The rough economic conditions in Egypt have taken their toll on the GSM (Global System for Mobile communications) market in the country. The steep devaluation of the Egyptian pound from an average of 3.9 pounds to the US$ in 2001 to six pounds to the US$ in 2003, has resulted in increasing inflationary pressures in the country and has lowered people’s real incomes.
Whereas the market added 1.29 million GSM subscribers in 2000 and 1.4 million subscribers in 2001, it only added 866,000 in 2002, reveals a new report from the Arab Advisors Group. The analysis of the duopolistic GSM market in Egypt reveals revenue pains.
The Egyptian pound gradually slided between 2001 and 2002, from an average EP3.9 to EP4.6 to the dollar. This drop meant revenues, which are calculated in foreign currency needed by the operators to finance their expansions, declined.
For example, Mobinil’s gross revenues in Egyptian pounds increased by 11 percent in 2002 to exceed EP2.5 billion, yet declined by close to six percent when calculated in US dollars to reach $560 million.
“The revenue pains have multiplied in 2003. In the first quarter of 2003, the monthly average revenue per user (ARPU) in Egyptian pounds was steady and similar to that in 2002. In US dollar terms, however, the first quarter 2003 monthly ARPU actually dropped by 20 percent,” Jawad Abbassi, Arab Advisors Group’s president wrote in the report.
“The Arab Advisors Group believes that the steep decline in revenues growth will negatively affect future network expansions and infrastructure deployment in Egypt’s GSM services,” Abbassi added.
This dual problem of devaluation and lower market growth also complicates Telecom Egypt’s GSM network plans. The state-owned operator has a third GSM license but has not rolled out its network yet.
The Arab Advisors Group believes that a third GSM network in Egypt’s current market situation is a tough sell. Telecom Egypt’s service record is not better than MobiNil’s or Vodafone’s. As such, the operator will not be able to attract the high revenue post paid users already served by the two operators.
Its growth therefore will arise from marginal users whose APRU is even lower than the average market ARPU. At the current growth rates in the market, the feasibility of the project will be in doubt.
This situation raises the stake and puts the onus on Egypt’s regulator and government to come up with a solution that does not endanger Telecom Egypt’s finances and at the same time serves the interests of the Egyptian consumers.
The solution may indeed lie in a Mobile Virtual Network Operator (MVNO) approach or, more daringly, obligatory national roaming between GSM operators. Such a scenario, the Arab Advisors Group believes, will of course need fair compensation to the existing GSM operators in the country for national roaming. — (menareport.com)
© 2003 Mena Report (www.menareport.com)
