High-speed mobile data networks in Egypt's telecoms sector move closer to completion

In October and November 2016, three of Egypt’s main mobile telecommunications operators – namely Vodafone Egypt, Etisalat Misr and Orange Egypt – signed 4G LTE licence agreements with the country’s telecoms regulator, the National Telecom Regulatory Authority (NTRA). This embrace of new, high-speed mobile technology by the nation’s communications providers has been in the works for some time.

Indeed, the launch of 4G LTE has been under discussion in Egypt since at least 2014, when the Ministry of Communications and Information Technology (MCIT) announced that it planned to secure the necessary spectrum for high-speed mobile services. The development and launch of the service will further increase the sector’s already tight competition. In large part this is down to the fact that the NTRA issued a 4G LTE licence not only to the three mobile operators, but also to Telecom Egypt (TE), the state-owned, monopoly fixed-line telecoms operator, thereby adding a major new operator to the mobile segment. However, while this move will likely see changes in the performance of the country’s operators, the opportunities for boosting revenues – and increasing data penetration – are clear. “Two years ago when we initially decided to clear up and sell 4G spectrum, we faced many issues,” Ahmed Said, the economic affairs director at the NTRA, told OBG in early 2016. “Today many challenges remain, but we are confident that the technology will be in place on the ground soon, and that the changes in the sector will benefit Egyptian consumers.”

Development History

The MCIT’s development plan, as announced in 2014, involved issuing a series of new, unified licences. These were meant to simultaneously allow TE to compete for the first time in the mobile segment, and for Vodafone, Orange and Etisalat to move into the fixed-line segment, which hitherto had been dominated by TE. The idea, in effect, was to use the launch of 4G LTE to carry out a broad market liberalisation programme. This plan remained in place until mid-2016, at which point the MCIT and the NTRA began shopping the newly established licences to the mobile operators. “There were a whole a range of technical challenges that we had to overcome with regard to clearing up the necessary spectrum to allow for 4G services,” Said told OBG. “The unified licence carries significant infrastructure installation requirements. We want the operators to work together to install these networks, and eventually to share them as well.”

Making Changes

Under the NTRA’s initial plan, the sale of a unified licence to TE carried with it a requirement that the state-operated firm divest itself of its 45% stake in Vodafone, which is Egypt’s largest mobile operator. However, this condition was subsequently dropped. In mid-2016 Orange, Vodafone and Etisalat turned down the unified licence offer, naming insufficient spectrum as the primary reason. Consequently, TE became the sole unified licence-holder when it acquired one in August 2016 for LE7.08bn (equivalent to $372.5m as of December 2016). Over the following months the NTRA considered tendering the licences on the international market. A range of foreign telecoms providers – including China Telecom, Saudi Telecom and the Kuwait-based operator Zain – expressed interest.

However, in October 2016 the regulator announced that if the operators were willing to pay entirely in US dollars – thereby helping to address a dollar-currency shortage that has affected Egypt’s economy in recent years (see Economy chapter) – they would be issued additional spectrum for a nominal cost. The resulting deals involved the issuance of a modified unified licence to all three mobile operators, under which the firms can offer 4G LTE services and fixed-line services, but not fixed data. Vodafone secured its licence for $335m, while Etisalat paid $535.5m and Orange paid $484m. “There is not much retail opportunity for TE in the 4G mobile segment, as penetration is already over 100%,” Said told OBG. “Our primary concern is to make sure that 4G services come into operation sooner not later.”