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In three years, mobile subscribers have grown to 1 million

Egypt's rapidly growing mobile phone industry is a good example of the private sector's potential. In three years, mobile subscribers have grown to one million, as consumers have opted for the services and options that remain unavailable from fixed lines.

Driving this phenomenon is the fierce competition between mobile providers the Egyptian Company for Mobile Services (MobiNil) and Misrphone-Click GSM . A consortium of France Telecom, Motorola and Egyptian partner Orascom Technologies, MobiNil began operations in the fall of 1997 after being awarded a license to operate as Egypt's first private-sector mobile provider. The company purchased the existing state-owned network, giving the company a head start.

In 1998, Click GSM began operations. Consisting of a partnership among Vodaphone Airtouch and Egyptian investors such as Click GSM and Alkan Group Chairman Mohammed Nosseir, Click touted newer technology and offered a prepaid card, a first in the Egyptian market.

Two years later, competition is heating up. MobiNil maintains its lead, with 60 percent of all mobile subscribers. Gaining ground steadily, however, is Click, with 40 percent of the market.

Osman Sultan , CEO of MobiNil, says that the battle ahead in the Egyptian mobile telephone market will not only be over market share, but the quality of service.

"Mobile telecommunications are evolving every day. Today it is voice, fax and data. Tomorrow it will be Internet applications and video," says Osman. "Our target is to be on the game and to do whatever we can to meet market means."

After taking a low profile its first year, due in part to the rapid rate of subscriptions, Click is making efforts to get the word out about what makes the company unique. "We have a solid company, which has achieved excellent results in terms of the market subscribers and supporters," says Click CEO Mohamed El Hamamsy . "The thing to do is stay on top of the technology and address customer requirements."

While MobiNil offers a wider coverage area, completing early the required 80 percent of all populated areas outlined by each mobile license, both companies are racing to offer services recently launched in larger mobile markets. This includes the launch of each company's Wireless Application Protocol (WAP) service this past spring. MobiNil's local WAP content is from sister company Link Egypt, with international content on news and stocks from Reuters and Click became the first regional mobile provider to feature news from CNN, with local information provided by Networks Valley.

According to Click GSM Chairman Nosseir, the issue of cost is paramount to increase the penetration of cellular subscribers. "The social structure of Egypt is a very flat pyramid, and if the price decreases slightly, then there will be a rapid increase of growth," says Nosseir.

Egypt is also pressing ahead with goals towards becoming the region's Silicon Valley. Minister of Communications and Information Technology Ahmed Nazi f , who holds the first portfolio of its kind in Egypt, says the government plans to create technology villages to help Egyptian technology bloom. "It starts in a small area where a high concentration of high-tech companies are provided with the best infrastructure and services around. Those areas will be promoted for international and Egyptian companies alike."

Highlighting this effort was President Mubarak's recent high-profile visit to the United States, where the Egyptian leader signed contracts with American IT giants Cisco and Nortel. Telecom Egypt awarded Nortel the $36 million contract to enhance Egypt's antiquated terrestrial telephone networks, but Nortel Networks Tim Watkins, president for National Telcos, says his company hopes for much more.

"It is a competitive market for sure," says Watkins. "There are new operators setting up, such as MobiNil, who represent great opportunities for us to supply our wireless equipment."
Let's built a cyber-pyramid of money, GOLO June 2000

Other parts of the government's plan to beef up IT include creating incentives for investment, building Egypt's information infrastructure, and developing human resources. A major boost was an agreement between the Egyptian government and Microsoft to provide Egyptian university students with computer training.

"Technology is one of our main priorities for investment. It has to be, because the technology in the industry is changing fast, and to remain ahead of the game, we need to adapt and change quickly," says Ihab Gohar, managing director of Animation Advertising Agency , a dynamic firm representing international brands like Jeep and Nokia.

Such services have not only driven subscription rates, they have also served as an example of just what the private sector can accomplish in the telecom sector. Recognizing this, the Egyptian Ministry of Communications announced last April the privatization of state-owned telephone monopoly Egypt Telecom. With nearly seven million lines and an estimated $6 billion in assets, the company's initial public offering of 20 percent has garnered considerable international attention. Long burdened by under-investment in infrastructure and personnel, Egypt Telecom now offers greater services, including voice-over-IP and other state-of-the-art applications found in developed countries. It is also expected that Egypt Telecom will make a bid for a third mobile telephone license to be issued in 2003.

Connecting Egypt to the outside world has been greatly enhanced by the success of NileSat, which provides a variety of free and pay television channels and Internet accessibility. Plans are going ahead with the launch of a second Egyptian satellite, called 102, this year.

One company on the cutting edge of Egyptian IT is Raya Holding , whose ten subsidiaries focus on investment opportunities in software development as well as telecom and professional services. Raya Chairman and CEO Medhat Khalil says working together in a sea of tough competition is the only way to stay ahead.

"One of the biggest benefits of bringing our companies together was the synergy created, which developed strength in diversity," Khalil says. "We grew by 200 percent in 1998. And we think that our greatest growth will come from increased market penetration in Egypt."

Those who entered the IT market early say they are already experiencing better returns on investment. "You always need to be ready for different opportunities," says Hani El-Sharkawy, president of El-Sharkawy International Group Ltd. (ESIG). "We became involved in e-commerce four years ago, and now it is bearing fruit. We are presently developing a huge virtual schooling project called the National Egyptian Education Project, in collaboration with many different editors from around the world."

ESIG, a diversified consulting group specializing in tele-education, telecom and satellite communications, trade marketing and publishing, aims to be "diverse enough to benefit continuously from being at the peak of one business cycle or another," adds Sharkawy.

American Chamber of Commerce in Egypt Executive Director Hisham Fahmy says the takeoff of Egypt on the Internet goes hand in hand with the country's strong relationship with the United States.

"The U.S. is leading the way in e-commerce, and we feel that we should facilitate the introduction of this technology into Egypt," says Fahmy. "We have received funds from USAID to get the project off and running. We have several e-commerce pilot projects in the offing, primarily to provide an example which others can follow." Such advancements are already helping local businesses compete against international giants.

One manifestation of popular interest in IT is the skyrocketing rate of Egyptians accessing the Internet. Cybercafes have sprung up from Luxor to Alexandria, spreading beyond the confines of the Egyptian capital. According to Egyptian officials, Internet use has tripled over the last two years to reach 400,000--making Egyptians the number one Arab country on the Net.

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© World INvestment NEws, 2000.
This is the electronic edition of the special country report on Egypt published in Forbes Global Magazine.
August 7th 2000 Issue.
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