Egypt Telecom Egypt plans may violate other licence agreements

Plans for state-owned Telecom Egypt to start up a global system for mobiles (GSM) operation once the period of exclusivity for the two existing operators expires at the end of 2002 are likely to be contested by the two companies concerned, a senior industry official says.

The official says that the licence agreement negotiated with UK-controlled Misrfone in 1998, the terms of which also apply to the operations of Egyptian Company for Mobile Services (MobiNil), states that any new operator will have to bid for a licence in a competitive auction. The earliest date for the auction is four years after Misrfone started operations on 27 November 1998. The starting price of the auction is to be $515 million - the price Misrfone paid for its licence - plus compound interest, based on the Central Bank of Egypt discount rate, which will bring the actual base price up to about $680 million, the official says.

The Telecommunications & Information Technology Ministry said on 11 May that Telecom Egypt would be entitled to set up a mobile phone system at the end of 2002 because it still holds its original licence which predates the award of the Misrfone and MobiNil licences. 'Telecom Egypt sold its operational assets to MobiNil in 1998, but not its licence,' says telecoms undersecretary Tarek Kamel. 'What it plans to do is activate its existing licence.' The ministry says it is also studying the option of issuing a fourth licence through an international auction.

The industry official says the ministry's view is unlikely to be accepted by the existing operators, as the agreement with Misrfone states clearly that any new mobile phone operator will be required to take part in an auction.

Misrfone, 60 per cent owned by Vodafone AirTouch of the UK, won its licence through submitting the highest price in the 1998 auction, originally intended to be for just one licence. MobiNil, a listed company in which France Telecom, the US' Motorola and the local Orascom Telecom are the main founder shareholders, was awarded its licence after it increased its bid price to match the Vodafone bid. MobiNil has also purchased the existing GSM operation of Telecom Egypt.

Investment analysts say the government is anxious to establish that Telecom Egypt will have the right to set up a mobile phone system because otherwise there is a danger that the offering of shares in the company will flop. A 20 per cent stake in Telecom Egypt is to be offered to the public in the fourth quarter of 2000 (MEED 19:5:00).

It is not yet clear what effect a legal battle over the Telecom Egypt mobile phone licence plan will have on the proposed share offering.