After a blazingly successful five years under CEO Ian Gray, Vodafone EgyptVodafone Egypt has transitioned the hot seat to a new, but familiar, face.

Had George W. Bush looked for a model of how to execute regime change in the run-up to his invasion of Iraq, he could have done worse than to look at how Vodafone EgyptVodafone Egypt manages C-suite transitions. In the past, the company has executed them flawlessly, combining the sense of renewal and invigoration that comes with new management with and the stability and continuity that stakeholders -- customers, partners, investors and government -- expect. Mohammed El-Hammamsy, founding CEO of Click GSM, helped settle in VodafoneVodafone veteran Ian Gray as his successor, by taking on the role of deputy chairman and going on to head the Vodafone Egypt Foundation as Grey settled into the top seat. The smooth transfer of power came as Vodafone EgyptVodafone Egypt was in a game of catch-up, racing to pull even --in terms of subscriber numbers, revenues, profits and the all-important industry metric known as "ARPU" --with market leader MobinilMobinil, which had a three-year head start.

Fast forward to 2007 and it's happening again. Founding chairman Mohammed Nosseir announced in June his retirement from the company he helped create, effective September. Great fanfare ensued as Vodafone EgyptVodafone Egypt threw a black-tie gala in his honor. (The company's marketing wizards, of course, dubbed it a black-and-red gala.) Gray was quickly named non-executive chairman of Vodafone EgyptVodafone Egypt -- and was just as promptly tapped to depart for Europe, where Vodafone Group has him running its operations in Poland, Hungary, Romania and Czech Republic as CEO Eastern Europe, in addition to his duties here in Egypt.

Taking Gray's post is Richard Daly, the retail guru who helped roll out VodafoneVodafone's storefronts in both the United Kingdom and Egypt. Before being tapped to take the top job here, UK-born Daly was Vodafone EgyptVodafone Egypt's chief commercial officer and deputy CEO. Daly, who joined Vodafone EgyptVodafone Egypt on June 1, 2005, and was promoted CEO in September, says it was "blindingly obvious" to those inside the business that he was being groomed to take over Gray's post.

What might be less obvious to outsiders is the extent of Vodafone EgyptVodafone Egypt's commercial success since Gray and Daly took over. From the perennial number-two slot, VodafoneVodafone now leads arch-rival MobinilMobinil --jewel of the home-grown Orascom TelecomOrascom Telecom empire --by most measures, except the absolute number of customers on its network.

In the last bt100 ranking of top companies on the Cairo and Alexandria Stock Exchange, published in June 2007, VodafoneVodafone edged out MobinilMobinil for the second year in a row, ranking sixth overall with revenues of LE 7.56 billion (down one slot from fifth the year before) against MobinilMobinil's seventh-place finish with LE 6.36 billion (also down one rank from the year before). VodafoneVodafone was also more profitable, grew its revenues and profits faster, and posted superior return-on-revenue figures.

And, then, of course, there's ARPU: In average revenue per user -- the key beauty-pageant statistic in the industry --Vodafone EgyptVodafone Egypt posted striking gains at the same time as independent analysts noted that MobinilMobinil's "diluted" (industry-speak for 'declined.')

For years, the knock on VodafoneVodafone was that it was the also-ran operator. But it wasn't the brilliant Tarek Nour-designed, drum-thumpingnationalist campaign for VodafoneVodafone's 3G launch that vaulted VodafoneVodafone into the lead. It was smart management in the years leading up to the launch.

With the company having lost both its founding chairman and the day-to-day involvement of the charismatic Gray, we recently sat down with Daly -- who grumbled that he "may start talking rubbish in about 30 minutes" as he was fasting near the end of Ramadan -- for a wide-ranging interview on what's next for VodafoneVodafone, which in addition to serving 12 million mobile phone customers, has also morphed into one of the nation's top providers of broadband, call-center and money-transfer services.

"What's remarkable," Daly says, "is that even now, with LE 10 billion in turnover, we're still a very young company --there's much more left to come."

Edited excerpts:

Readers who already know you will skip ahead a couple of questions to the business discussion [starting page 81], but for those who don't, what's your background? How did you wind up in Egypt?

