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Egypt was a presidential republic until February 2011, and is currently under military rule. The previous regime had been attempting to introduce economic reforms and modernise its economy by emphasising important sectors, such as infrastructure and communications.

Egypt's economy revived after the 1990s, with the liberalisation of the economy and successful measures taken by the government to curb terrorism and thereby establish political order in the country. However, this economic growth declined significantly from 5.4 percent during 1996-2000 to 2.7 percent during 2001-2004, primarily due to regional political instability, coupled with the government's inflexible monetary policies and the presence of a thriving foreign currency black market. Consequently, the Egyptian pound had a sharp fall of 45 percent against the US Dollar during 2001-2004. The availability of only limited arable land and overdependence on the river Nile also hampered sustained economic development in the country.

A large source of the country's revenue is the export of crude oil and petroleum, and manufacturing activities, such as cotton textile production.

The government has initiated the process to restore the economy by introducing various economic reforms in mid-2004, such as proposals to slash income tax and corporation tax, a reduction in energy subsidies and the privatisation of a number of enterprises.17

Table 1 provides an overview of the country's key economic parameters.

Table 1: Egypt - Important Economic Parameters July 2010

Economic Parameter

Population (July '10)

Population Growth (AAGR)

Unemployment Rate

GDP (PPP)

GDP real growth rate

FDI inflows

Value

80,471,869

2.00%

9.7%

$6,200

5.30%

$6.8 bn

Source: CIA World Factbook

Telecom Industry Overview

Egypt's telecom sector is one of the fastest growing markets in Africa in terms of absolute subscriber numbers. The country's telecom market was first opened to competition in 1997, when two operators were granted permission to provide public payphone services, and has since witnessed rapid growth.

The country's mobile sector is now completely privatised and the private firms have been allowed to offer Internet services as well. The only exception is fixed telephony, which is largely dominated by the partially privatised operator - Telecom Egypt (TE).

The National Telecommunication Regulatory Authority (NTRA) is the official telecom regulatory body of the country.

Table 2 provides an overview of the country's telecom sector in terms of subscriber numbers and penetration rates.

Table 2: Egypt - Telecom Industry Snapshot 4Q 2010

Segment

Mobile

ADSL

Fixed

Subscribers(millions)

69.24

0.91

9.4

Penetration

81.3%

1.1%

11.0%

Year-End

2002

2003

2004

2005

2006

2007

2008

Subscribers

4.41

5.73

7.58

12.82

17.97

30.25

41.27

Year-End

2009

2010

2011E

2012E

2013E

2014E

2015E

Subscribers

55.35

69.24

76.86

82.24

87.17

91.53

95.19

Figure 1 illustrates forecast growth in total subscribers and penetration in Egypt for the 10-year period from 2002 to 2011.

Figure 1: Egypt - Mobile Subscribers and Penetration (2002-2011)

Egypt Mobile Subscriber Forecasts 2005 - 2015E

Mobile Network Operators

In the Egyptian mobile market, there is a close competition between two of the three mobile network operators in the country - MobiNil and Vodafone Egypt.

Figure 2 illustrates the market share of the operators in terms of their subscriber base for June 2005.

Figure 2: Egypt - Market Share of Mobile Network Operators 4Q 2010

Egypt - Market Share of Mobile Network Operators 4Q 2010

Source: Blycroft Publishing c. 2011

From 2003 telecom regulator, NTRA, started assessing the possibility of ending the duopoly in the market by launching a third mobile network operator, thereby increasing competition and stimulating further growth in the market. In accordance with these goals, the regulator granted a GSM licence to Telecom Egypt (TE), the government-owned fixed-line operator. However, TE cancelled its plans to launch mobile services due to the unavailability of an international partner. As a result, TE returned the GSM licence to NTRA for a full fee refund. By year-end 2003, these frequencies were taken up by MobiNil and Vodafone Egypt for the expansion of their networks. This agreement was also accompanied by the government's affirmation of not launching a third mobile operator for at least two years. However, with the two-year deadline approaching its end, once again in 2005 the regulator indicated plans to grant a third GSM licence, which would include the permission to launch both 2G and 3G services. The licence was issued in March 2006.

Etisalat holds a 66 percent stake in the third operator, with six seats on the board, equivalent to two-thirds of the total seats. Its CEO was Saleh El Abdooli, having previously served as the network development manager for Etisalat in the UAE.

Etisalat launched both 2G and 3G mobile services in February 2007 using the 011 prefix. Etisalat paid some EGP 16.7 billion (USD 2.96 billion) for its 3G licence. The new network covered 70 percent of the country?s market on launch with a network of 400 base stations covering Cairo and four other major Egyptian cities.

MobiNil Telecommunications

MobiNil was the first operator in Egypt to launch mobile services on a GSM network in 1996. It upgraded its network to GPRS in 2003.

The three shareholder groups of MobiNil are Orange, Orascom and a public float. Figure 3 shows the latest ownership structure of the company.

Figure 3: MobiNil - Ownership Structure

MobiNil - Ownership Structure

The operator provides various value-added services, such as ring tone downloads, text messaging, MMS, video clips, greeting cards, etc. In 2005, a new 2.5G service called 'MobiNil Life' was launched by the operator to provide content downloads.

The operator's network covers 91 percent of the total populated area in Egypt.

Table 4 provides an overview of the operator's key performance indicators.

