Major African Mobile Markets: Future Growth Prospects 2006-2011  

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Back Industry Overview Mobile Markets Future Outlook Figure 1: Egypt - Mobile Subscribers and Penetration (2002-2011) Figure 2: Egypt - Market Share of Mobile Network Operators (June 2005) Figure 3: MobiNil - Ownership Structure Figure 4: Vodafone Egypt - Ownership Structure Table 1: Egypt - Important Economic Parameters (2004) Table 2: Egypt - Telecom Industry Snapshot Table 3: Egypt - Mobile Subscribers (2002-2011, In Million) Table 4: MobiNil - Key Performance Indicators (FY end-December 2004) Table 5: Vodafone Egypt - Key Performance Indicators (FY end-March 2005) Egypt is a presidential republic, which has been striving to introduce economic reforms and modernise its economy by emphasising important sectors, such as infrastructure and communications. Egypt's economy revived after the 1990s, with the liberalisation of the economy and successful measures taken by the government to curb terrorism and thereby establish political order in the country. However, this economic growth declined significantly from 5.4 percent during 1996-2000 to 2.7 percent during 2001-2004, primarily due to regional political instability, coupled with the government's inflexible monetary policies and the presence of a thriving foreign currency black market. Consequently, the Egyptian pound had a sharp fall of 45 percent against the US Dollar during 2001-2004. The availability of only limited arable land and overdependence on the river Nile also hampered sustained economic development in the country. A large source of the country's revenue is the export of crude oil and petroleum, and manufacturing activities, such as cotton textile production. The government has initiated the process to restore the economy by introducing various economic reforms in mid-2004, such as proposals to slash income tax and corporation tax, a reduction in energy subsidies and the privatisation of a number of enterprises.17 Table 1 provides an overview of the country's key economic parameters. Table 1: Egypt - Important Economic Parameters (2004) Telecom Industry Overview Egypt's telecom sector is one of the fastest growing markets in Africa in terms of absolute subscriber number. The country's telecom market was first opened to competition in 1997, when two operators were granted permission to provide public payphone services, and has since witnessed rapid growth. The country's mobile sector is now completely privatised and the private firms have been allowed to offer Internet services as well. The only exception is fixed telephony, which is largely dominated by the partially privatised operator - Telecom Egypt (TE). Some of the major events anticipated to influence Egypt's telecom market in the near future are the long awaited introduction of competition in the wireline market, the issuing of a third mobile licence and the launch of converged IP-based voice and data services by the proposed launch of Next Generation Networks (NGN). The National Telecommunication Regulatory Authority (NTRA) is the official telecom regulatory body of the country. Table 2 provides an overview of the country's telecom sector in terms of subscriber numbers and penetration rates. Table 2: Egypt - Telecom Industry Snapshot Mobile Market Egypt's mobile communication market is among the few large markets in Africa and has a huge consumer potential owing to its large population and low mobile penetration. The mobile market in Egypt has witnessed a significant growth in subscriber numbers over the last few years, largely driven by telecom reforms, which began in 1998. There has also been an increase in the low-income customer segment over the years due to stiff price competition between the mobile operators in the country and specifically the availability of pre-paid and instalment payment options. Mobile services in Egypt are provided by two operators - MobiNil and Vodafone Egypt. They compete intensely for the segment of high-spending post-paid subscribers in a market, which has a large segment of pre-paid subscribers only spending a marginal amount on mobile usage per month. GSM-based services were first launched in the country in 1996 by MobiNil, followed by Vodafone Egypt, which launched its service in 1998. More advanced services based on GPRS technology were launched in the country in 2003 by both the operators, but their use has been limited. Currently, the two operators provide enhanced data services, such as SMS, MMS, ringtone downloads, video clips, greeting cards, mobile banking, etc. Market Size The total number of mobile subscribers in the country at the end of June 2005 was 9.67 million with a corresponding penetration of 12.6 percent. The country's mobile subscribers are expected to increase at a CAGR of 22 percent during 2005-2011, resulting in a mobile subscriber base of 38.94 million and a penetration rate of 45.4 percent in 2011. The number of mobile subscribers increased by 32.3 percent from 5.73 million at the end of 2003 to 7.58 million at the end of 2004, driven by the growth of low cost pre-paid subscriptions. Table 3 shows the forecasts for mobile subscribers in Egypt for the 10-year period from 2002 to 2011. Table 3: Egypt - Mobile Subscribers (2002-2011, In Million) Figure 1 illustrates forecast growth in total subscribers and penetration in Egypt for the 10-year period from 2002 to 2011. Figure 1: Egypt - Mobile Subscribers and Penetration (2002-2011) Mobile Network Operators In the Egyptian mobile