Egyptian expansion

With a population of some 70 million people, a relatively low mobile penetration rate and a fixed line sector soon to be opened up to competition, Egypt offers great potential for telecom operators and service providers.

The country, which now has three mobile operators, Mobinil, Vodafone and Etisalat has changed rapidly in recent years, as the increased competition created by the three operators has led to a changing dynamic in the market.

 

And with Egypt's National Telecommunication Regulatory Authority (NTRA) expected to make a decision on how to launch a second-fixed line operator, imminently, the market looks set to experience further significant change for the next few years.

George Edward is one telecom professional with his finger on the pulse. As chief commercial officer at MobiServ, a company that provides a broad range of back-end infrastructure services for the telecommunications sector, Edward has a clear overview of what makes the Egyptian telecom sector tick.

"The mobile penetration rate now is something in the order of almost 50%," Edwards says. "Egypt has about 35 million subscribers out of 75 million inhabitants.

The Egyptian market penetration rate had been going through a steady increase in the first six or seven years and then suddenly there was a boom when the decision was taken by the regulatory body to give the third licence.

For Edward, the entry of a third operator served as clear demonstration of the power that competition can exert on a market. Following the entry of the UAE's Etisalat into Egypt, the two established operators modified their operations.

"This was when Mobinil and Vodafone changed their strategy into developing the market and increasing subscribers, and of course raising the bar for the third operator," he says. Edwards adds that he thinks this level of competition, and the low penetration rates, will sustain growth in the market for another couple of years, before declining.

"Whether Egypt is moving towards other mature markets in the region with 100% penetration is difficult to say. This will depend on how the operators want to make their revenue, whether they want to present more value-oriented offerings with high penetration, or not to decrease the rates from the existing figures.

"The acquisition rate, which is about 5-6 million subscribers now, will continue for another year maybe two and will then start to decline," he says.

Amid this level of competition, there are differences in the way the three mobile companies operate.

Between the GSM operators there is a lot of rivalry and two of the operators are focusing more toward value offerings and market share, which is Mobinil and Etisalat, which wants to expand its customer base, while Vodafone is offering on having a premium perspective or value to their service," Edward says.

It is selling offerings at a higher prices than the other two operators and is actually making considerable more net income at the end of the year." Etisalat meanwhile has not yet produced any financial figures because they have only been active for a few months.

For Sameh Atalla, MobiServe's managing director, one of the key challenges facing operators in Egypt is how to make money in a market where ARPU is among the lowest in the Middle East.