Uncertainty pervades all four North African states and this is reflected in BMI's Q411 update to this report. Conflict continues in Libya and, although an interim government is now in power, it lacks the ability to begin to seriously tackle the country's massive social, economic and infrastructure problems.

We still have no idea how amenable the new government will be to a free and open telecoms sector. Elections are scheduled in Tunisia for late October. While the process of transition has been remarkably smooth so far, the possibility remains that opposition to reforms could still materialise and this weighs on our outlook regarding political risk.

The political situation in Algeria is rather more stable, although we continue to forecast considerable potential for sudden outbreaks of civil unrest that could unseat the government and the economy. The government's tough stance towards Orascom Telecom's ownership of mobile operator Djezzy and its continued harassment of that operator for unpaid taxes and price promotions do not bode well for future prospects regarding foreign investment in this market. Djezzy has been valued at around US$7bn, but it seems that the government may baulk at paying a high price for ousting Orascom. We expect

deliberations to continue for some time. This is unfortunate, as Algeria will be tendering 3G licences in Q411. Djezzy must now consider whether or not to bid for assets that will only add to its value and therefore make it less appealing to the government.

Although, political risks weigh heavily on the region, we continue to expect robust growth in the mobile sector in particular. Broadband is also expanding, although mobile broadband appears to be a real growth engine, particularly in Morocco. BMI continues to believe that the effect of the upheaval will be more long term, particularly in encouraging future outside investment and overall ICT policy.

North African markets remain at the bottom of our Business Environment Ratings, with only Iran showing weaker scores. The low rating is from a combination of weak Industry Rewards and Country Risk scores. Libya has the dubious honour of holding the poorest score for Industry Risks, a score which considers the independence of the national regulator.