Walking the fixed-line talk

The government of Egypt is focused on increasing fixed-line penetration in the country to 25% by 2010 despite the threats of voice over internet protocol (VoIP) and fixed-mobile substitution. Christopher Reynolds travelled to Cairo to speak to the country’s sole fixed-line provider Telecom Egypt about how it intends to achieve this goal in the face of an increasingly hostile market.

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By  Administrator Published  February 25, 2007

The government of Egypt is focused on increasing fixed-line penetration in the country to 25% by 2010 despite the threats of voice over internet protocol (VoIP) and fixed-mobile substitution. Christopher Reynolds travelled to Cairo to speak to the country’s sole fixed-line provider Telecom Egypt about how it intends to achieve this goal in the face of an increasingly hostile market.

Telecom Egypt is the largest provider of fixed-line services in the Middle East and North Africa (MENA), registering more than 10.7 million fixed-line customers at the end of the third quarter of 2006. However, the figure only  represents a market penetration of 14.9% in a country of over 70 million inhabitants.

The telco provides local, long distance and international voice services, as well as internet and data; along with wholesale services including the leasing of broadband capacity to ISPs, and national and international interconnection services.

Although Telecom Egypt has enjoyed a comfortable position as the country’s fixed-line incumbent, it has always strived not to adopt a complacent attitude towards its market. The Egyptian government is looking to increase fixed-line penetration in the country to 25% by the end of 2010, despite the worldwide slowdown of fixed-line growth. This is a strategic mission for Telecom Egypt and its vice president of planning Dawlat El-Badwy believes that through the deployment of relevant technologies and government grants, her company is on track to meet the penetration targets set.

“We are on track to achieve the government’s target using a variety of technologies. Also, if the cost [of rolling out fixed-line coverage] is high for certain areas, we have a deal with the Telecommunications Regulatory Authority (TRA) that we can use the universal TRA fund to develop areas that are not profitable for us in order to achieve the government’s targets,” she says.

A willingness to adapt to prevailing technological advances is a quality El-Badwy is trying to foster at Telecom Egypt. For instance, CDMA (code division multiple access) was one of the key technologies Telecom Egypt selected in order to overcome the challenges of covering a scattered population and an area geographically unsuited to the installation of copper cables. With the rise in cost of copper cable and the relatively low price and wide availability of wireless solutions, CDMA was a vital aspect of Telecom Egypt’s business case for mountainous, rural, and low population areas of the country such as Sinai, and for meeting wider government-set targets for increased fixed-line penetration.

El-Badwy is fully aware of the problem fixed-mobile substitution presents and realises that a large enterprise such as Telecom Egypt needs to significantly limit the effects of the decrease in its public switched telephone network (PSTN) traffic, through employing strategies that mitigate mobile substitution and prevent a significant migration of international calls to VoIP.

Installing measures to lower operational costs is also high on Telecom Egypt’s agenda in order to provide lower prices to PSTN customers tempted to migrate to mobile.

Telecom Egypt also participates in the Egyptian mobile market by supplying mobile interconnectivity via its current 44.66% holding in Vodafone Egypt, the country’s second-placed operator in terms of subscriber numbers.

El-Badwy also wants to maximise Telecom Egypt’s joint venture with Vodafone and she mentions fixed-mobile convergence and triple play as likely future developments, which can offer subscribers additional services and features.

“We have a joint venture with Vodafone and of course fixed-mobile substitution is huge, it is rapidly increasing. [So] we started to think about value added services [in order to try and stem the tide of fixed-mobile substitution]. Triple play is one of the features that actually encourages the use of the fixed line. Whatever the percentage of substitution, the subscriber still requires a fixed line. So fixed-line companies need to think of ways for subscribers to need a fixed line and promote these ways,” El-Badwy explains.

Telecom Egypt already operates with around 15% of its international transit traffic over IP networks, with 12 softswitches and media gateways that cover the whole country. This is the first stage toward Telecom Egypt’s deployment of triple play and next generation network (NGN) platforms. El-Badwy wants to test the waters with NGN and triple play, and Telecom Egypt has deployed its current experimental IP network in order to familiarise itself with the technology and to further train its engineers in NGN operability.
 
The other factor for Telecom Egypt to consider is the already huge growth of broadband internet in Egypt, allowing the telco to offer IP services on top of its broadband connections. Internet usage in Egypt has grown at an exponential rate year-on-year since 2003, and by December 2005, Telecom Egypt Data was servicing over 27,343 ADSL subscribers, an increase of 197% from 2004.

VoIP currently constitutes a massive threat to Telecom Egypt’s fixed-line subscriber base. Research from analyst firm IDC shows that up to 70% of broadband customers use VoIP for international, long distance calls in countries where VoIP is legal. In a price-sensitive market such as Egypt, a great deal of broadband customers establish a DSL connection and then set-up a LAN network within their residential complex in order to share the connection and costs across households, allowing price-sensitive consumers to use VoIP for international calls at a considerably lower cost.

Another likely revenue bleeder is the Egyptian government’s deregulation of international calling. Etisalat, the UAE operator that is preparing to launch Egypt’s third mobile licence in February, is currently lobbying hard to obtain an international licence in order to bypass Telecom Egypt completely.

Although nurturing new revenue streams to compensate for fixed-mobile substitution is a priority for Telecom Egypt, El-Badwy remains committed to maximising the efficiency of Telecom Egypt’s customer services. The creation of a new customer care centre has helped Telecom Egypt streamline its support service, allowing subscribers to apply for a new line, resolve billing complaints and access caller ID services.

The telco also plans to transfer to a new billing system in July, which will be able to provide customers with greater flexibility in selecting the parameters and criteria of their bill and provide detailed reports and statistics.

“Customer satisfaction really is the main issue. We want to keep up to date with new developments but we never apply a technology for the sake of the technology,” El-Badwy comments. “The technology needs to provide us with real value, and if we see that it fulfils the requirements of our subscribers we will start to deploy it,” she states.

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