Monday,16 July, 2018
Current issue | Issue 1362, (28 September - 4 October 2017)
Monday,16 July, 2018
Issue 1362, (28 September - 4 October 2017)

Ahram Weekly

Fourth mobile operator arrives

A fourth mobile network operator might benefit consumers, but not necessarily the industry, writes Nesma Nowar


“We” promises competitive calls and Internet bundels
“We” promises competitive calls and Internet bundels

Telecom Egypt’s (TE) launch of its new “We” mobile network kicked off with strong demand this week, as people scrambled to TE outlets to subscribe to the new network leaving some waiting in queues for hours to obtain one of the new 015 numbers.

With the launch of the new network, state-owned TE became the fourth mobile network operator in Egypt. The company will offer 2G, 3G and 4G services using its own network and roaming agreements with Etisalat and Orange.

The demand for the new lines comes as no surprise given the competitive calls and Internet bundles the company has offered.

For mobile Internet services, We will cost LE10 for 1GB of data, LE20 for 2.5GB, LE40 for 6GB, LE100 for 18GB and LE200 for 40GB, while its standard prepaid rate stands at LE0.12 per minute.

Customers can also buy prepaid bundles of interchangeable units for LE20 for 1,600 units or LE40 for 4,000 units. A unit is worth one minute, SMS or MB. The cost of the new line is LE15.

TE inaugurated its first customer service centre in Cairo’s Mohandessin neighbourhood last week, and it is planning to increase its main branches.

TE Chief Executive Ahmed Al-Beheiri said the company would invest LE7 billion over the next year to develop its cable infrastructure and telephone exchanges and launch a marketing campaign.

He said that TE’s entry into the mobile market had been necessary in the light of dwindling revenues from fixed landlines, which amount to LE6 billion annually.

The company expects that revenues from the mobile network will constitute some 16 per cent of its total revenues in 2022. TE has a monopoly on fixed landlines in the country and has more than six million subscribers.

The clear winner from the launch of the fourth network is the consumer, as more competition means cheaper prices, said Mohamed Al-Messiri, an equity analyst at Pharos Holding.

However, the new network will put pressure on the other three mobile operators to maintain their current prices, or lower them, at a time when they are already suffering from high operating costs and prompting a request to increase the prices of mobile calls.

The request came after increases in the prices of fuel and electricity, in addition to last year’s floatation of the Egyptian pound, all of which have pushed costs up. Al-Messiri said that some of the companies had been incurring losses.

The mobile penetration rate in Egypt is 110 per cent, he added, so any new company entering the market would have to take a share of other companies’ customer base.

“Competition is good, but at the same time we should not kill the industry,”Al-Messiri told Al-Ahram Weekly.

He explained that TE’s entry to the mobile market had impacted existing prices, adding that Egypt is the second-cheapest country in the world when it comes to the cost of mobile phone calls and data.  

State-owned companies in other countries have shares in their mobile markets, but the difference is that they entered the market from day one when the penetration rate was zero, Al-Messiri said.

“You can’t hope to enter the market easily when it is already saturated and costs are on the rise,” he said.

As for the revenues TE expects to achieve from the new network, Al-Messiri said that the company would be unlikely to see profits soon. TE was selling the new lines at prices that were lower than their cost in a bid to attract customers, he said, adding that the company’s target of adding two million subscribers was “unrealistic”.

When Egypt’s third mobile operator Etisalat entered the market in 2008, the penetration rate was only 60 per cent and it did not achieve any profits before 2014, not reaching 24 million subscribers until last year.

Al-Messiri said that TE’s entry to the market by offering attractive mobile data bundles was a step in the right direction, however, because unlike for voice calls the penetration rate for data services in Egypt is still low, standing at 32 per cent.

But he nevertheless expected the company to incur losses because of high costs, adding that the generation of profits would depend on how fast TE could build its customer base and trim its cost margins.

High costs could also prevent it from any plans of divesting its 45 per cent stake in Vodafone Egypt, he said.

Al-Messiri said that the Vodafone stake constituted 42 per cent of TE profits, which would make it difficult for the company to let it go. However, holding the stake might be seen as a conflict of interest after the company enters the mobile market.

TE has announced that it has no intention of selling its stake in Vodafone soon.

The company, 80 per cent of which is owned by the government, obtained its licence to operate 4G services in September 2016 for LE7.08 billion.

It expected to spend some $400 million building its own network.

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