Egypt’s telecom operators have faced more than their share of challenges in the past year, with revenues sliding as a result of the political unrest that persisted long after the downfall of former president Hosni Mubarak.
But the level of the declining revenues faced by the operators looks set to be a temporary phenomenon. The situation also belies the true state of Egypt’s telecoms sector, and its potential.
Indeed, Egypt is home to one of the most developed telecom sectors in Africa, with national and international fibre infrastructure, some of the lowest pricing for services in the region and a competitive mobile sector. The country is also home to more than 150 internet and data service providers.
“There were more than 80 million mobile subscribers in Egypt by the end of Q3 2011, following a year-on-year growth of 26%,” says Farid Lekhal, a principal at Delta Partners. “This implies a penetration above 93%. As the market reaches saturation levels, mobile operators are moving from the intense competition, which pushed voice prices down by more than 50% over the last two years, to customer value management.”
Osman Abu Al-Nasr, country director in Egypt for Nokia Siemens Networks, thinks that demand for communication is at an all time high, with figures past market saturation. He says: “In spite of this turbulence and the relative instability associated with revolution – or perhaps as a result of this – the demand has increased for continuous communications through mobile phones. The end result was an increase in the mobile penetration rate and subscriber numbers, especially with the fierce competition between mobile operators and their aggressive promotional offerings. Specifically, the mobile penetration rate of 79.57% in August 2010 increased significantly to 97.93% in August 2011, and by now should have crossed the 100% threshold.”
Al-Nasr also believes that there is still more growth on the horizon and that initiatives such as LTE, fixed and mobile broadband, mobile payment solutions and the issuance of a fourth mobile provider licence “can all regain momentum”.
The highest growth is mainly seen to be in mobile broadband services which gives network operators like Mobinil, Etisalat Misr and Vodafone Egypt newer streams of revenue to tap into. The average revenue per user (ARPU) is steadily declining and this is where telcos can differentiate themselves and gain customers.
After studying the market carefully, Carlo Alloni, president and head of Ericsson North East Africa, says that while the operators continue to seek growth and create shareholder value, they are faced with declining ARPUs. “The need for new services that can introduce an additional source of revenue, reduce churn and attract new subscribers from competitors is more important than ever,” he says. “I also see customer experience and mobile broadband offerings to be a significant differentiator in the market place.”
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With the Arab Spring, tourism hit an all time low, seriously hampering roaming revenues for the telcos. This was also coupled with censorship and restrictions on internet usage during the crisis driving revenues further down. However, due to this, mobile broadband became a steadfast alternative and the gains are only just starting to trickle in.
Alloni thinks that broadband services are definitely garnering interest and could very well be the next cash cow for operators. He says: “We see a growing market in broadband services, for both mobile and fixed networks. Consequently, there are some applications which have started to gain popularity, and lately for example we noticed a renewed attraction to all smartphone applications, with Facebook and Twitter being the dominant applications. Fields that I personally think can be further explored are related to traffic, health and security, where I believe there is still repressed demand.”
