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Wed 8 Mar 2006 04:00 AM

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All Eyes on Egypt

The race towards the third licence in Egypt is set to be an interesting one, with bidders - likely to include MTC, Etisalat and MTC - to be assembled together in a room for the upcoming auction.

|~||~||~|The process to award the third GSM licence in Egypt was officially launched last month with the government requesting requests for proposals (RFP) from interested parties. By the beginning of March as many as 18 bidders had come forward to express an interest in learning more details about the award process, and for some, there are areas of concern.

The licence will be awarded by way of auction and bidders will be assembled in a single room where they will be able to openly hear and assess their competitors’ bids. The Egyptian government’s reason for conducting the auction in such a manner is no doubt to raise the level of competition and therefore the price paid, though such an attitude may not necessarily be in the best interests of the development of the communications sector in the Egypt.

Not all 20 or so parties that have purchased information packs are expected to actually qualify to participate in the auction and Egyptian sources estimate that perhaps 6-10 bidders will actually sit around the table at the start of the auction process. MTC has expressed a real conviction to winning this licence, having opened an office in Cairo last month, and regularly commenting on how important the market is to the company’s overall strategy. The third Egyptian licence is probably MTC’s most important opportunity since it launched its successful bid for Celtel International about a year ago.

The UAE’s Etisalat has expressed strong interest in the licence as has South Africa’s MTN, which has become the continent’s most aggressive pursuer of mobile communications outside the continent of Africa. A source close to MTN says that at the core of MTN’s strategy is an ambition to transform itself from being just an African mobile communications operator, to a global one, extending to markets as far away as Latin America.

Like most significant award processes in the region, the Egyptian case has had its fair share of intrigue. Telecom Egypt, the state-owned monopoly fixed-line provider had initially been barred from participating in the process. It already holds a minority stake in Egypt’s second-placed mobile operator Vodafone Egypt, and was widely expected not to participate in the award of the third GSM licence.

However, a clause within the RFP appears to have been included with the primary aim of allowing Telecom Egypt to participate should it decide to. The clause states that the licence shall not be awarded to a company that already has an existing stake in a mobile entity in Egypt. This can be interpreted to mean that Telecom Egypt will be permitted to participate in the process, and should it be successful, would then be allowed to offload its stake in Vodafone Egypt before being allowed to take possession of the third licence.

Interestingly, such a principal can also be applied to Orascom Telecom, the Egyptian backer of MobiNil, which owns a large minority stake in what is Egypt’s leading mobile provider. Should Orascom prefer to have full control of an operator, it could choose to pursue the third licence, and should it be successful, sell off its stake in MobiNil and concentrate completely on the new operation.

With a mobile penetration rate in the region of 20%, and a population in excess of 75 million, investment in Egypt appears to be a potentially lucrative investment. The proportion of youth in the population is significant and given that up until a little over a year ago the two incumbents appeared to be satisfied to participate as cosy duopoly, there appears to be a real opportunity for a new entrant to come into the market and gain a significant market share in relatively short period of time.||**||

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