CAIRO: The much-anticipated bid for the third mobile license was awarded to the Etisalat consortium, which offered LE 16.7 billion, plus six percent of annual revenues paid to the government as license fees. Besides the UAE telecom operator, the consortium includes Egyptian partners Egypt Post, National Bank of Egypt (NBE) and Commercial International Bank (CIB).
Egyptian partners control 34 percent of the consortium. Etisalat will sign the contract with the Egyptian government in a month and will begin operations in February 2007, says Communication Minister Tarek Kamel.
The bid started at LE 2.5 billion ($434 million) as a one-time, upfront fee, in addition to 3 percent of the operator’s revenue as annual licensing fees. Kuwait’s MTC consortium came second, followed by Qatar’s Q Tel consortium.
Prime Minister Ahmed Nazif stressed on the transparency of the auctioning process and was not transmitted live as initially intended due to legal concerns, notes Amr Badawi, executive president of Egypt’s National Telecom Regulatory Authority (NTRA).
The amount paid and the tight competition that marked the bid is an indication of “the confidence we receive from foreign investors, says Nazif.
Revenues will go to the state treasury Nazif adds, and won’t be confined to the telecommunications sector.
The winner is to enter a market of 73 million citizens, 13 million of which are already subscribers to incumbents Vodafone and Mobinil. Badawi expects the third network operator will take 20 to 25 percent of the market share, and predicts that in the next five years there will be five to seven million subscribers with Etisalat.
Mohamed Hassan Omran, Etisalat chairman, was reluctant to give similar predictions, saying it is “too early to discuss such topics. Starting capital of the project, services pricing and commercial brand name are yet to be announced.
A third network operator will increase competition, says Kamel. Nazif explains that the competition will be in the best interest of the consumer, whether in service quality or pricing.
Incumbent network operators Mobinil and Vodafone have previously implied that they will not be affected by the competition. A pricing war would be in their benefit. “When prices go down, then we can achieve higher number of subscribers, Mobinil’s Naguib Sawiris told the press last February.
In late June, Orascom Telecom shares shed 2.1 percent of their value to end at LE 233. Vodafone Egypt fell 2.8 percent to LE 77, while its rival Mobinil finished 4.5 percent down at LE 119.5.
In spite of this slight fall, both companies have previously said that they are not worried about the upcoming competition. On the contrary, the price Etisalat paid for the license has made people realize that the mobile network industry is undervalued, according to Taimoor Labib, director of investment banking at EFG-Hermes. Mobinil and Vodafone stock prices went up by almost 20 percent and 12 percent, respectively, following the announcement of the results yesterday.
Labib says it is a great day for Egypt, as a country and as a government. The government exceeded expectations and managed to raise approximately $3 billion during difficult market conditions, he explains.
Yesterday, there was a 2.5 percent increase in the local stock market turn over, Labib adds.
After the Ministry of Communication and Information Technology announced it is accepting offers for the third mobile license in Feb.19, 11 candidates initially presented bids.
On June 11, the NTRA board of directors reviewed the bids and eliminated two consortiums: Emac for Information Systems, a company affiliated with Kuwait’s Kharafi Group, together with India’s Reliance, formed the first consortium, while the second consisted of Saudi Telecom and Telekom Malaysia.
The two consortiums did not pass the technical evaluation. Exact reasons for the disqualification were not announced. According to a statement made by an advisor for the Ministry of Communications and Information Technology (MCIT) in early June, the choice was based not only on price, but also on how quickly each consortium can set up a network.
The nine consortia that advanced to the financial bidding process received a score of no less than 700 out of 1000 in the assessment of the technical proposals.
The nine qualifying contenders that remained following the technical assessment were the Etisalat consortium; MTC of Kuwait with Egyptian Financial Group (EFG-Hermes) and Bahgat Group; MTS of Russia and TeleTech of Egypt; TurkCell of Turkey, with Banque Misr of Egypt and Amwal from the Gulf; TeleNor of Norway and the National Telecom Company (NTC) of Egypt; Wataneyia International of Kuwait, with Univest, the National Bank for Development of Egypt, and Aman Trading; Nesma Consortium – Qtel of Qatar, Naaem Group, and Singapore Tech Telemedia; Telecom Egypt and Telecom Italia; and MTN of South Africa with Raya Holding of Egypt.
The news has been wreaking havoc on the local stock market. Following the announcement of the NTRA technical evaluation, CIB benefited from topping the list of bidders. On July 3, the bank s stock price ended 2.6 up at LE 61.55. Following the result CIB stock prices increased by 8 percent. Additional reporting by Najla Moussa