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Egyptian mobile shutdown will cost telcos millions

Lost revenues and penalty clauses likely to cost operators millions, says analyst

Operators stand to lose millions in lost revenue.
Operators stand to lose millions in lost revenue.

Egyptian telecoms providers could suffer losses running into millions of dollars after the Arab country's government shut down internet and call services amid ongoing political protests.

Egypt, the Arab world's most populous state, has one of the highest rates of mobile penetration at more than 71%, served by firms such as Mobinil and Etisalat Misr.

"There are several levels - it's the direct cost to the companies that provide the services, the service-level agreements they have to adhere to, and the penalty levels involved," Ovum analyst Angel Dobardziev told Arabian Business. 

"The other aspect is the revenues being lost. I would say that in both ways we're talking losses in the millions."

Egypt, which is grappling with violent protests against the rule of president Hosni Mubarak, on Monday shut down all mobile phone networks in a bid to stop the frenzied spread of dissent.

Hundreds of service providers offer connections in Egypt, but just four own the infrastructure - Link Egypt, Vodafone/Raya, Telecom Egypt, and Etisalat Misr.

The fallout from the technology blackout is also likely to take its toll on neighbouring Middle East states, where telecoms operators derive a portion of revenue from Egyptian business.

 "Considering Egypt's position, that it's the largest Arab nation and its geographic location as a hub, other countries will be affected," Dobardziev said. "Most are those with which it has the closest links commercially and culturally. The UAE obviously is one of them, but all neighbours will be affected."

With a local provider like Mobinil, he said it was impossible to pinpoint a figure.

"We do know it will be significant to the top line and to earnings as we move into days and into weeks."

The shutdowns are a setback for a government which has worked tirelessly to establish Egypt as a technology and communications hub on par with India and cities in the West.

"What you see right now is friction between the openness and connectedness and aspiration - in a broadest sense, connection - and what has been a traditional way of doing things, and we're seeing the effect of that," he said.

"It's been building for years. What we're seeing is the effect of that friction. The political actions do have an effect [on the mobile industry.] How long that will go on is unknown."

Despite the fact that the technology industry will recover in the long-term, investor confidence will be shaky until the unrest ends, Dobardziev added.

"All the actions we're seeing of various international companies to extract their staff - it's going to have an [immediate] effect on the outsourcing industry and its international standing as a tech hub."

Google said on its blog late Monday night that it had set up a ‘speak-to-tweet' service to help people in Egypt stay connected. The service allows people without an internet connection to leave a voice-mail message, which will automatically be turned into a tweet.