Another operator in Egypt's crowded mobile services market raises the prospect of greater competition and hence better deals for consumers.

 

Landline monopoly Telecom Egypt (TE) sent a release to the stock exchange on Thursday saying it will apply for the 'virtual' licence if the possibility is offered by Egypt's telecoms regulator.

 

A Mobile Virtual Network Operator (MVNO) provides mobile services to customers by hiring network assets and capacity from another operator, meaning it does not have to build its own infrastructure.

 

Egypt currently has three mobile providers: Etisalat Egypt, Vodafone Egypt and Mobinil.

 

The head of the National Telecom Regulatory Authority (NRTA), Amr Badawi, told Ahram Online that his organisation is considering offering an MVNO licence to Telecom Egypt and the decision "might be taken within a month."

 

A virtual network works independently of the host mobile network and sets its own retail pricing. However, the virtual network has to pay a fee to the host in proportion to usage by its customers.

 

TE holds a monopoly on Egypt's fixed line market and is also a main shareholder in Vodafone Egypt. Acquiring another mobile phone interest could give TE a preferential position in the market, something Badawi says the NRTA is studying before offering a virtual licence.

 

"It is too early to predict the negative impact on [other] mobile operators as it is not yet clear whether one, two or three of them will be allowed to offer MVNO solutions," says Mohamed Hamdy, a telecom analyst at investment bank CI Capital.

 

"With penetration rates at 98 per cent at the end of September 2011, competition could be fierce and could lead to a war price with the new operator. This can surely benefit consumers," he adds.

 

TE's ownership of Vodafone Egypt, however, might complicate matters.

 

"If the telecom authority approves its licence, we think TE would opt for Vodafone Egypt as a host given its 45 per cent ownership [of the operator]," adds a note from CI Capital.

 

In that case, the opportunity for Vodafone Egypt might outweigh the threat to its own business. Meanwhile, the other two players -- Mobinil and Etisalat -- will be negatively affected by the tougher competition.

 

A virtual network could come at the right time for TE which has seen a steady decline in its landline subscribers since mobile phones were introduced to Egypt in the late 1990s.

 

Acquiring a share of Vodafone offered TE important resources; around 40 per cent of the public company's profits come from the mobile firm while 60 per cent are from internet and landlines.   

 

The idea of ending TE's landline monopoly has been proposed many times. NRTA chief, Amr Badawi, told Ahram Online the idea is "a possibility" but not right now. 

 

Telecom Egypt may benefit from the experience of Vodafone Egypt in Italy. Earlier this year, the mobile firm started a virtual network there to service the country's Arab diaspora.

 

Virtual networks are also gaining ground with mobile providers in Russia, the US, South Korea and Europe.