, however, they are not known to provide any
significant water services in rural areas (Hall, Lobina
and de la Motte, 2004: 3; Owen, 2008). Their absence
in rural areas reflects the income gap between rural
and urban households and difficulties in achieving the
economies of scale needed to reduce costs.