Analysts expect uphill battle for new operator to gain market share
CAIRO: Third mobile network consortium leader Etisalat will begin commercial operations this February, the network s newly appointed CEO Saleh El Abduli announced yesterday during the contract signing ceremony held in Alexandria.
With test runs scheduled for November or December, El Abduli says the company is now in the process of setting up its offices and selecting senior management, a process expected to be completed within one month.
The deal signing came 14 months after the National Telecom Regulatory Agency (NTRA) first called for bids in May 2005. The winning consortium, which includes the National Bank of Egypt (NBE) with 20 percent, Egypt Post with 20 percent and Commercial International with 4 percent, beat 11 offers from European, Arab and Asian consortia last month.
The Etisalat consortium intends to compete strongly in the Egyptian mobile market and to translate its current success in many other markets such as UAE and KSA into work patterns and innovative services for the benefit of all Egyptian community sectors and groups, Etisalat Chairman Mohammed Omran said during the signing.
The company, now the lone 3rd Generation license holder, says it will aim for 70 percent network coverage by the end of the first year, 85 percent after the second and 100 percent after three years, El Abduli says. The company had earlier announced it will use dialing code 011.
Vodafone has announced it will decide whether or not to apply for a 3G license, worth LE 3.3 billion, in September. Mobinil is now locked in a dispute with NTRA over whether the EDGE technology it now offers can be classified as 3G. If NTRA officials have their way, Mobinil would be required to pay the same licensing fee in order to continue offering EDGE.
Despite high consumer anticipation of the third network, some analysts doubt the market s ability to afford 3G technology and the new operator s ability to gain significant market share without lowering even further one of the lowest per minute rates in the Middle East. EFG Hermes Senior Analyst Wael Ziada says the company will have trouble turning profit because of the high licensing fee already paid and projected high start-up costs.
Last month, Etisalat announced it had reached agreement with 22 Arab and European banks to obtain a $3 billion (LE 17.3 billion) revolving line of credit, which El Abduli says puts the company in strong financial position to finance its new network.
Minister of Communication and Information Technology Tarek Kamel, who signed on behalf of the Egyptian side along with NTRA Director Amr Badawi, confirmed the LE 16.7 billion licensing fee has been transferred to the NTRA s account in NBE. He says the signing reflects years of effort to liberalize the country s traditionally weak telecommunications sector by involving the private sector.
Commenting on the company s strategy to gain market share in the initial stages of operation, Omran did not go into specifics, though he had earlier downplayed the possibility of launching a price war with Mobinil and Vodafone.
With no doubt, Egyptian citizens will be the main beneficiary of such strong competition amongst the three operators to gain unique, high-quality and competitive price services, Omran says. Etisalat and its Egyptian consortium partners promise to provide the latest state-of-the-art services, enabling a large number of the Egyptian community to benefit from diverse mobile services at suitable prices.
According to NTRA figures, mobile penetration reached 19.5 percent in June 2006. Kamel says he expects the number to reach 40 percent by 2010. The number of subscribers, almost evenly split between Mobinil and Vodafone, has reached 14 million, up from 2.9 million in June, 2005 and just 650,000 in October 1999 when mobile technology was first introduced.
The third network operator is yet to officially register its commercial name, though Nile Telecom has been widely circulated as a strong possibility.