Despite high penetration rates, Egypt's mobile market continues to be attractive to investors, reports Niveen Wahish The growth in Egypt's mobile market has been unimaginable. Four years ago, mobile penetration stood at only 17 per cent. Today, according to figures from Egypt's National Telecommunications Regulatory Authority (NTRA), penetration stands at 75 per cent, the equivalent of 57 million subscribers. Mobile penetration is the number of cellular phone subscriptions per 100 inhabitants. These figures have surpassed any expectations. Pyramids Research, the telecom research arm of the Light Reading Communications Network, had forecast back in 2006 that penetration would reach 38 per cent by 2011. In 2009, Pyramids Research, in another report, said they expect mobile penetration to reach 97 per cent by year-end 2014. But the high penetration rate is not putting off potential courters of the market. The recent expression of interest by Telecom Egypt (TE), Egypt's fixed line monopoly operator, to buy out Vodafone Egypt has revealed that new investors are still keen on the Egyptian market. Telecom Egypt already owns 45 per cent of Vodafone Egypt and was seeking to buy the remaining stake. However it was announced on Tuesday that the two companies are no longer in negotiation. And that should Vodafone wish to sell in the future, TE would take first priority. Nonetheless, once it had come out that TE was interested in Vodafone's remaining stake, other companies revealed their interest as well. In fact, it was reported that five companies were interested in stepping in should Vodafone decide to quit the Egyptian market. Even Orascom Telecom, which already owns a stake in Mobinil, Egypt's first mobile phone operator and a direct competitor to Vodafone Egypt, expressed interest in bidding for Vodafone's stake should the latter opt to sell. To Hashim Zoheir, head of the Mobile Applications Committee at the Chamber for Communications and Information Technology, mobile penetration in Egypt may be high as far as voice services are concerned, but are low when it comes to data and Internet services. To him, the future lies in business and Internet applications. He noted that 58 per cent of the population is below 25 years of age. "This is a generation that writes and browses and speaks less -- it's a worldwide trend." In the meantime, he said the growth of voice services would not stop but it would grow at a much slower rate. Zoheir lamented that the price war between the existing three operators has ruined the market, causing average revenue per user to decline drastically. "Their [the three mobile operators] only way out is to head towards data." Zoheir dubbed TE's keenness to acquire a mobile network as "very smart", to make up for slower growth in fixed-line subscriptions. In fact, TE had expressed its readiness to apply for a fourth licence should the Egyptian government put one up for bidding. But Zoheir believes three companies are enough for the market. "The chances for a fourth company to enter the market and succeed are slim, unless it is adopting a completely different strategy." TE was said to have offered some LE25 billion to buy out Vodafone. While that is considerably higher than the LE17 billion Etisalat paid for the third licence, Zoheir pointed out that it is cheap considering what it would pay if it were starting a network from scratch. As for the attractiveness of Egypt's market to other regional players, Zoheir pointed out that other regional markets -- like Saudi Arabia, Kuwait and the UAE -- are saturated. Their operators may be interested in the Egyptian market as a value keeper for their capital. They are not only considering short-term gains, but are also looking at the long term. Zoran Vasiljev, partner at Value Partners, a global management consultancy firm, also believes the Egyptian market has plenty of growth potential, even in terms of voice communications. He believes that the 57 million number referred to are SIM cards sold, not subscribers using services currently, explaining that an individual could own more than one SIM card. He added that operators are recognising that potential and are trying to be innovative about it. "Growth still lies in rural areas. So far, growth has been in urban areas because by default this is where the money is." Vasiljev also believes that acquiring Vodafone Egypt would be a great opportunity for TE, because it would leave it as the only fixed-line mobile operator. "Whether they succeed in their acquisition or apply for a fourth licence, they have done their math and they see a percentage of market share that they could acquire." Vasiljev also sees a growing trend of consolidations ready to happen in the region as a whole. Those acquisitions, he said, aim to grow capabilities in other revenue-generating services; thus the focus will be on acquiring capabilities in technology, content and innovation. Operators are looking not just at assets but additional capabilities that will differentiate them from the competition. "Companies are expanding scope, not just scale," he said, through partnering with content providers, for example. Vasiljev believes opportunities to develop Internet content platforms, such as portals and e- commerce platforms, or to use the operator's marketing edge for launching services, have not been exploited. Opportunities for the delivery and monetisation of local media content over the Internet are also not exploited. He too agrees that "the name of the game is data", explaining that users now spend much more time browsing the Internet on their phones. That appetite, he said, will boom when more Arabic content is made available through partnerships between content providers and telecommunications operators. And to him, pricing is no obstacle. It will all depend on the packaging of the content, to make it attractive. He explained that a lot of content could also be financed by advertisers, rendering it much cheaper. The growth in Egypt's mobile market boomed with the advent of the third mobile operator Etisalat Misr. The two existing companies, the Egyptian Company for Mobile Services (better known as Mobinil) and Vodafone Egypt, entered into cutthroat competition to conquer the market before Etisalat began operations in the summer of 2007. After then the competition got even tougher, with the three operators going into a price war to win over subscribers, slashing charges to levels many fear have jeopardised quality.
