Telecom Egypt eyes mobile licence towards year-end

Reuters, Thursday 7 Jul 2011

The majority state-owned landline operator is looking to introduce mobile services in a move to boost its long-term growth prospects, says chairman

Egypt's revolution has not dimmed Telecom Egypt's ambition to push further into mobile phone services and the company aims to secure a mobile virtual network licence towards the end of the year, its chairman said.

The mostly state-owned landline monopoly is relying, for now, on data services to offset lower fixed-line income and has also been trying to establish a mobile operation to boost longer-term growth prospects.

Telecom Egypt owns a 45 per cent stake in Vodafone's Egyptian mobile venture but does not have management control and only consolidates part of the profits from that business.

Analysts have played down the prospect the army-backed government overseeing the country since the overthrow of President Hosni Mubarak in February will take major decisions affecting the telecom sector without a stronger popular mandate.

But Telecom Egypt chairman Akil Beshir said it was in talks with the national telecoms regulator over an MVNO licence.

"Many people do not expect this government to take a major decision like introducing an MVNO, but we keep working on it," he told Reuters in an interview, adding a decision to grant the licence could come towards the end of the year.

Beshir said his goal was to transform the 80-per cent state-owned company into a "total telecom service provider" and that meant pushing into mobile services as a priority.

Vodafone Egypt and Mobinil dominate the mobile market, followed by Etisalat Misr.

Telecom Egypt offered, a year ago, to buy out Vodafone's 55 per cent stake in Vodafone Egypt but the two sides could not agree on a price and Beshir said there were no talks over a buyout for the time being.

"So, MVNO would be a good way of leveraging the partnership," he said, indicating Vodafone could collaborate on the MVNO if it felt the service was not competing directly with its own.

The popular uprising in January and February disrupted Egypt's telecom industry, partly because the government cut off networks to try to stop people using phones and social media to rally against Mubarak.

While Telecom Egypt -- which owns the bulk of Egypt's Internet and fixed-line infrastructure -- reported a 10 per cent drop in first-quarter net profit, Beshir said the revolution was positive for the company overall.

The central role played by social media in mobilising the opposition and bringing people into the streets helped boost the number of Egyptian Facebook users to 7.5 million from 3 million before the revolution, he said, a fillip for internet providers.

Expected pay rises for many Telecom Egypt staff, part of a trend of payroll increases across the economy in response to a wave of industrial action, would not necessarily mean lower profitability for the company this year, said Beshir.

"I cannot say [profit will drop] because ... we are increasing revenue and profits and our net profit depends to a great extent on Vodafone Egypt profits as well," he said.

Beshir said the uncertain operating environment meant the company should be "conservative in cash" but also ready for any investment that would benefit shareholders, such as a shift further into the mobile segment.

"But if at any time we feel we do have the cash and we do not have any investment opportunity, then we will obviously have to use the cash for shareholders, either by buying back shares ... or paying cash dividends."

He said the state, in need of funds, might decide to lower its stake in Telecom Egypt -- the law allows it to sell it down to 51 per cent -- but that was not on the table for now.

The company was close to an agreement with rival Mobinil in a dispute over interconnection fees, Bashir said.

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