My background's in retail, really. I came up through Marks & Spencer training and spent about 12 years there before joining British Home Stores (BHS), which I guess most of your readership here won't know about. They're two big UK-based international department stores. So my background is really in retail, retail operations. I spent a total of 19 years with those two companies. I worked abroad with BHS in Hong Kong for a year and six months in Paris. I left BHS as their retail director in 2000 --that's when I first came into contact with Ian Gray.

How did you meet Ian?

Through a head hunter. Ian was then managing director of VodafoneVodafone retail in the UK, which was 150 stores at the time. In fact, it was in a position not terribly different from how the Egyptian market feels right now -- you know, you're on that tipping point where it's just really accelerating. Ian was just building out that business and he had been approached about taking something bigger and better within the Vodafone Group, so I think his ticket to a good job was to recruit his successor.

He came and found me, and I must say that the day I trekked up to Banbury to meet him was the best day's work I ever put in. I was supposed to meet his HR director, but the HR guy had forgotten about it and wasn't there. So it's 7 o'clock at night as I arrive at this dark, shut-down office. Ian came out and was like, "Okay, who are you?"

To make a long story short, three hours later Ian had basically bought into the idea of giving me the job. And those three hours? To know Ian is to know he's the consummate coach. I'm sure he's done it to you. I imagine you asking him a question, and him saying, "Well, I think you should ask the question this way"

In our interview, he'd ask me a question and I'd answer it, and then he'd totally coach me. He'd come back and say, "Okay, I'm going to ask you another question, and I think that you should maybe consider it from this point of view" And then he'd ask the question and you'd answer it, whereupon he'd say, "That's a very good answer!"

It was just a kind of indication of the guy, of what a people person he is. He didn't know me from Adam, but he took three hours out of his night to spend time with me.

In the end, one of the biggest achievements in my career was to inherit the retail business from Ian and the expansion program we had to go through: We went from 150 to 450 stores in not much more than a year or 15 months. It was one of the fastest retail expansion programs the UK has ever had. It was intensive -- and good fun.

High-energy, high-results and very people-oriented -- that's the type of environment I really enjoy.

What brought you to Egypt then?

Ian, again. It wasn't planned that way at all. He came out here and, khalas, he said good-bye and that was that. I went on to become sales director for the UK in 2004-05, and that's when I ended up, by coincidence, myself and my wife sitting next to Ian and his wife at a VodafoneVodafone Global dinner at a palace in Oxfordshire. We were chatting and Ian said, 'You know, I'm glad I saw you, because I'm beginning to think that history might be about to repeat itself.'

And that was that. I arrived here in June 1, 2005, as Ian's chief commercial officer. I ran the sales and marketing function and, gradually, over two years I picked up a broader remit within the country so that, in effect, I was deputy CEO, a title I held for the last six months or so. And then the opportunity came

How has the transition been?

It's been a very steady, well-planned succession. It's been extremely smooth for this organization and for our partners, which is very important. It was vital that everyone understand that this was about continuity and keeping the knowledge base in place -- that it's not a personality-based thing but rather a VodafoneVodafone way of working.

The thing that made it interesting was that we set up and managed the transition at a reasonably turbulent time, during which we had the Telecom EgyptTelecom Egypt activity, the third operator coming, the 3G launch and Mohammed Nosseir stepping down. With all of that going on, it was really important for us to make sure continuity was strong.

This plan was hatched two-and-a-half years ago. It wasn't a, you know, 'Ian's leaving, what should we do?' type of thing. It's been a very well understood thing, and for the vast majority of people, it was blindingly obvious that I was Ian's successor -- not just inside the company, but this was expected among the vast majority of our partners. That's why, for the last 18 months, I was being introduced around and getting closer to the minister [Tarek Kamel, the minister of communications and IT], the regulator [Amr Badawi, head of the National Telecommunications Regulatory Authority], to our business partners.

Over the last year, Ian was pulling further and further back from the day-to-day and playing, to a large extent, the chairman's role, as I've been running the business week-to-week and month-to-month.

My responsibility is now to repeat that, so that over years one, two and three from now, the same kind of long-term thinking takes place. That's been the journey.

