The nine-year MobiNil-Vodafone control of the Egyptian mobile market ended with Etisalat Misr joining the fray on the first of May. The three operators now offer the traditional second generation services (2G), both for the prepaid and postpaid customers at almost the same price. In addition, as of Friday, both Etisalat Misr (EM) and Vodafone Egypt (VE) are offering the more sophisticated 3G broadband services.
The three players are racing to seize the largest slice of the cake, with the two 3G operators using newspaper, TV and radio commercials in multi- million pound media campaigns to introduce their new 3G service.
The third generation services, which include 3G broadband and “3.5G”, permit faster data transfer and better voice quality. More modern mobile handsets can now be used to surf the Internet, watch live TV channels, stream video and make visual phone calls. “3G broadband takes mobile services to a very high level of speed and quality,” noted VE’s CEO Ian Gray in a press conference at Vodafone headquarters last week to launch the 3G services. “The difference is like using DSL compared to the old fixed telephone line.”
EM acquired their 3G licence last May after it outbid its competitors and nabbed a licence to operate Egypt’s third mobile network using both the second and third generation technologies for a whopping LE16.7 billion, in addition to transferring six per cent of its 3G revenues to the National Telecommunication Regulatory Authority (NTRA). VE acquired a licence to offer 3G services in February after paying LE3.4 billion in addition to agreeing a profit-sharing scheme which commits it to transfer 2.4 per cent of revenues to NTRA.
“We thought it will take longer to generate competition in the 3G arena, but since they [VE] are here, this is a plus for the customer who can now choose between different operators and prices. The competition will encourage operators to offer competing services,” Saleh El-Abdouli, CEO of EM, told Al-Ahram Weekly.
What are the differences likely to be? A quick look at the price schemes announced by the two companies might give the impression that there is no price war; however a closer look reveals how fierce the competition is.
“We have virtually the same prices for video calling and music download services. Our tariffs for mobile TV are higher than theirs, LE1 for each minute compared to LE0.5,” said EM’s Abdouli. “However, all VE’s tariffs are not tax inclusive, which means that we offer lower prices, not only in 3G services but also in prepaid cards.” According to Abdouli, users of Etisalat’s prepaid Ahlan cards get speaking time worth exactly what they pay for. “If you buy an LE100 card you get LE100 worth of talking minutes.”
To counter-attack, Vodafone depends on a package of free and promotional offers. During the first months after launching its new services, users have 20 minutes free of charge of video calling, in addition to LE15 worth of mobile TV and a one free downloaded song per month. ME’s Abdouli said that when it comes to price schemes “nothing is fixed”, hinting that the company might lower its prices, whereas VE’s Gray said that most of the prices are long term and that he does not expect to see any changes soon.
Both companies are backed up by the expertise of their mother companies. VE is 55 per cent owned by Vodafone Group which is a world leader in mobile technology. UAE-based Etisalat holds a majority stake in EM and enjoys a regional leading position, as it was the first to offer GSM , GPRS, MMS and 3G services in the region, and has a wide range of activities including fixed line, Internet companies, cable TV and satellite-based mobile technology. It operates in Saudi Arabia, Pakistan, Sudan and seven sub-Saharan African countries.
VE boasts that subscribers can make use of the 380 roaming deals that Vodafone Group has with its international networks. On the other hand, EM stresses that it is operating a brand new uncluttered network, compared to the nine-year-old networks of MobiNil and VE, which should mean higher speed and better voice clarity.
The two companies are watching each other’s moves closely. VE said it is currently in negotiations with Telecom Egypt to use its nationwide network as distribution centres. This is to counter- balance EM’s advantage of having access to the branch networks of its two other shareholders — the National Postal Authority and National Bank of Egypt.
All three companies are banking on the growth potential of the market. Even without a 3G licence, MobiNil plans to inject LE2 billion worth of investments during 2007 on network improvements.
Egypt’s cellular market has a penetration rate of 24 per cent, which means that only 24 per cent of the population are subscribers to mobile networks. This rate is considered very low compared to other parts of the region: in the UAE, the comparable figure is 140 per cent, and even compared to a country with the same per capita income such as Morocco, the rate is 50 per cent.
According to end-of-March figures, the market is currently divided between MobiNil with around 11 million subscribers or a market share of 51 per cent and VE with 10 million subscribers or a market share of 49 per cent. EM says that it was able to attract 100,000 in less than two weeks since officially launching its services.
A report issued by HC Securities in March predicted that the market penetration rate will reach 46.5 per cent by the end of 2011, implying a total subscriber base of 36.8 million, and that MobiNil will retain 42.6 per cent of the market, VE 41 per cent, and EM 16.4 per cent.
While the 3G services of both VE and EM currently only cover the governorates of Cairo, Alexandria, Sharm El-Sheikh and Hurghada, the services are expected to cover more cities soon.
Etisalat is counting on negotiating agreements on local roaming services. This service allows the third operator to use the networks of the other two inside Egypt in locations that it does not cover and, as a result, allows it to attract more subscribers.
Another agreement the three operators are currently negotiating with the NTRA which might change the features of the mobile market is the number portability option according to which customers will be able to switch carriers without changing their mobile phone number, a policy that would give the customer the upper hand in choosing among operators. The three companies will also apply for the international gateway licence when the NTRA decides to offer it. Currently mobile companies have access to international traffic only through Telecom Egypt facilities.
Market observers see these developments as evidence of fairer competition in a very lucrative market. The operating revenues last year in the mobile market were a massive LE14 billion, with MobiNil earning LE6.3 billion and VE LE7.5 billion, so a more competitive market is certainly welcome. As for Etisalat, which paid LE16.7 billion to acquire its licence in addition to making major investments in new infrastructure, Abdouli believes that it will still break even within five years.