WATANI International
6 June 2010
For the past two weeks, news had been circulating that Vodafone International was in negotiation to sell its 55 per cent share in Vodafone Egypt, with the value of the sale estimated at EGP24.3 billion, according to the Financial Times. The most viable prospective buyer appeared to be Telecom Egypt (TE), the owner of the remaining 45 per cent share in Vodafone Egypt. Had TE succeeded in acquiring Vodafone Egypt, it would have been the only company in Egypt that operates both landlines and mobile phone services. Such a position was utterly troublesome for Mobinil and Etisalat, the other two mobile service providers in Egypt, since TE, which is 80 per cent owned by the government, is the country’s fixed line monopoly.
Last Wednesday, however, Vodafone Egypt announced that talks with Vodafone International had broken, but gave no reason for that.
Fixed, mobile, or both
TE had previously announced its desire to receive a permit to become a mobile service operator, after its profits on landline operations declined sharply owing to intense competition with Egypt’s mobile phone operators. The Ministry of Communications never responded to TE’s request, and the company is eager to enter the mobile phone market, either by acquiring Vodafone Egypt or by receiving a licence to become the country’s fourth mobile phone operator.
Abdel-Rahman al-Sawy, head of the communications department at Helwan University, told Watani that, with consumers preferring the more flexible options offered by mobile phone operators, the landline phone market in Egypt is getting narrower by the day. This, Dr Sawy says, leaves TE with the option of operating a mobile phone service of its own in order to be a serious player on the field, meaning it could either acquire an existing operation or licence to operate a new one. Doubtless, acquiring an existing operation would provide TE with a ready-made network and subscribers. Were this to take place, Dr Sawy said, the mobile phone services should be run by an entity independent of the landline services; otherwise TE would be the only company running mobile phone services while it has a monopoly over fixed line phone services, thus gaining undue advantage over its competitors.
Hashem Zoheir, a former deputy head at Mobinil, remarked that in case TE acquires its own mobile services operation, the government should grant Mobinil and Etisalat licence to run fixed line phone services, in order to have a level playing field.
Talaat Omar, deputy head of the scientific committee for communications engineers, shares Mr Zoheir’s view. The same opportunities offered TE, he says, ought to be granted to its competitors. This would work to the benefit of consumers, and would create mobility on the market. Furthermore, Mr Omar says, merging fixed line and mobile phone services has helped improve the quality of phone service wherever in the world it was implemented.
Market share
During the recent talk about the sale of Vodafone International’s share in Vodafone Egypt, Orascom Telecom (OT) chairman Naguib Sawiris expressed his company’s interest in buying. But a telecom official said Egyptian regulatory authorities would not allow OT to buy a stake in Vodafone Egypt if the deal gives OT management stakes in two competing firms.
The biggest share of Egypt’s mobile market by subscribers—out of a population of some 80 million, there are 57.7 million mobile phone users—belongs to Mobinil which is jointly owned by OT and France Telecom. Vodafone Egypt has the second largest share, while Etisalat Misr, a unit of Emirates Telecommunications Corporation, runs the third licence for mobile phones granted by the State.
Vodafone Egypt is one of the mother company’s best investments, according to Khaled Higazy, head of the State relations department at Vodafone Egypt. The Egyptian market, he says, ranks sixth among 31 countries where Vodafone operates. Vodafone would never entirely quit the Egypt market, he says.