market, there is a close competition between the two mobile network operators in the country - MobiNil and Vodafone Egypt. Figure 2 illustrates the market share of the operators in terms of their subscriber base for June 2005. Figure 2: Egypt - Market Share of Mobile Network Operators (June 2005) Since 2003, the country's telecom regulator, NTRA, has been assessing the possibility of ending the duopoly in the market by launching a third mobile network operator, thereby increasing competition and stimulating further growth in the market. In accordance with these goals, the regulator granted a GSM licence to Telecom Egypt (TE), the government-owned fixed-line operator. However, TE cancelled its plans to launch mobile services due to the unavailability of an international partner. As a result, TE returned the GSM licence to NTRA for a full fee refund. By year-end 2003, these frequencies were taken up by MobiNil and Vodafone Egypt for the expansion of their networks. This agreement was also accompanied by the government's affirmation of not launching a third mobile operator for at least two years. However, with the two-year deadline approaching its end, once again in 2005 the regulator indicated plans to grant a third GSM licence, which would include the permission to launch both 2G and 3G services. The licence will be issued in March 2006 and the services are expected to be launched by year-end 2006 or early in 2007. MobiNil Telecommunications MobiNil was the first operator in Egypt to launch mobile services on a GSM network in 1996. It upgraded its network to GPRS in 2003. The two shareholders of MobiNil are Orange and Orascom. Figure 3 shows the latest ownership structure of the company. Figure 3: MobiNil - Ownership Structure The operator provides various value-added services, such as ring tone downloads, text messaging, MMS, video clips, greeting cards, etc. In 2005, a new 2.5G service called 'MobiNil Life' was launched by the operator to provide content downloads. The operator's network covers 91 percent of the total populated area in Egypt. Table 4 provides an overview of the operator's key performance indicators. Table 4: MobiNil - Key Performance Indicators (FY end-December 2004) Vodafone Egypt Vodafone, along with a consortium of other international investors, obtained Egypt's second GSM licence in 1998. Figure 4 shows the latest ownership structure of the company. , Figure 4: Vodafone Egypt - Ownership Structure Vodafone, like its competitor MobiNil, also launched its 2.5G (GPRS) services in 2003. It currently offers various services including pre-paid lines, SMS, data services, etc. In 2005, it launched BlackBerry services in the country to provide e-mail and Internet access and other advanced non-voice services. The operator's GSM and GPRS networks cover approximately 98.5 percent of the total population of Egypt. Table 5 provides an overview of the operator's key performance indicators. Table 5: Vodafone Egypt - Key Performance Indicators (FY end-March 2005) Recent Developments The following are some of the recent developments in the Egyptian mobile market: Technology Innovations and New Services In October 2005, MobiNil selected Tekelec, a US-based telecom company, to expand its network capacity in Egypt. Regulatory Developments In October 2005, NTRA indicated plans to grant a third GSM licence, which would include the permission to launch both 2G and 3G services. The licence will be issued in March 2006, with the launch of services expected by year-end 2006 or early in 2007. Moreover, the regulator said that the other two operators would also be allowed to offer 3G services, and the launch date for all the operators offering these services would remain the same. Top of page Future Outlook Egypt is a developing economy whose progress is largely dependent upon economic reforms, especially the privatisation of sectors, such as power generation, infrastructure construction and telecoms. This should enhance economic development and reduce unemployment. There is much scope for the growth of mobile services in the country. MobiNil considers the present economic scenario of Egypt as advantageous for telecom growth especially with the former telecom minister, Ahmed Nazif, becoming the country's Prime Minister. Improved economic conditions, liberalisation of the telecom sector, price competition among operators and the expected launch of mobile services by a third operator are expected to propel the growth of mobile services in Egypt. Some of the factors likely to help rapid growth of the mobile market in Egypt: Increasing economic growth resulting in an increasing average per capita income and hence subscribers' spending The government's plan to further liberalise the telecom market from 2006 by implementing measures such as the issue of another licence for fixed-line operators Price competition between the two operators, especially for the pre-paid customer segment The possibility of the launch of a third GSM network, which is expected to be bid for by international companies from the US and Europe who have indicated a strong interest in the licence - the issue of a third mobile licence would spur the growth of subscribers in the low-income segment as compared to the present scenario, where the two operators are more competitive in the high-income spending group The number of mobile subscribers is expected to be approximately 38.94 million at the end of 2011 with a corresponding penetration rate of nearly 45.4 percent. 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