You've been here years and your speech is peppered with Egyptian-isms, so this is a bit of an asinine question, but our readers are always interested in how foreign managers see their work environment. So tell us: What are the biggest differences between Vodafone EgyptVodafone Egypt and Vodafone UK? What expectations did you have of Egypt?

I don't know what expectations we had, but Egypt was always been extremely good to us. Unlike in Hong Kong, I came here with my wife and two kids and we've never had a single day where we've asked ourselves whether we've done the right thing. Professionally, it's been very good for me. Personally, the family has really grown because we're sharing a different experience together. Every day, there are 100 different and amazing things to talk about at night.

The kids -- they're 10 and 13 --are loving it. They're having a great time and are just now, after about two-and-a-half years, realizing it's not a holiday. Actually, now they talk about Egypt as home when they're in the UK.

Who knows how long we'll be here? I think now it will wind up being a five-year story, maybe even longer.

What about corporate culture? What's the biggest difference?

Apart from the driving? I think the most noticeable difference in the professional environment within the company is that we have an incredibly positive mindset in Egypt. There's a lack of cynicism, a lack of 'been there and done that,' so the enthusiasm for growth and for action and the enthusiasm for taking on things is enormous.

Coming from the three different countries in which I've worked before -- France, certainly in the UK and very much so in Hong Kong -- the attitude is, 'The answer's no -- now you have to persuade me why it could be yes.' You know: It's like, 'Yeah, yeah, yeah, that's a fine idea on paper, but we did it 22 years ago, and it didn't work, so forget it.' There, you need a very persuasive, compelling style of management.

Here, it's very much a 'slow down' management style, because if you tell people, 'I think I'm going to go there,' everyone's gone --they're over there immediately. There's almost a blind faith, and the responsibility that puts on the leader is to be extremely thoughtful about not just throwing random ideas out there. You need a clear plan, then you need to give people a very clear context: Why are we doing what we're doing? What's our timeline?

We're building long-term processes here.

The other adjustment is that we're in an extremely fast-developing environment, whether that's business, technology, consumer maturity, etc. Moreover, business here is very much based on relationships rather than processes.

There are lots of people who debate Egypt as an environment for business, but I've always found that the environment is there to be made, you just have to work at it. You have to predict the future, look at who is going to be influencing, then build your relationships with those people. The decision makers of Egypt, in business and in politics: extremely intelligent, extremely good at listening, extremely happy to have a dialogue.

And that's part of the beauty of it: A company of VodafoneVodafone's size can have an influence, we can make a significant difference, but it's in a completely different style than you would have in a more mature governance model. Relationships are so important, which really suits my predecessor, and it suits me as well. We put a lot of energy and a lot of fun into the people. Don't complain if you don't get what you want --get in there at the front of the process and influence it.

How does it feel to be a news story all the time?

Ben [Padovan, the company's newly arrived director of corporate affairs] has been experiencing this in day 10 of his time with us! It's ridiculous that there's been a small CEO change and we've commanded the front page of Al-Akhbar, Al-Ahram for nearly a week. They ran follow-up stories!

To have that kind of impact is enormous, and it puts on pressure that you have to get used to. The CEO of Vodafone UK -- whose business is 10 times the size of this business -- is not known really outside the industry, he's not a national figure, so you have a different responsibility.

I'm sure Ian mentioned this to you, but we have a set of organizational values. Within that, we have our vision and our core purpose. Our core purpose at Vodafone EgyptVodafone Egypt is to be the role model for doing business in Egypt. In the UK, it talks about making money. But we're a role model here. And we think that's great, because when we think about management style, when we think about leadership style, we think about business ethics and the way business works, aspiring to be the role model makes certain you make the right decisions.

It may not be how Egypt does it today, but we're big enough to help change the business climate. So be brave, do what you think is right, go with your heart -- even when it looks like it's something others might not want to go with.

You were the architect of the expansion campaign we've seen since 2005. What was the biggest challenge?

The market was at 8 million when I got here; it's now at 27 million. Before that, we were at 3 million. It's exponential, in a sense. So two big challenges. First, we took a conscious decision -- which is not the same as a lot of the foreign-owned companies in Egypt --that we would be an Egyptian business. Out of 4,000 staff, we have today something like 12 expats. A tiny number. We made that a very conscious decision, because we thought the company's long-term structure would be best served by that. And yet we were doing that in a very high-tech, leading-edge environment and amid very rapid expansion.

