 Telecommunications on the Nile
Egypt's mobile phone industry is one of Egypt's best examples of how the government wants the privatization process to work. In less than one year, the mobile phone monopoly has been transformed into a fiercely competitive industry with two new networks battling for customers and market share. The first company to enter the market, Egyptian Mobile Services Co, or Mobinil , has become the most actively traded stock on the Egypt Stock Exchange.
The process started in November 1997 when the government issued a tender for the award of a mobile license. The bid was won by a consortium of two international investors, France Telecom Mobile International and Motorolla, who joined forces with main Egyptian partner Orascom Technologies to constitute the Mobinil Consortium. They paid LE 1.75 billion, about $520 million, to the Egyptian authorities for the right to provide services.The consortium took control of 68% of Mobinil. The other 32% were open to public subscription on the stock market.
In late 1998, a second mobile telephone company entered the field, creating competition in the sector. MisrFone , or Click GSM, took the market by storm with a prepaid calling card system. Mobinil, who took advantage of its initial position (more services, better coverage, more subscribers, roaming agreements with 60 countries) now intends to introduce a similar prepaid system with its Alo card. |
In its first year of operations, Mobinil has increased its subscriber base to150,000 from 80,000. Even though it was forced to halt new subscriptions for a period in 1998 while upgrading network capacity. Osman Sultan , president and CEO of Mobinil, notes that while the number of subscriber is gratifying so are the number of shareholders who have invested. "We have over 100,000 shareholders," says Sultan. He says the Egyptian market offers great potential because the mobile phone penetration rate is very low compared to western markets and even when compared to other Middle East markets such as Lebanon or the Gulf states. Cairo alone is a high density market with more than 15 million people. "Market research also shows that Egyptians like to talk on the phone, because the average usage for a subscriber per month is 500 minutes compared to 150 minutes in some European countries," he says.
As Egypt moves ahead in opening up business to the private sector, telecommunications is seen as an industry that provides excellent opportunities. Mohamed Nosseir, president of Alkan Group, which is involved in a number of investments including the second mobile phone license in Egypt, says Click GSM expects to outpace Mobinil by mid
1999. The second network, launched at the end of 1998, is a joint venture with the British Vodafone and the American Air Touch Communications. On the Egyptian side, EFG-HERMES and Banque du Caire joined forces. By mid February, according to Nosseir, Click had surpassed expectations with 65,000 subscribers. The company is not public yet, but Vodafone and Air Touch are expected to launch it as an initial public offering in two years.
There are still many opportunities ahead for investment in telecommunications. When Egypt Telecom, the monopoly telephone company, is eventually privatized it is likely to be the largest private offering in Egypt’s history. |
EGYPT
