Etisalat enters Egyptian market

Competition has increased in the Egyptian telecoms sector following the award of Egypt's third mobile network licence. Egypt's National Telecommunications Regulatory Authority and Ministry of Telecommunications and Information Technology accepted a bid of E?16.7bn ($2.6bn) from a consortium of Etisalat

Analysts had predicted a winning bid of between $lbn and $1.74bn, but a least three of the nine submitted bids exceeding $2bn.

The consortium will offer both 2G and 3G services from February 2007 on the back of at least $1bn in investment. The winning consortium has agreed to pay the government 6% of its revenues, well above the 3% stipulated by the government. The sixe of the licence tee and the government payments indicates the value that Etisalat sees in the Egyptian market.

In November, Mobinil announced that it hopes to acquire an advanced 3(? licence. According to reports from Egypt, a 15-year 3G licence would cost about $580m, but Mobinil is keen to see if a shorter licence or an alternative means of providing advanced services can be found.

Mobinil has been providing enhanced data services, such as streaming video on Edge technology, and has been in dispute with the Egyptian telecoms regulator over whether such services constitute 2G or 3G technology. The regulator is keen tor the company to apply lor a 3G licence but it is allowing Mobinil to continue providing its enhanced data services until the issue is resolved.

The company had a 50.5% market share in June 2006, with 7.230m subscribers, giving it a dominant position in the sector. Vodafone was just behind with 7.089m subscribers, but both companies will have to work hard to continue rapid growth, given the arrival of Etisalat.

Telecom Egypt is considering increasing its shareholding in Vodatone Egypt and has ottered the government just over $1bn tor an additional 24.4% stake, equivalent to E?100 per share. At present, Vodafone of the UK owns a 50.1% stake and 'lelecom Egypt 25.5%.

Despite the telcconis boom, Telecom Egypt has been able to boost its fixed line business at a remarkable rate. The number of landline subscribers increased by 10% between the fourth quarter of 2005 and the first quarter of 2006, to reach 10.49m, with a penetration rate of 14.7%. This resulted in a 71Mi rise in revenues and a 14% increase in net profits to E?668m ($117.1m).

According to a survey of the Top 100 Arab Companies in African Business's sister publication, The Middle East, (January 2007), Egyptian telecoms operators comprise (our of the biggest seven listed companies in North Africa.

This is a remarkable achievement for a sector that was not fully deregulated during the most recent financial year but provides further evidence of the market's potential. The four companies, Orascom Telecom, Telecom Kgypt, Vodafone Egypt and the Egyptian Company for Mobile Services, had combined market capitalisation of nearly $23.5bn at the time of the survey.

Orascom Telecom, which owns Mobinil, lost its position as North Africa's biggest company, despite seeing an increase in its market capitalisation from $ 10.68bn to $ 12.33bn over the past year. It was overtaken by another North African telecoms company, Morocco's Maroc Telecom. Orascom now has over 40m subscribers across a number of markets, including Algeria, Egypt, Tunisia and Zimbabwe. The company hopes to continue attracting more customers but also plans to offer additional services to its existing customer base in order to increase its income per subscriber.

Akil Beshir, the chairman of Telecom Egypt, said: "Operationally we pcrlormed well, maintaining growth levels in our fixed line subscriber base and at the same time monthly average revenue per user was also stabilised, despite the fact that the impact of our tariff rebalancing measures has not yet taken effect. Telecom Egypt's second phase of tariff rebalancing became effective from 1 April 2006 and is designed to enable us to compete more effectively in Egypt's fully liberalised telecommunications market."