That meant, first of all, that every expat has to be very focused -- not on the task, but on coaching and developing and knowledge transfer. Every day, you have to give 10 people the knowledge and the skills that you've got. That hasn't happened over two years, that's happened over nearly a decade now.

So I'd say the biggest challenge, as the ramp-up came, was coping with both scale and very complex -- and every day different -- technical challenges. We had to build capacity and structures as we ran, but Ian and I come from the same school, one that believes in the best in people, that people are generally far more capable than many might give them credit for being.

On the technical front, what we've done has been remarkable. The whole organization has performed amazingly, but I talk specifically about our technology function. These are bright young Egyptians who have sucked in knowledge from around the world and done it here for the first time. We haven't got 50 expats building our network or our [integrated voice response] infrastructure or our CRM systems. Obviously, we have competent vendors working with us, but the key is that we've had an extremely good team.

They're the unsung heroes?

Yeah! Of course the marketing guys get all the profile, but the technology team is superb -- they're the engine room.

Which brings me to another of our challenges, which is the average age of our managers: mid-to-late twenties. It's so young for Egypt and the staff profile at many of the majors is double our age. With age comes experience and a kind of maturity in dealing with people. One of our challenges is that when you have young leaders leading very young teams that are often full of new graduates who are completely new to the company -- no internships, nothing -- the people-management skills are just not experienced enough.

It's not that they aren't good people, it's just that we haven't had the years of experience. I wouldn't say we're facing a challenge, because our staff genuinely loves working here, but I think we're facing a particular priority in the next couple of years to build a sustainable leadership style.

How do you do that?

One is just that time passes. Keep your people and allow time to mature then. We have a lot to do, so we can be very task-oriented, and an easy way for leaders to manage their people is to keep them busy. What we're trying to encourage is the ability to sit down with somebody and have a different kind of conversation -- a conversation about the employee as an individual. How are you developing? How could VodafoneVodafone help you? Where do we go over the years?

Giving leaders advice about how they speak and how they come across? For a 25-year-old Egyptian guy who is now managing 10 or 20 or 50 people, this is completely new. They're doing this for the first time.

Secondly, VodafoneVodafone has lots of international coaching, training and development programs, so we fly lots of our mid-and-senior-level managers out to Europe to programs at some of the best institutions -- IMD in Lausanne, INSEAD in Paris, Ashridge in West of London.

We've been very successful, and now the challenge is to keep focusing on putting down the roots, not on the day-to-day tasks. I think my role is to move us into Phase 2: We're at the end of the beginning, so now it's time to build sustainable infrastructure. People are the core of that, because at the end of the day, this is a people business.

How has the market dynamic changed -- or not -- since EtisalatEtisalat went live?

I think it has probably changed a bit less than people expected, to be honest. Look, I can only talk about VodafoneVodafone, but clearly EtisalatEtisalat are extremely professional, very knowledgeable. They've done a super job in the Emirates. They've done a super job in Saudi. But still, they're in a very young stage of their company's life. In our research on what to expect, it was a little bit of an unpredictable environment. It wasn't clear whether EtisalatEtisalat had a tried and tested model that would be replicated in Egypt, or whether this would be really unique. Because really, for them, this was the first very competitive market they entered.

We didn't know how they would play, and there was lots of speculation that they were going to be extremely aggressive. I think the consumer expectation was that there would be a steep change in the market, particularly in terms of pricing. Obviously, VodafoneVodafone didn't really expect that, because there's a regulator, and already the market is extremely competitive.

In the two years since I came to Egypt, the price of a pre-paid minute has gone from LE 1.50 to, when EtisalatEtisalat launched, 39 piasters. The majority of the price cutting has happened over the last two years. But there was a consumer expectation, and it was whipped up by the hype in the press.

That kind of hype is very different. The arrival of a third mobile operator isn't front-page news in, say, Germany. Here, it is -- and they're talking about it in the coffee bars, in the shisha bars. That's a lesson: Word of mouth is massive. Things you do good just go -- as do the things you do badly. You have to tread very carefully and wisely.

