GSM incumbents move to head off Telecom Egypt

25 April 2003
Vodafone Egyptand Egyptian Company for Mobile Services (Mobinil)are negotiating a possible joint payment to Telecom Egypt (TE)in return for the company postponing its launch of the country's third GSM network, scheduled for the fourth quarter. 'If there is no other company available for us to launch the new service with, Mobinil and Vodafone will pay about£E 2,000 million [$345 million],' says a TE official. 'In this case, we will not start for about four years.' Mobinil president Osman Sultan has confirmed that discussions between the three companies are under way, but has declined to give any further details. Vodafone has also declined to comment.

Under the terms of the mobile licence TE acquired for £E 1,975 million ($340 million) last year, the company has been entitled to start operations since 1 December. Five companies submitted bids in mid-2002 for the equipment supply contract for TE's planned cellular service, but an award was not expected until the company had concluded the search for an international partner to take a stake in its GSM division. TE is being advised by Credit Suisse First Boston(MEED 28:3:03).

Mobinil and Vodafone Egypt each have over 2 million subscribers. The continued profitability and potential of the market are evident from Mobinil's results for 2002, which show that total revenues for the year ending 31 December rose by 11 per cent to reach £E 2,576 million ($444 million), while net profits rose by 24 per cent to £E 422 million ($73 million).

Despite Egypt's sizeable population, however, the major issue facing TE is whether it will be able to secure sufficient numbers of high-value subscribers to compete effectively with the two incumbents.

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