Getting connected: International connectivity is routing through Egypt

At the axis of the Middle East and North Africa (MENA) region, Egypt is capitalising on its geographical advantages to build its role as a regional and international telecommunications centre. Increasing global connectivity has the advantage of improving the capacity of Egypt’s communications infrastructure at a time of rising demand, supporting both consumer usage and the outsourcing and offshoring industries. Global connectivity is also a major issue for mobile operators looking to provide international services.

TE NORTH: In August 2011 Telecom Egypt (TE) announced that it had completed the upgrade of its TE North subterranean cable in partnership with French-US telecoms provider Alcatel-Lucent. The system is now equipped with 40 gigabit per second (40G) wavelength, and is the first cable network in the Mediterranean with commercial 40G services. The 3600-km cable will connect Abu Talat near Alexandria in Egypt to Marseille in France, with a branch to Cyprus. The system will include branching stations allowing further links to other locations in the Mediterranean basin.

The use of 40G technology will double the design capacity of the existing system from 10 terabytes per second (TBps) to 20 TB ps, according to Alcatel-Lucent, which needs the expanded capacity to meet rising demand. The firm says that the 40G technology will allow operators such as TE to continue to deliver connection quality, speed and bandwidth to its commercial clients and users, who are increasingly demanding multimedia services. “Infrastructure like TE North encourages the creation of new industries as it offers incentives such as lower costs for companies that need access to international gateways like call centres,” TE’s former CEO, Tarek Aboualam, told OBG.

It is not only domestic firms that are developing international links. In March 2012 India’s Tata Communications announced that it had finished construction on a fibre-optic cable link across Egypt, completing the firm’s 9280-km network, offering a seamless connection between Europe and India, via the Middle East.

GATEWAYS: TE held a monopoly on international calling operations until changes were introduced in 2005 that opened the market. In 2007, a few months after its launch, Etisalat Misr was awarded Egypt’s second international gateway licence. TE’s international gateway provides high-margin business for the fixed-line operator itself, but few benefits for mobile operators using it, which earn only local rates on foreign calls. TE currently makes annual revenues of around LE2.5bn ($418m) on its gateway licence, according to Karim Khadr, the head of research and senior analyst for telecoms at HC Securities and Investment in Cairo.

In December 2011 the international press reported that Mobinil had applied for a licence to establish its own international telecoms gateway. Mobinil’s CEO, Yves Gauthier, said his firm was in negotiations with Egypt’s telecoms regulator, to lower the LE3.1bn ($519m) fee for the licence. Mobinil had announced in the past that it would seek to set up its own gateway if it could not secure price concessions from TE, though it has reached deals with the state-owned operator in the interim. If Mobinil’s bid is successful, the gateway will enable the operator to set its own prices for international connections and profit.

ADVANTAGES: The advantages of having an international gateway are clear from Etisalat’s success. The company was buoyed by its gateway earnings, and it has an edge over competitors due to its ability to offer local-rate voice and data services to its Egyptian subscribers when they travel, using Etisalat subsidiary networks, like those in the UAE and Sudan. Similar deals are available for Etisalat subscribers in other countries visiting Egypt. While in the EU, roaming costs were brought down by regulation, market forces have led the way in Egypt. All three operators are majority-owned by foreign firms with international affiliates. Many Egyptians live abroad, particularly in the Gulf, and some 14m visitors arrive in the country each year. Thus, excellent international connectivity and an attractive roaming package are important selling point for an operator.