I would describe Etislat's entry as professional, innovative, rational and building for the long term. That's how I see what they're doing. And all those words were already terms people use for VodafoneVodafone. While we come from very different backgrounds, our philosophies of what we want to do in the market are, in many ways, very similar.

VodafoneVodafone knows that this is a long-term business. The real success, at a business level, isn't about rapid acceleration of the market over two years and then saying, 'What now?' You need a very long-term view, and you need to ask where a mobile communication company goes over the decades that follow.

What's different in the market now? EtisalatEtisalat are marginally cheaper than the incumbents. They launched with a nice 3G -- or "3.5G," as they call it -- proposition, which is exactly the same as ours. We're now a three-player market. But does it feel massively different? No. And it's actually been very good for our team, and this ties back in to what I said about management maturity: When there's only two of you competing in the market, it's very easy to get into a tit-for-tat kind of thing.

Our team have managed the arrival of a more competitive market. I'm very proud of that. On the operator side, all three parties have settled down into a three-player market, everyone's being very professional. It's the way it should be, and all three players are behaving with integrity and common sense. I think we've played a very big part in shaping that environment.

That's what Ian was saying the last time we spoke with him -- right before you launched 3G. He said the dynamics would change because you could no longer anticipate what the other player would do.

And this is good, because then you start to focus on your own game. This is one of those things where experience helps. When I first arrived here, I often found we were saying, 'We have to do this because our competitor is going to do that.' And I would ask, 'How do you know they're going to do that?' And the answer would come back, 'Well, they do it every year,' or 'Well, it's a rumor,' or 'Well, it was in the press.' So, fine, let's do it. And once we did, the competitor reacted, and our guys would say, 'See, we told you so.'

Then you find out down the road that, hey, they were actually reacting to what we had done -- they were reacting to us.

Ian asked me what I thought was the one big thing I brought to the company, and in the first year I was here, I would say it was the recognition in the workforce that doing nothing is probably the right result as opposed to this notion that "we have to do something because" To some extent, it's too easy to become busy fools -- lots of activity, but what was it focused on?

We've tried to say less is more. Let us not worry about our competitors, but about delivering on our game plan. That's difficult in a two-player market, when it's a 50-50 game and you can see big swings in market share very quickly. But in a three-player market, those swings are rather less marked.

The trick is to have a clear strategy and execute from it, without getting knocked off course by reacting reflexively to the competition. Stick to your own game and don't run a reactionary business. Inside the business, institutionalizing that view has been the biggest change.

Outside, I think this is a competitive market. You're seeing the customers benefit from greater value. They're benefitting from a market in which all three players are trying to innovate a bit more.

When competition comes in, you up your game, and that can't help but create value for the consumer.

How have you ramped up your competitive metabolism?

Obviously, there is value competition, and in some respects that results in cheaper consumer prices. Not massive, but prices have come down a bit, and we're playing in that game, but only to a certain extent. We've launched a number of products, including Aham Khamsa [Favorite Five], a family product to really give some more value to those customers who have been with us for a long time.

Otherwise, we need to invest in customer service and infrastructure to make certain we're still seen as the innovation leader and quality operator over the long-term. Those are our traditional strengths, and it's a wise man who plays to his strengths.

You're clearly ahead in the ARPU game, you're making public commitments to innovation. How do you keep that momentum going forward?

I don't think momentum going forward is really a challenge. The only challenge is prioritization, and focus, because we're in a technology game where there are at least five proposals for new --very good, very exciting, very innovative -- applications and value-added services flooding my e-mail inbox every day from people around the world.

The trick isn't about momentum, it's about focus and understanding what the customer's needs are, segment by segment.

You're right, though: We have done extremely well on the ARPU game, and I think that's a combination of two things, by the way: One is about the fact that we attract, on balance, more higher-value customers. I think that's because of how we've placed innovation and quality among our brand attributes. But we also extract higher monthly expenditures from all our customers. We do that by making certain the services we put to customers are fitted to their needs.

