Google has decided to bypass the regional choke-point of Egypt and to build its new marine fibre-optic cable, dubbed Blue-Raman, through Saudi Arabia and Israel, the tech giant announced last week.
The $400 million cable will carry Internet traffic from Mumbai to Saudi Arabia via the Red Sea, then up through Jordan and Israel, across the Mediterranean, and into Italy.
The US newspaper the Wall Street Journal reported that the move aims to decrease Internet traffic in Egypt. The majority of Internet cables connecting India and Europe at present pass through Egypt, and the decision was also based on reducing the chances of global Internet problems occurring should damage occur to Egypt’s cables.
Moreover, cable owners are dissatisfied with the fees imposed by Telecom Egypt, the local operator, to allow their cables to pass through Egypt, the newspaper added. Analysts said the state-owned company demanded some of the highest fees in the world, costing the companies 50 per cent of the price of connecting their cables from Europe to India.
Egypt has the second-highest number of Internet cables after the US. Seventeen per cent of the world’s Internet cables pass through Egypt’s regional waters, a Telecom Egypt official said.
But Egypt lacks investments in the field, and the capacity of the cables are not utilised to their full extent, private-sector sources and former government officials told Enterprise Press, an online news service.
According to independent reports, Egypt’s infrastructure has not been able to keep up with the bandwidth required by modern cables. Despite the upgrades the government has carried out to boost the country’s capacity, Egypt loses out when the price and speed of its Internet services are compared to those in neighbouring countries.
To maximise Egypt’s potential, the country has to offer more incentives to the private sector and allow it to contribute to setting up better infrastructure and improving regulations, said private-sector sources and former government officials.
Egypt’s geographical location connecting Europe and Asia makes it an ideal meeting point for marine Internet cables. To benefit from this advantage, Telecom Egypt has acquired additional shares in the industry and built new cables.
It is the owner or partner in many cables that pass through Egypt. In 2018, the company announced that it had acquired MENA Cables and sealed an agreement to serve countries in southern Africa, before signing a memorandum of understanding to expand on marine cable services in the region.
Telecom Egypt has also become a partner in the Africa2 marine cable project, joining a consortium of seven global telecommunications service providers to establish the 37,000km Africa2 marine cable that connects Europe, the Middle East, and 16 African countries.
The cable aims to provide a new pathway linking the Red Sea and the Mediterranean Sea for the first time in more than a decade along with overland tracks parallel to the Suez Canal. It uses new technologies that allow the deployment of up to 16 pairs of fibre-optic cables instead of eight.
As soon as the new cable starts operations in two years’ time, it will be able to deliver speeds of 180 terabytes per second, allowing Egypt to improve its Internet services, a source at Telecom Egypt said.
The fees collected from companies to allow their cables to pass through Egypt go to the treasury. In 2019, Telecom Egypt collected LE2.9 billion in fees, or 10 per cent of the company’s profits in the first quarter of 2020, according to a report sent to the Egyptian Stock Exchange.
The fees contributed between 6.6 per cent and 17.4 per cent of revenues registered between 2008 and 2019, according to a study by Submarine Cable Map.
Egypt has already invested in extending fibre-optic cables instead of copper ones. The government implemented this project in two years instead of the scheduled four years and invested LE17 billion in it between 2019 and 2020 and LE43 billion since 2014, said an official at Telecom Egypt.
Hamdi Al-Leithi, deputy manager of the Chamber of Telecommunications and Information Technology at the Egyptian Federation of Industries, said building cables across Egypt was cheap but faced a number of challenges, including bureaucracy, time delays, and hesitation in making decisions.
Improving the business environment could triple the revenues of Telecom Egypt, which lost $1 billion in investments between 2012 and 2014 due to bureaucracy and security conditions at the time.
Telecom Egypt has a monopoly on Internet cables in Egypt, leading to worries regarding a lack of competition, the official said, adding that the same kind of monopoly existed in Saudi Arabia. However, the latter country was faster in taking decisions and facilitating operations for investors.
Egypt needed to invest LE120 billion to expand its fibre-optic cables locally and to improve the speed of the Internet, Al-Leithi said.
Telecom Egypt’s revenues were LE22.3 billion in the first nine months of 2020, up by 18 per cent on the same period a year earlier. The rise in revenues was coupled with an increase in the firm’s retail business by 30 per cent in the first nine months of 2020 on the same period in 2019 in the light of sharp rises in data-service revenues, the company reported.
Its net profits reached LE3.5 billion in the first nine months of 2020, up by three per cent on the same period in 2019. Landline and super-speed Internet subscribers also increased by nine per cent and 16 per cent, respectively, in September 2020, in comparison to September 2019 figures.
Telecom Egypt added that its mobile service subscribers had reached 7.1 million customers in September 2020, recording an increase of 55 per cent in one year.
Google’s move will not harm Telecom Egypt, but it will decrease its revenues. The location of Google’s new cable does not mean the tech giant will end its business in Egypt, said Mariam Wael, a telecommunications analyst at Pharos, an investment bank.
Sixty per cent of Telecom Egypt’s revenues are collected from the retail sector, not cables. However, if international companies walk in Google’s footsteps, Telecom Egypt’s revenues could be affected, Wael added.
Egypt’s revenues from hosting marine cables in its regional waters are estimated at $200 million. Al-Leithi said that Google’s latest decision would not affect Telecom Egypt’s revenues because it collects fees from hosting cables and maintenance stations as well.
However, he agreed with Wael that Telecom Egypt’s revenues could be hard hit if more international companies bypass Egypt.
*A version of this article appears in print in the 3 December, 2020 edition of Al-Ahram Weekly