Mobile operators in Egypt have been looking to increase data volumes to boost their revenue flows. Data usage is low by international standards, but attractive pricing packages and cheaper smartphones are seeing take-up of value-added services (VAS) such as internet applications increase. While there is 3G capacity for current internet usage, in the next few years Egypt is set to start to roll-out long-term evolution (LTE) networks (similar to 4G systems) to handle future data and voice traffic.
PENETRATION & GROWTH: Maria Samir, an analyst at the Cairo-based Beltone Financial, estimates that data penetration is only 13% to 14% when measured by the number of regular users of data services. She estimates that less than 20% of subscribers have handsets that they can access 3G services, and figures from the Ministry of Communications and Information Technology (MCIT) suggest the proportion may be lower, at 11.78%. As a result, there is a large gulf between data take-up and mobile use, which suggests that 80m SIM cards or more are active without regularly being used for data. The operators’ goal is to encourage those users to start taking up VAS on a regular basis.
According to Mohamed Zein, a senior analyst at HC Securities in Cairo, data penetration is growing steadily rather than spectacularly, but the potential is substantial. “On the ratio of GDP per capita to data penetration, the market is still very under-developed,” Zein told OBG. “Data is the future.” Cost is still a factor limiting growth in Egypt, which is a relatively low-income country in which a substantial proportion of the population has little or no disposable income for such a relative luxury; around a third of the population survive on under $2 per day, and the vast majority earn less than $5, according to the World Bank. Both the cost of handsets and of data packages are barriers to entry for many Egyptians, though prices of both are falling due to competition and the need to stimulate growth. Cheaper smartphones are making access to mobile data cheaper and easier. Vodafone, for example, offers smartphone packages from as little as LE499 ($71), while Chinese devices costing as little as LE1000 ($142) are available. As most Egyptians do not speak a foreign language, the growth of Arabic-language content is another important factor in encouraging the take-up of mobile internet services.
EVOLUTION: The next major stage in data service development – and thus arguably in the development of the telecoms sector as a whole – will be the roll-out of LTE networks over the coming years. Before the of July 2013 removal of President Mohammed Morsi, LTE was expected in 2014 or 2015, though the timeframe is now less clear. In April 2013, Amr Badawi, former executive president of the National Telecommunication Regulatory Authority (NTRA) told OBG that the expectation was to launch LTE in 2014, “but initially, this will only be limited, as the industry still has to look at the availability of spectrum and the money it will invest in LTE”.
For the time being, there is ample 3G capacity to handle demand. “With 3G usage low, and most voice on 2G, there is little need to go into LTE now,” Zein said. “I do not think it will be necessary until 2015.” Freeing up spectrum for LTE development will be important in the medium to long term. Currently a substantial part of the spectrum, is used by broadcasters as well as state organisations such as the military, utilities operators and the Ministry of Transport – as is normal in many countries. At its 2012 world conference, the UN International Telecommunication Union urged regulators to make the 700-MHz band in available for mobile services.
As voice revenues slow – a process that could be exacerbated by the arrival of a fourth mobile operator – providers have been focusing on the data segment. Growth has been healthy, albeit from a rather low base. With competition intensifying and demand for mobile internet services rising, data is likely to be an ever more important part of operators’ strategy (and, they hope, revenues) in the coming years. The introduction of LTE may not initially make a substantial impact, but as data volumes rise, the investments telcos are planning in the technology now may shape the market of the future.
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