Egypt: Added value in telecoms

Limited scope for further increasing mobile penetration amongst Egypt’s massive 80m-person population has intensified competition in terms of both tariffs and products between Egypt’s three GSM operators – Vodafone, Mobinil and Etisalat – who may soon be joined by the country’s first virtual network operator.

Egypt had 91.32m mobile subscriptions at the end of January, according to the Ministry of Communications and Information Technology (MCIT). This suggests a penetration rate of 112.3%. The high figure reflects the fact that many people have two or more SIM cards: some have several telephones, while others rotate SIMs depending on whom they are calling.

Subscriptions held by visitors and SIMs used for laptop data connections also boost the figure, and there is also a degree of “churn” in the market, or customers switching operators regularly to benefit from the latest deals.

Nonetheless, there is little doubt that the mobile market is nearing saturation in terms of SIM ownership. Karim Khadr, the head of research at HC Securities & Investment in Cairo, told OBG that, discounting the very old, very young and very poor, there are around 55m Egyptians who realistically could be expected to own mobiles. Among this demographic (approximately two-thirds of the population), he estimates that real penetration is around 100%.

As a result, competition between the operators has intensified dramatically and the sector has increasingly been characterised by battle for market share, with one of the most significant shake-ups the wake-up of the country’s third major GSM operator. Etisalat, majority-owned by the UAE national telecoms company of the same name, entered the market in 2007, and its aggressive pricing policies had an immediate impact on overall tariffs, though its subscriber base is still slightly more modest than that of Mobinil and market leader Vodafone.

This sort of competition has obviously benefitted the consumer, but has also cut average revenue per user (ARPU) considerably. Khadr estimates that ARPU now ranges between LE23 ($3.80) and LE27 ($4.45), depending on the operator. This has squeezed margins, prompting operators to try and expand usage of value-added services, particularly mobile internet data.