Table 4: MobiNil - Key Performance Indicators (FY end-December 2010)

 

KPI

Subscribers (in Million, Dec 2010)

Revenue (Million US)

Blended ARPU (USD)

Churn %

CAPEX (Million USD)

 

Value

30.225

1,793

5.25

-33.4%

353.9

Source: Mobinil

Vodafone Egypt

Vodafone, along with a consortium of other international investors, obtained Egypt's second GSM licence in 1998.

Figure 4 shows the latest ownership structure of the company. ,

Figure 4: Vodafone Egypt - Ownership Structure 2010

Vodafone Egypt - Ownership Structure 2010

Source: Vodafone

Vodafone, like its competitor MobiNil, also launched its 2.5G (GPRS) services in 2003. It currently offers various services including pre-paid lines, SMS, data services, etc. In 2005, it launched BlackBerry services in the country to provide e-mail and Internet access and other advanced non-voice services.

The operator's GSM and GPRS networks cover approximately 98.5 percent of the total population of Egypt.

Table 5 provides an overview of the operator's key performance indicators.

Table 5: Vodafone Egypt - Key Performance Indicators (December 2010)

KPI

Subscribers (in Million, Dec 2010)

Revenue (Million US)

Blended ARPU (USD)

Churn %

CAPEX (Million USD)

 

Value

31,271

 

2,177

5.63

NA

NA

Source: Vodafone Group

Recent Developments

The following are some of the recent developments in the Egyptian mobile market:

Technology Innovations and New Services

  • In December 2010 Vodafone Egypt said that it would deploy Clarity's Infrastructure Management solution which would automate and co-ordinate key finance, network and service management processes, which will allow the operator to track rollout against supplier performance agreements and have an overview of asset location, availability and capacity.
  • Mobinil partnered with Alcatel-Lucent in December 2010 to launch a mobile advertising service that allows its mobile subscribers to have access to interactive advertising tailored to their personal interests. A soft launch saw more than 200,000 subscribers opt-in for the service. Advertisers during the launch included Adidas and Nokia.
  • In late 2010 Orange announced the launch of high-definition voice mobile telephone services in Cairo over Mobinil's network. According to the operator, this was the first time high-definition voice for mobile phones has been launched in Africa and the Middle East.
  • In October 2010 The Minister of Communications and Information Technology and Vodafone Group signed three joint co-operation deals between the Information Technology Industry Development Authority (ITIDA) and Vodafone International Services for off-shoring outsourcing and ICT services. Under the first deal, Vodafone International will expand its customer services and outsourcing centre established earlier this month with the appointment of 1,200 specialist staff, which will double the existing establishment. The second deal saw Vodafone International Services expanding its ICT Specialist Centre with the appointment of 230 specialist staff to provide hosting, technical software development and ICT services to the Vodafone Group in Germany and other parts of the world, whilst the third saw Vodafone International establish a new R&D centre in which 100 apprentices working for Vodafone Global Enterprise.
  • Orascom Telecom Holding (OTH) in July 2010 sold its internet services arm LINKdotNET and Link Egypt (LINK) to Mobinil. The sale excluded the non-ISP part of Link Egypt?s business and affects LINKdotNET?s Egyptian operations only.

Regulatory Developments

  • In November 2011 the National Telecom Regulatory Authority approved 6 million new lines which are to be shared equally amongst three mobile operators under the new numbering system (015). This brought the total number of new lines granted in October and November of 2010 to 9 million.
  • Yasser ElKady was appointed as the new CEO of the Information Technology Industry Development Agency (ITIDA) in November 2010, and will report directly to the Minister of Telecommunications and Information Technology. In September 2009, ElKady was appointed as the First Deputy to the Minister of Investment. To support his role for the Ministry, Yasser was also appointed as a board member for the General Authority for Investment (GAFI).

Future Outlook

In January 2011 Telecom Egypt was reported as to be considering acquiring a licence as a Mobile Virtual Network Operator (MVNO). This would require the co-operation of an existing Mobile Network Operator (MNO), and this in turn is usually the smallest by subscriber numbers, so making Etisalat Misr the most likely candidate for such an approach. Etisalat had some 7.3 million mobile subscribers at the end of September 2010, representing an 11 percent share of the mobile market. This follows its approaches to acquire a larger stake in Vodafone in 2010 which were turned down.

In the closing weeks of 2010 Etisalat Misr announced that it had obtained an EGP 7.2 billion (USD 1.2 billion) syndicated loan to finance infrastructure expansion. The banks, which include National Bank of Egypt, Banque Misr SAE, and National Bank of Abu Dhabi, will provide 76 percent of the long-term financing in Egyptian pounds and the rest in US dollars, the company said. Emirates Telecommunications said in June it planned to invest EGP 8 billion to expand its network over the next three years. Etisalat is the country?s third-largest mobile operator.

The National Telecom Regulatory Authority (NTRA) in July 2010 approved two groups to provide triple-play services to residential compounds in Cairo?s suburbs which contain between 50 and 5,000 housing units. This followed NTRA?s announcement in October 2009 that it would license two geographically focused triple-play concessions. LINKdotNET Egypt recently sold to mobile operator MobiNil, and includes affiliates of local telecoms group Orascom Telecom. The other group was thought to include Vodafone Egypt.

The number of mobile subscribers was approximately 69.24 million at the end of 2010 with a corresponding penetration rate of nearly 81 percent.

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