Telecom Egypt Mulls MVNO Option

Egypt’s fixed line incumbent Telecom Egypt (TE) is reportedly mulling the option of setting up a mobile virtual network operator (MVNO), according to Reuters, citing local press reports.

hile TE already holds a 45% stake in the country’s second largest cellco by subscribers, Vodafone Egypt, it is believed that it is considering the MVNO venture as a way to become more involved in the country’s mobile sector, prompted in part by continued fixed to mobile substitution.

TE had earlier this year looked to increase its stake in Vodafone Egypt, but the cellco’s UK-based parent company, Vodafone Group, ended negotiations in June 2010 over a possible divestment of its interest in its Egyptian subsidiary – little more than two weeks after the parties first began discussions.

TE had approached the British group in April 2010 to sound out the possibility of a possible deal, which had been valued at between GBP3 billion and GBP4 billion (USD4 billion-USD7 billion).

Vodafone Considers Pulling Out of Egypt Subsidiary

British mobile group Vodafone is understood to be examining the possibility of selling its controlling stake in its Egyptian subsidiary, the Financial Times reports. According to the broadsheet, citing people familiar with the matter, Vodafone has already started initial negotiations regarding the potential divestment of its 55% holding in Vodafone Egypt, with fixed line incumbent Telecom Egypt (TE) mentioned as the interested party in a deal that could be worth up to GBP3 billion (USD4.3 billion). Despite claims that talks have been ongoing for around a month though, Vodafone declined to comment on the matter, while TE said that it was unaware of any discussions.

The revelation comes after Tarek Tantawy, CEO of TE, which already owns 45% of Vodafone Egypt, said that the fixed line operator was mulling its options for a full entry into the domestic mobile sector; it is believed that if no agreement is reached between Vodafone and TE that the latter may consider trying to secure its own wireless licence, should the government as rumoured offer a fourth mobile concession in the future.

Additionally, should a deal be reached it would also underline the willingness of Vodafone Group CEO Vittorio Colao to streamline his company’s portfolio, in line with comments made by the executive earlier this month stating that the group was looking to focus on developing its European units, alongside its interests in sub-Saharan Africa and India.

Egypts Bans Ban On Skype Calls

Egypt’s National Telecommunication Regulatory Authority (NTRA) has confirmed that the country has begun enforcing a ban on international calls made via mobile internet connections, Reuters reports.

The ban applies to all three of Egypt’s mobile network operators – Egyptian Company for Mobile Services (MobiNil), Vodafone Egypt and Etisalat Mirs – and is expected to provide a much-needed boost to the fixed line revenue of monopoly landline provider, state-owned Telecom Egypt (TE). Clarifying the situation, Amr Badawy, executive president of the NTRA, said: ‘The ban is on Skype on mobile internet, not on fixed, and this is due to the fact it is against the law since it bypasses the legal gateway.’

Under existing regulations all international calls must be routed via TE’s network. Despite mentioning Skype by name, it is understood that the regulator may extend the ban to other services, with Badawy noting: ‘We are targeting any illegal voice traffic on the mobile (internet). Any traffic outside the international gateway is against the law.’ It remains unclear however whether such a restriction will be extended to fixed line internet connections.

Egypts Considers Selling Off It's Stake In Telecom Egypt

The Egyptian government is believed to be considering the sale of a portion of its 80% stake in fixed line incumbent Telecom Egypt (TE), Reuters reports. A final decision has yet to be reached on such a divestment, but commenting on the development, Tarek Kamel, Egypt’s communications minister, said: ‘When I was asked a question on whether it was possible to put an additional stake from Telecom Egypt on the stock exchange in the future, my response was yes, dependent on ongoing studies with experts and consultancies.’ No timeframe for a final decision on a stake sale has been suggested, and Mr Kamel also noted that any such action would require approval by the cabinet. The government holds an 80% stake in TE, having sold a 20% tranche in December 2005.

Alongside the revelation about the possible stake sale, Mr Kamel also announced that the state could consider offering a fourth mobile licence, noting: ‘It is a possibilty in the future but it would depend on further studies on market dynamics and the added value of such an act.’ TE managing director Tarekt Tantawy subsequently told local newspaper Al-Alam Al-Youm that his telco would look to bid were such a concession put up for grabs.

Egypt Aims At Increasing Internet Penetration Fourfold

According to Egypt's Communications Minister, Tarek Kamel, the country is currently preparing a USD1 billion plan aimed at boosting internet penetration fourfold in the next four years, Reuters reports. Commenting on the proposals Mr Kamel said: 'Most of the investments...will primarily go in local investment in increasing the local capacity.'

It is understood that such local investment will be ploughed in to a combination of wireless and wired services covering both rural and urban areas, and will follow up the country's investment in international broadband cable systems that is expected to at least double the capacity coming into the country from the current 60Gbps.

The minister also noted that the government is targeting a broadband penetration rate of 20% by end-2013, equivalent to enabling access to connections to around four million households.

As at end-2008 Egypt's broadband penetration stood at just 0.9%, with a total of 696,305 high speed internet subscribers in the country. TE Data, a subsidiary of fixed line monopoly provider Telecom Egypt, dominates the sector, controlling more than half of all broadband subscribers at September 2009, with 479,819.

Telecom Egypt Reports 72% Growth in Profits

Telecom Egypt reported a 72 percent rise in first-quarter net profit to EGP 962.4 million compared with a net profit of EGP 558.3 million in the first quarter of 2008. Operating revenues rose to EGP 2.53 billion from EGP 2.39 billion a year earlier. The firm's EBITDA and before provisions was EGP 1.35 billion.
The company has an Internet subsidiary TE Data and also has a minority stake in Vodafone Egypt. Total retail revenues for the first quarter of 2009 were EGP 1.468 billion, a modest increase of 2 percent compared with Q1 2008, while the access revenues, comprising connections and subscriptions, grew from EGP 459 million to EGP 536 million, as a result of tariff rebalancing which was only effective in the second half of 2008
Voice revenues declined 4 percent year-on-year to EGP 680 million for the first quarter, reflecting the increased pressure on this segment from the mobile market. However, the largest constituent of Telecom Egypt's voice revenues, derived from local calls, has seen a significant increase year-on-year.
As TE Data further increased its market share, revenues from internet and data continued to grow, up 27 percent year-on-year to reach EGP 146 million for Q1. In the first quarter alone, TE Data added 52,000 new DSL subscribers to reach 477,000 subscribers, an increase of 83% in comparison to the end of March 2008. Total fixed line subscribers were 11.6 million, as at 31 March growing by 2.6 percent year-on-year. Telecom Egypt's investment in Vodafone Egypt was good for a contribution of EGP 350 million.