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Triple play, competition, FTTH, IT exports - Egypt is changing

News that Telecom Egypt is to offer triple play services over a new fibre-optic cable network is one of several indicators that Egypt is a market undergoing a major transition - in the right direction. Analysis by Michael Schwartz.

Developing Telecoms has carried several stories over the last few months which show that Egypt is emerging steadily as an important Middle Eastern market. There has, sadly, been the squabble in the courts about France Telecom’s attempts to buy Orascom’s remaining shares in Mobinil but diverting one’s gaze from this legal side-show to the world of communication reveals Egypt’s healthy state.

At the recent ITU Telecom World Egypt adopted a lively strategy in setting up her own national pavilion, as did a fellow Middle-Eastern player Saudi Arabia. As my colleague Alec Barton wrote in his review of ITU Telecom World, the pavilions, “left no doubt of the determination of these and other emerging markets to attracting inward investment to their growing ICT sectors.” 

And than there is the region as a whole. The Arab Advisors Group, using its own Cellular Competition Intensity Index (CCII), rates Egypt as the fifth most competitive market in the Middle East Admittedly, the rating of 69.8% is substantially lower than the most competitive market (Iraq, 91%) and even the second and third (Jordan 82.7%, Saudi Arabia, 79.2%) but Egypt is showing strong signs of success in the region.

Triple play on the way  

Fixed-line telephony in Egypt is a monopoly under the control of Telecom Egypt. This company has started to construct fibre-optic cables with a view to offering triple play services, ie, phone, Internet and cable TV. At this point, the monopoly no longer applies; the Egyptian government has issued two licences over and above Telecom Egypt’s existing authorisation.

The licences are expected to be a real money-spinner for the Cairo Government as it is hoped that they will raise US$1 billion in the next five years. As if that was not enough for the fixed-line incumbent, it is also under attack from mobile operators looking for market share in voice and data. 

At present, however, Telecom Egypt is not deterred: FTTH will roll out in one of the Cairo suburbs, and 70Mb/s broadband is a target. Also, but more ambitiously in the sights of Telecom Egypt, is the building of an infrastructure which will stand up to competition from triple play entrants. The Government is aware of this threat to the company; for all its commitment to competition, new players will initially be restricted to more modern suburbs and developments.

The Egyptian market from 1999 to 2010      

A mere ten years have passed since Egypt’s Government adopted deregulation as its policy. At that time only a very small fraction (2%) of the country’s GDP came from telephony. Mobile phones and the Internet changed everything in terms of technology.

The changes have not taken place in one swift development; initiatives and special studies have aided Egypt’s progress, as has the realisation that existing poverty would hinder the speed of change. In this respect there is a Catch 2: mobiles bring prosperity but citizens are often too poor to afford the mobile (the Government in Cairo has not opted for the village phone model but left it to individuals to invest in handsets).  

There is, without any doubt, a commitment by Cairo to bridge Egypt’s Digital Divide and to bring in the benefits of ICT. A concept called e-readiness is encouraging co-operation between public and private sectors. 

Exports are another plank in the rise of Egyptian telecoms. Developments are being monitored by Egypt’s Information Technology Industry Development Agency (ITIDA) which shares a sense of real optimism that its IT export target of US$1.5 billion by next year will be achieved. 

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