Telecom Egypt (te) has announced its intention to offer fourth line mobile services and the Daily News Egypt interviewed the company’s CEO and CFO on 11 July to discuss their vision, as well as upcoming expected changes in the telecommunication market.
Mohamed Elnawawy, managing director and CEO of te, explained that this new service will give the company a good opportunity to grow, adding that it will have a chance to compete in 85% of the market, from which they are currently excluded, with the mobile license.
“We’re not just a new mobile player. We’re a new mobile player that has connections to 7 million users,” he said.
“For example, we’re intending to serve governmental enterprises, the biggest spender in this sector, and we’ll have a good opportunity to serve them. This will give us access to new 10%-15% of the market share,” he added.
“Also 2 million home costumers are buying our DSL service so we can make sales for the mobile services with them as well,” Elnawawy said.
A statement issued by HC Equity stated that even though the market is becoming saturated; te has strong potential due to its revenue stream and strong balance sheet.
Elnawawy, however, believes the possibility of the telecom sector to become saturated is close to none.
“This market is incapable of getting stagnated simply because people are born every day,” he said.
Describing the future of the telecommunication market Elnawawy said: “The market is redefining itself; the old has died and the new has not yet been born.”
Te issued a statement in March announcing it would be ready to launch mobile services in mid-July, once it receives the license, however there was a slight delay.
Mohamed Shamroukh, the company’s Chief Finance Officer, stated that the company has been negotiating with the National Telecommunications Regulatory Authority (NTRA) and with the mobile operators in the market.
“There’s a delay, but we hope that it doesn’t exceed July. We have the technical and commercial capabilities that allow us to follow through with what we previously announced through the media, but we’re still waiting for the license,” Shamroukh said.
“The market is worth around EGP 33bn and it’s still growing. Telecom Egypt’s legal share in this market is around EGP 5bn so that new license will improve our market share,” he explained.
Shamroukh stated that the company is currently offering a number of competitive services in the market. However, they face a threat to their operations because the company is handicapped in the mobile services segment “and this lessens our competitive edge.”
He said that at the initial stage, te decided to operate with minimum capital expenditure, mainly because of its investment in Vodafone Egypt [45% ownership].
“We are not intending to own a spectrum, so we are going to rely on the telecom operators that are currently available in the market to offer the total telecom services to our clients,” he said.
“Our strategy in the two-year start-up stage will be to sustain our traditional line of business and maintain the attractive margin we are creating while gaining the internal knowhow with a minimal investment,” Shamroukh added.
He added that this minimal investment plan will change when the company receives the foresee analysis. “We will await the results and base what our strategy will be on them. We want to invest in the newest technologies possible,” he said.
When asked about the plan to finance this project, Elnawawy said the company doesn’t believe that there is a large level of investment at the current stage.
“The costs will mainly be on goods sold so we don’t need financing on that level. When we start thinking about a 4G network, maybe a year from now, we will think about the spectrum costs and radio-asset costs then the financing will become our focus issue,” Elnawawy said.
“We have a lot of cash and we believe we’ll be able to do the financing ourselves but this will be a business case that we must negotiate with our shareholders,” he added.
When asked how the company will be able to have a competitive edge in the market, Elnawawy said: “The company’s competitive edge is always in its conversed services.”
He further explained that the company aims to leverage its infrastructure to offer a better mobile product which will be introduced in January 2014.
Regarding the ongoing dispute between te, Vodafone and Mobinil on the inter-operator rates owed by the mobile-phone providers, Elnawawy referred to the telecommunication operators as “good partners.”
Elnawawy refused to comment on the reported EGP 8bn in debated fees and added that it was extracted from a statement of the central auditing organisation reports.
“We have an ongoing arbitration and we’re expecting to finish all the hearings this year. We’ll be awaiting the awards in the fourth quarter of 2013 or the first quarter of 2014,” he added.
Te’s profits declined about 13% compared to 2012 and witnessed a drop of 6% in the first quarter compared to the same period last year. Nevertheless, Elnawawy forecasted the end of year profits to be around 3% or 4%.
“The overall image looks great. Bear in mind that a big chunk of our profit comes from Vodafone whom we don’t control. We need to know what Vodafone plans,” he said.
No plans to expand abroad
Elnawawy said that the company is not perusing any foreign expansion projects at the moment.
“Companies which expand are mainly companies that had a high level of success in their countries and decided to grow. We are still mediocre in our market,” He said.
On whether or not the subscription to fixed lines will continue declining, Shamroukh explained that the dynamics of the customer base are changing.
“The decline was because there was a no real broadband service offered in the Egyptian market,” Shamroukh said.
“We have 90 million population and two-thirds of our population is below the age of 25. This means there is a plenty of room for us to do better job,” Elnawawy added