The launch of 4G mobile networks in September 2017 represented a turning point for the Egyptian telecoms sector, ushering in a new period of investment, international partnerships and technological innovation.
New Deals
The National Telecommunications Regulatory Authority (NTRA) started issuing long-awaited 4G licences in 2016, with Telecom Egypt (TE) the first to acquire one for LE7.08bn ($466.4m) in August. Following initial hesitation over spectrum offers and foreign-exchange conditions, the country’s other operators – Vodafone Egypt, Etisalat Misr and Orange Egypt – followed suit in October. Orange paid $484m for its licence, Vodafone $335m and Etisalat $535.5m, with the sums varying due to spectrum allocations. All four operators launched 4G services in September 2017, further stimulating demand for smart phones. Smartphone users numbered 23.6m at the end of 2017, compared to 21m the previous year, according to local media.
“We expect a positive impact from growing data revenue of mobile operators,” Ahmed Adel, head of telecoms research at Egyptian investment bank Beltone Financial, told OBG. “Data penetration is quite low at 36%, against voice penetration of 110%. One reason is connection quality, but 4G allows operators to improve quality and raise speeds at affordable prices.”
Investment Wave
The impending launch of 4G led to a wave of investment in infrastructure, services and marketing by the mobile operators, which also allowed them to refresh and reinforce their brands. In a press release, Orange said it doubled its investment in the country to help develop 4G, supported by a €750m loan from its French mother company. This brought Orange’s total investment in Egypt to more than LE32bn ($2.1bn). As part of the promotional push for its 4G services, the company announced discounted smartphones for as little as LE999 ($65.80), extra data for those upgrading their SIM cards and lower-cost home internet packages.
Vodafone Egypt, meanwhile, will have invested LE9.5bn ($625.9m) between 2015 and the end of FY 2017/18, and expects a further 10% increase in investment over the next three years, Ayman Essam, head of government relations at Vodafone Egypt, told local media in late 2017. In addition to plans to broaden its network and build more towers, the company is allocating funds to outsourcing services. It expects investment outlay to be matched by a 10% rise in revenue from the launch of 4G.
The timing of 4G development allowed state-owned, fixed-line operator TE to launch its new mobile service WE with a 4G offering from day one. The company, which will initially rely in part on Etisalat’s physical network, has invested LE1.4bn ($92.2m) to provide the latest services, on top of the LE595m ($39.2m) paid to the NTRA for appropriate frequencies. In June 2017 TE signed an agreement with state-owned National Bank of Egypt as the agent for a LE13bn ($856.4m) loan from a consortium comprising Commercial International Bank, Banque Misr, Qatar National Bank and France’s Credit Agricole. TE reported that the loan would be used to boost investment in infrastructure and mobile internet services, although analysts at Belton suggested it could also be used to cover 4G licence costs.
Next Steps
In October 2017 Etisalat Misr announced a four-year contract with international telecoms company Ericsson to modernise its network and business support systems. Ericsson will help Etisalat capitalise on the growth of 4G and lay the foundations for the development of 5G and the internet of things. Etisalat hopes the deal will help it streamline both capital and operational expenditure, while allowing it to market innovative products faster and offer an improved user experience. Etisalat aims to offer customers more flexible and personalised service packages, including cross-bundling and shared data plans.
TE is also seeking partners to help grow its network. In January 2018 local firm Linatel Telecommunications announced that it was in negotiations with the state-owned operator for the expansion of its infrastructure.
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