Interview: Hazem Metwally; Jean-Marc Harion; Ahmed El Beheiry
How can average revenue per user be further increased in the mobile segment?
HAZEM METWALLY: The Egyptian market in itself is a market with a great deal of potential. The potential lies mainly in the growth of mobile usage. Although the penetration rate of mobile lines is already above 100%, due to the relatively young average age of the country’s population, we expect the demand for data and its subsequent usage to increase.
Having said that, it is probable that data services and other adjacent services like mobile banking will be the primary engines of growth in the future.
JEAN-MARC HARION: The recent launch of 4G in Egypt will be the main driver of revenue increases. The market is at a very early stage due to the late launch of 4G, with the 4G spectrum having been granted at the end of 2016 and made available to operators in September 2017. Therefore, mobile data will be a primary driver of growth in the coming months and years, for both consumers and enterprises. In the meantime, Egypt remains the country with the lowest mobile communication prices in the world, even after the price increase requested by the regulator. Therefore, the very low prices of data services are making them attractive to all segments of customers in Egypt.
AHMED EL BEHEIRY: Telecoms operators have been relying heavily on traditional revenue streams, such as voice and internet services, and are falling behind in diversifying activity towards ICT services with higher added value. In the business segment many ICT services present a promising outlook for operators, especially cloud computing, where Egypt has a comparative advantage. The country connects 11 cable systems in the east to 13 in the west through seven routes, which positions it as a partner of choice for transit traffic between Europe, Africa and Asia.
Furthermore, the country is currently in a strong position to become a major player in the storage and monitoring of big data for international corporations.
What are the main challenges to and opportunities for the provision of e-payment services?
HARION: Mobile money and e-wallets are very important and fast-growing services. There are huge opportunities to develop the use of mobiles for billing, the payment of fees and money transfers in Egypt, but until recently only a few of these services were authorised. Thanks to the government’s renewed push for financial inclusion, an increasing number of services have recently received authorisation, yet we must still comply with both banking and telecoms regulations. One of the main benefits of mobile money is to offer payment options to the unbanked population, who make up more than half of all Egyptians.
This is the real opportunity, complementary to bank services, and it is now being recognised and supported as such by the government.
EL BEHEIRY: The increased use of e-payments will present significant opportunities, especially to smaller companies. E-payment optimises the business operations of these firms and frees people from having to safeguard large amounts of cash. When it comes to mobile payments, telecoms operators and suppliers play a major role in future growth due to wearables and smartphones, branded mobile wallets, and secure next generation networks and technologies.
However, Egypt has two main challenges related to the service: promoting acceptance among smaller merchants through regulations and initiatives to reduce cash usage, and building customer loyalty through trusted services and data privacy.
METWALLY: E-payment services are mainly driven by decisions of the central bank, and at present we are working with the National Bank of Egypt. There is certainly more that can be done in regards to expanding the service, as well as enhancing interoperability between the service providers. We believe the government is interested in expanding e-payment usage, especially given the high share of the population that remains unbanked, at around two-thirds. Offering e-payment services and leveraging the reach of mobile operators can help change the landscape in this regard, and the potential is very large.
How has the central bank’s decision to float the currency in late 2016 affected the sector?
EL BEHEIRY: With the currency flotation, Egypt is an increasingly attractive destination for the development of offshoring activities, especially business process outsourcing (BPO) for companies in Europe, Africa and the Middle East. These activities are expected to grow, especially given that Egypt is now as appealing as China and India in terms of cost, and can deliver excellent BPO services due to its highly qualified human resources. These activities should also benefit from the new Investment Law, which will serve as a catalyst for growth in the sector by incentivising multinationals to set up local offices in Egypt.
METWALLY: A lot of our operational inputs are priced in dollars, such as the equipment that we use to modernise our network and expand network capacity every year. Consequently, those costs have more than doubled since the flotation, which puts pressure on our investment efficiencies and pushes us to invest more to cope with the growth. Of course, it is not only equipment expenses – the rise in the cost of energy has affected us as well, as our network operates over 6000 sites. Therefore, when the price of diesel goes up, the cost of local services rises with it.
HARION: The decision to float the Egyptian pound by the central bank heavily affected the mobile segment, especially in terms of investment and operating expenditures related to those investments, which are paid in US dollars or euros. This has been a considerable challenge to deal with. We had to launch a large-scale transformation programme to soften the foreign exchange impact, adapt our cost structure and maintain our capability to keep investing as before.
What potential exists for infrastructure sharing among telecoms operators?
HARION: On the mobile side, operators are currently sharing infrastructure on a case-by-case basis, with a very pragmatic approach. It is an easy decision to make in the less-dense areas of the country or along new roads, and it will likely continue. When it comes to infrastructure sharing, the sharing of fixed infrastructure is a priority. Telecommunications operators need to be allowed to build fixed network infrastructure and share in fair market conditions. Egypt needs and deserves a best of breed broadband internet network, and it is very difficult for a single operator to invest in the fibre-optic infrastructure nationwide.
METWALLY: We do a bit of infrastructure sharing, but it is not on a large scale. However, we believe that enhanced infrastructure will be very important to the movement of data traffic. There is already a big increase in the demand for data and the infrastructure network is going to have to cope with that. There are certainly some efficiencies that can be exploited by sharing infrastructure, but whenever there is an opportunity we opt for building our own infrastructure because we believe in that. It is in our company DNA to build infrastructure whenever feasible.
EL BEHEIRY: Much remains to be done to increase advanced telecoms services, particularly in rural areas. The problem arises from the high cost of mobile infrastructure needed to upgrade to next generation networks, and this leads to high prices for the consumer as operators seek to recover their investments. Therefore, sharing infrastructure is an option that lowers the cost of network deployment. Furthermore, network sharing allows operators to turn their attention to improving innovation, customer service and commercial offerings.
Sharing infrastructure is becoming a necessity, and we see that competitors are increasingly becoming partners in order to limit their increasing investments.
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