14 - 20 June 2001
Issue No.538
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Al-Ahram Weekly Online 14 - 20 June 2001 Issue No.538 |
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The battle of the cells
Egypt's third cellular phone network operator will face tough competition from the two already established operators. Niveen Wahish reports
A recent announcement by the prime minister has helped calm a dispute between Egypt's two mobile operators, on the one hand, and Telecom Egypt (TE), the holder of the country's fixed-line monopoly which is set to become Egypt's third mobile network operator, on the other.
Rubbing shoulders over cellphones: will a third competitor vye for a portion of the pie?
A few months ago few would have predicted that Egypt's two mobile operators, engaged in intense competition, would ever see eye-to-eye on anything. But now they seemed to have found a common cause in trying to ensure that the country's third mobile network operator only be allowed into the market on the same terms that they were. TE has recently announced that it intends to offer mobile services in late 2002.
Both the Egyptian Company for Mobile Services (MobiNil) and Vodafone-Egypt (Click), believe that the third operator should be subject to the same fees they were. Back in 1998, each company paid some $514 million to obtain their licence to operate a mobile network.
But Akil Beshir, chairman of Telecom Egypt (TE), claims that TE already holds an operating licence, having been granted one earlier by the state on the basis that it would operate the first mobile network. TE, says Beshir, sold MobiNil its network but retained its licence. Monies paid by MobiNil, says Beshir, were divided between TE and state coffers with only the money for the network going to the state-owned telephone company.
The ruckus began following the approval by the Telecommunications Regulatory Authority (TRA) of TE's request to resume offering mobile services starting 1 December 2002 -- the date the exclusivity period for the existing two companies expires. However, TRA announced that it has yet to determine the fees TE will be required to pay. Although these fees will certainly include regular charges for reserving frequencies and company-specific number codes, whether TRA will require TE to pay a one-time licensing fee remains to be seen.
The TRA is a semi-independent body whose role is to oversee all telecommunications activities such as the allocation of frequencies, granting licences, monitoring the quality of services and prices and preventing monopolies.
In the meantime, Prime Minister Atef Ebeid has been quoted as saying that the third operator would be required to pay licence fees. In light of the TRA's announcement, however, observers are unclear about the implications of Ebeid's statement although it seems to have placated MobiNil and Click for the time being.
Before Ebeid's statement, the two companies had threatened to launch a court case if TE was exempted from a licensing fee. They argued that their contracts state that a third entrant into the mobile market would be required to bear the same licensing costs they had incurred. Naguib Sawiris, chairman of MobiNil, also pointed out that if Egypt wishes to attract much-needed foreign direct investment, it needs to be seen to be honouring its commitments to private investors.
Mohamed Nosseir, chairman of Vodafone-Egypt, also put forward a good argument. He said that if the third mobile operator pays for its licence the state would receive funds equivalent to those it hopes to collect through the sovereign Eurobond issue -- but without incurring the costs of the issuance process.
As the debate continues, TE is not losing any time in setting up a company to offer mobile services. Beshir has said that although the company will wait until it has a partner before it begins setting up its network, it has begun collecting data and making the necessary studies upon which it will base its operations. Financing for the new network, Beshir said, will be obtained through loans, TE resources and funds contributed by a strategic investor.
How TE will go about capturing a niche in the market is another issue that it is looking into. Entering the market four years after the existing two operators, TE's mobile company will be faced with stiff competition. According to Beshir, "Class A customers are already taken." However, he suggested that the market for mobile services in Egypt is far from saturated.
In fact, Mohamed El-Hamamsy, CEO of Vodafone-Egypt, told Al-Ahram Weekly in a recently published interview that by 2008 mobile teledensity in Egypt is predicted to reach 18-20 per cent. Currently it is approximately three per cent.
Although TE's strategy to attract customers has not been made public, Beshir concedes that prices are unlikely to be a factor because those currently offered by the two companies are already very low and are expected to have decreased further by the time TE joins the fray. To attract customers, Beshir said that TE is faced with the challenge of offering new services.
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