Shaping up

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Telecom Egypt's infrastructure, which includes 27,000 km of fibre optic cables spanning the country, allows it to act as a wholesaler to the other operators, which need to use the infrastructure for backhaul.

In 2008, some 40% of Telecom Egypt's revenues came from wholesale business - a rise of about 15% on the previous year - according to Beshir.

"We are wholesaler to all other operators including mobile and data. They use our infrastructure because we own all the infrastructure, and there is no economic feasibility for them to come in on their own," he says.

Mobile market

Egypt's mobile sector is dominated by two incumbents, Mobinil and Vodafone Egypt, which "know the market very well", and one newcomer, Etisalat Misr, which has been aggressive in trying to gain market share, according to Ernst & Young's Shabbana.

"My understanding is that Etisalat Misr became profitable in 2008. Analysts have said that they want to get 10 million subscribers by 2010, while the largest incumbent, Mobinil is currently emphasising that it has reached 20 million users," Shabbana says, adding that Etisalat will have to expand its customer base significantly to achieve this ambitious target.

"Etisalat is an interesting player, they definitely have the deep pockets," he adds. "They look like they are using a two-pronged approach, which is basically going for the low-end pre-paid customer by heavily discounting the prices, while on the other hand they also started to have an aggressive plan for business users that includes some significant discounts on international calling charges," he says.

From the vendor's perspective, Osman Abu Al-Nasr, Motorola country manager for Egypt, is optimistic about the development of Egypt's mobile sector, particularly the uptake of 3G services, and the use of new technologies including WiMAX.

"Egypt is embracing newer technological innovations as it strives to provide better connectivity across the nation," Al-Nasr says.

"Mobile penetration in the Egyptian market is increasing and congruent to global standards, Motorola expects there will be increased growth on mobile adoption as opposed to landline phones," he adds.

"The pre-paid model will continue to dominate and the launch of 3G services has been met with excitement and uptake has been good. In terms of growth, we expect approximately 10 million additional subscribers in 2009 across the three mobile operators."

Al-Nasr is also optimistic that competition will increase across the board as new technologies are introduced.

"Motorola sees more liberalisation in the telecom sector and expects competition through the introduction of newer technologies - for example we anticipate that WiMAX licenses will be issued this year. The general use of VoIP is not possible in Egypt currently, but it is highly anticipated and would add another dimension to the communications mix."

Data drivers

For Girish Trivedi, deputy director, of Frost & Sullivan's telecom practice for South Asia & Middle East, internet is set to be the fastest growing part of Egypt's ICT sector in the next few years. "Internet users have grown from 1.35 million to 7-8 million by 2007," he says.

"Most projections show that mobile phone growth has peaked, but the expansion of the internet is only beginning, and will provide many opportunities for investment. The type of internet subscribers is also changing, going from practically zero broadband users at the beginning of 2004 to over 225,000 users in December 2006."

Telecom Egypt's Beshir agrees that data is an area of huge growth in Egypt, with about five ISPs and "close to two hundred virtual ISPs, class B and class C resellers," competing in the sector.

Telecom Egypt competes with these players via its own ADSL broadband service and dial-up connections, which remain popular as fixed line subscribers can automatically use the service at the cost of local calls. Telecom Egypt is also the only wholesaler to all of the other ISPs.

The operator competes in the ISP retail sector via TE Data, which is 95% owned by Telecom Egypt and commands almost 60% of the market. However, it is restricted from offering bundled voice and internet packages, as it remains the only fixed line operator.

Growth of broadband uptake in Egypt is "almost 100%" across all of the ISPs, according to Beshir. "That was starting from a small base. Right now, we are about 600,000. By the end of the year we expect that to be 1 million, and at least 1.5 million next year."

But he adds that Telecom Egypt also faces competition in the internet arena from the mobile operators' 3G services.

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READERS' COMMENTS

Market Opportunities in Egypt
Posted by Alex Baran, Cleveland, United States on Wednesday 4 February 2009 at 19:20 UAE time

Egypt is one of US's most important bilateral trading partners. I read at http://www.export-usa.com in what sectors are made the biggest U.S. investments. As major infrastructure projects are constantly being made, American companies will find attractive opportunities here.

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