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Summary

The Egyptian telecoms market has been subject to confusion from the lack of clear regulatory decision-making on licensing Telecom Egypt (TE) to enter the mobile market, and it has been filled with controversy over TE’s potential conflict of interest in making such a move. TE has now announced that it is planning to launch commercial mobile services in 2017 under the country’s new unified licensing program, raising concerns that it will add pressure to an already saturated market and leading to speculation about whether unified licensing is what the Egyptian ICT market needs to boost growth in the data services sector.

New licensing regime could be the boost that Egypt needs

In 2014, talks began concerning the potential entry of fixed incumbent TE into Egypt’s mobile market. Since then, developments relating to the move have been erratic, mainly because TE already has a presence in the mobile market through its 45% stake in Vodafone Egypt, and launching its own mobile network would result in a conflict of interest. Strong opposition from Orange and Etisalat over TE’s entry into the mobile market resulted in the regulator opting for a unified licensing regime rather than selling TE a mobile license. This move, in theory, puts an end to TE’s monopoly on the fixed market, while giving it the right to roll out mobile services.

TE is circumventing the need to invest in rolling out its own network by launching as an MVNO, bringing cost benefits. It is negotiating with the country’s mobile providers, and the deadline for the process has been extended by the regulator. Equally, the cost for mobile operators of rolling out their own fixed infrastructure to a level at which they can compete with TE is not one that they are willing to bear. Therefore, the operators have opted for “virtual fixed-line” licenses whereby they can offer fixed services over TE’s infrastructure.

What TE intends to do with its stake in Vodafone Egypt remains undecided, seeing as the regulator has already given the group the right to launch mobile services despite its stake in Vodafone.

Some argue that the decision to allow for unified licensing will have a negative effect on the market, but the opening of the telecoms market in this way could be the push that Egypt’s ICT sector needs. Mobile voice is at saturation point due to price wars, and data take-up is not growing as fast as it should due to QoS problems and socioeconomic barriers such as low literacy and lack of disposable income among some user segments. There has been a lack of investment in fixed infrastructure over the last few years, with fiber still not fully rolled out. 4G has only just become commercially available, and we yet have to see TE enter the market.

Providing all the players in the market with a unified license creates a more level playing field, which could stimulate subscription and revenue growth in the Egyptian telecoms sector from data services. How operators will exploit this new playing field remains to be seen over the next few years.

Appendix

Further reading

Egypt Update, TE0015-000375 (June 2016)

Author

Mai Barakat, Senior Analyst, Middle East and North Africa

mai.barakat@ovum.com

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