Interview: Al Hamli, Gauthier, Dowidar
What impact will a unified licensing regime have on Egypt’s telecoms sector?
SAEED AL HAMLI: Generally speaking, the new regime will impact the telecoms industry positively if done right. There are lots of challenges ahead for the National Telecommunications Regulatory Authority (NTRA). While the introduction of a new mobile operator would cause a great deal of concern over future investment for existing mobile network operators, the process for the new unified licence needs to be crafted carefully so that it protects all stakeholders’ interests.
YVES GAUTHIER: A universal licensing regime could bring more benefits to the market. The impact on competitiveness will depend on if the three phases are implemented as planned. For example, the opening of the international gateway and 4G long-term evolution (LTE) infrastructure will make the market more competitive – provided all players have the same rights and obligations. Growth in competition can also be expected in DSL and voice-over-internet-protocol services as a result – especially in new urban developments where infrastructure can be readily put in place.
HATEM DOWIDAR: The new licensing regime is a good idea in principle, but the NTRA must execute it effectively. When we talk about unified licensing in Egypt, we are talking about equal rights and obligations for all operators. It is essential to ensure that the regime is fair to all and that it includes infrastructure and international services. The current model has certain limitations in these two areas. Ultimately, if we think about the future of mobile and data, much needs to be done in Egypt in terms of infrastructure to meet international standards, which will require decentralisation of infrastructure.
How can downward pressures on average revenues per user (ARPU) be mitigated?
GAUTHIER: Interfering in prices is sometimes a necessity. When an operator offers services below the cost, although it might be beneficial for the customer in the short term, it is not good for the sector in the long term. Other regulatory reforms that might help ARPU could include authorising new services, especially mobile money. This is a service that targets a large segment of the population that is not banked and uses only cash. With mobile money, you accelerate the circulation of cash among a very large segment of the population while making it traceable and taxable.
DOWIDAR: Within a truly free competitive market, there should be minimal control of prices. The regulator’s task should be to create balanced competition, which ensures consumers get the best value, but too much control over pricing or an overly competitive market may lead to the deterioration of the quality of service. Hence, it is extremely important to find a balance to foster the right developments in the sector.
AL HAMLI: The regulator plays a major role in maintaining value, as it will, in the end, impact the companies’ taxable income. The prices for interconnection could be used to maintain such value, whether for domestic or international interconnections.
What role do you see for broadband coverage in terms of future growth?
DOWIDAR: The growth of data in the coming years is going to be very significant. Not only has data penetration increased, but content is more widely available to a much larger number of people, as access to devices has increased dramatically. As a result, fibre infrastructure must be rolled out across the country. This would increase service quality for both fixed and mobile services. Hence, and as part of the unified licensing legislation, a proper regulatory framework should ensure that enough investments are directed towards enhancing fibre-optic infrastructure, which would allow operators to offer competitive landline services and prices.
AL HAMLI: Egypt is 15 years behind when it comes to state-of-the-art fibre technologies. The country requires a hybrid infrastructure solution – in terms of radio, fibre and satellite – to ensure the most efficient and cost-effective solution for the deployment of broadband. Moreover, it also requires increased regulatory facilitation and permission in order for the operators to be able to build their own infrastructure.
GAUTHIER: In 30 years, every household and business will rely on broadband connections. Even now, with increasing activity in terms of personal wireless communications, broadband is required. However, with a microwave network, broadband development becomes extremely difficult. In order to properly develop broadband, a fibre backbone is essential. Of course, there is also a need for spectrum frequency, but with those two elements in hand, the country will be ready to provide wireless broadband. It is important to note that, with broadband expansion, fixed landlines would not disappear but would reach a limit in terms of subscriber numbers. With the technology available today, there is room for both fixed and mobile services.
What can be done to expand demand for value-added services (VAS) in Egypt?
AL HAMLI: At the moment the market in the country is saturated and the voice business is almost stagnant, if not declining. This is due to the fact that data services and mobile internet are growing very fast, as well as the fact that customers are adapting to new over-the-top services. Therefore, operators are investing heavily in VAS services as a way to grow their revenues and to use them as a differentiation tool.
VAS services offer three unique value propositions: they require carefully chosen partnerships with key service providers, leading to a clear and fair business model that does not promote conflict of interest; they demand deeper understanding of customers, with product design and pricing being key success factors; and they need a lot of marketing, as many of VAS services are new to the Egyptian market.
GAUTHIER: Among other services, mobile money penetration and apps will experience significant growth in coming years, particularly as we continue to see increasing smartphone penetration within the market. Other VAS that will continue to expand in the short term including ringback tones and infotainment – all of which provide extra revenue.
DOWIDAR: The ability to carry out the necessary developments, whether in infrastructure, technology or regulations, is very important in order to take advantage of the momentum we are seeing in VAS demand. Some popular VAS, such as mobile payments, include those specifically designed for the banking sector and the responsiveness from the Central Bank of Egypt is impressive. This is especially remarkable considering how conservative the banking sector has traditionally been. This is an excellent example of how regulators, mobile operators and banks can work together to provide customers with products that add value to the economy.
How challenging will the roll-out of LTE be?
GAUTHIER: The roll-out of LTE will certainly be challenging. In addition to backbone development, companies need additional frequency in both the 2.6-GHz and 800-MHz bands. Furthermore, infrastructure sharing is necessary, as it will help reduce costs. There are already over 1000 sites that are being shared between different operators, but there is room for improvement.
DOWIDAR: Without proper fibre infrastructure, the roll-out of LTE will be very challenging. Within the new unified licensing regime, there are plans to establish a company to roll out fibre across the country, which would be shared by all operators. The challenge would be to ensure that all the requirements are met. The eagerness and drive of the government to ensure that there is support behind this company will be crucial.
AL HAMLI: LTE is in the second phase of the unified licensing regime, which should be complete by 2016. The target frequency will be 700 MHz, and we believe LTE should use other available frequencies in order to gain the maximum broadband benefits of such large bandwidth. However, LTE will be challenged by both the higher demand of backhauling bandwidth (i.e. fibre and/or radio) and coverage of such a high-density area.
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