For example, our call-tones, or ring-back services. We get nearly a million customers a month using it. Truth is, we're now constrained on this product by capacity. This is enormous, and it's a novel value-added service. We built this ourselves, locally. We knew it would take off here because we went to other emerging markets --India, the Philippines, South Africa, which is always a good benchmark for us -- and asked what was working there. Some things just die a death, they would never work here. But there are some things that totally work, and this is one of them.

Call tones are a nice product, they're a fun product. On the other side, if you can put out products that actually make a difference to people, like Vodafone Cash? That's fantastic.

How is it doing?

Vodafone Cash is taking off, but balance transfer, where it originated, is a big hit. We were the first to launch it, and now 50% of our pre-paid base uses it every month --50%. We're now at about 5 million of our customers a month transferring balance around Egypt. It's now a form of currency. They pay us a very small per-transaction fee for it. It's a very easy-to-use IVR product, which is something else: In Egypt, it's all about IVR as a way of service, not SMS or command text. We've really built IVR because it's the way to go.

Vodafone Cash was a built on balance transfer. We recognized a consumer need -- in all different segments of society. It may never be as big as balance transfer--

You don't see more market potential there? Isn't it the first tangible step toward an e-wallet?

I suspect it won't ever be as big as balance transfer, but I expect it will become significantly mass market. The need to move money around -- nationally and internationally --is a basic human fundamental. The banking infrastructure in Egypt is quite good, but your ability to move money from Cairo to, say, Alexandria, is difficult. For many, it comes down to putting the money on the SuperJet with the driver taking a little fee. Now, you can just do it through Vodafone Cash.

People are starting to pay their domestic staff with it. Give them a VodafoneVodafone SIM card and transfer their wages, letting them go take the money out of the hole in the wall. We're getting a lot of corporates coming to us looking into this. So, sure, this will end up being a payment method.

One of the things we really like is that local entrepreneurs with websites are now advertising that you can dial a certain number and pay by Visa, MasterCard or Vodafone Cash. Helwa! It's a pull, and we never really thought about that. But now the vision is that I have my Vodafone Cash and I pay the taxi driver that way. I'll know we've arrived when the cabbies start accepting Vodafone Cash.

Then there's 3G. How are you folks making out with that?

It's great. Lots of learning. Remember the business case for 3G: Why did we do it here in Egypt? There were two things. First and foremost, voice capacity. The market is growing rapidly, and the customer numbers are growing extremely fast, but what's unusual compared to the rest of the world is how the number of minutes per customer is going up, too. We're adding customers and the average number of minutes each is still shooting up.

The implications of minutes going up -- and everyone felt this, on all the networks -- is that things get congested. That means you need to keep building and building and building, but there's a limit to how big a 2G network you can create. You're just constrained by spectrum and cell-site availability.

3G is a big pipe, and it's great for offloading voice.

Objective two was to give us a platform for the future. Lots of people like to call it data, but it's just the internet. We're talking about taking the internet mobile.

How are we doing? I was looking at the statistics today, and in places like Nasr City, Heliopolis, Mohandiseen, Zamalek, we've already got 10% of our total traffic off 2G and onto 3G. It's not particularly obvious to the customers because the market is growing so fast, but for us, having a brand new network, releasing the pressure from 2G has been extremely important. We know that without 3G, our 2G congestion would be intense right now.

Keep in mind: We operate at the highest capacity use rate of any VodafoneVodafone country in the world.

So users' handsets will automatically switch to 3G if they can?

Exactly.

And how many handsets do you have?

We have 1.2 million 3G handsets on the network now. And they're not 3G, but among the handsets on our network now are 15 iPhones!

Will there be an iPhone available and will it be with VodafoneVodafone?

Apple has just announced its deal in Europe -- in the UK and Germany -- and it's not with VodafoneVodafone. Vodafone Group had a long discussion with Apple, and continues to have a good dialogue with Apple, about wanting to get the service. But there are a couple of problems with it.

First, it's not a 3G device, and when we go to market with a music product, it will be on our 3G network, so that's a bit of a show-stopper for us. The other thing is the business model: Apple takes a slice of the revenue from the operator, and of course that's not something VodafoneVodafone has ever done before and we're not sure why we would get into that game now.

Already, we're the number-one digital music seller in many countries as it is, so of course we see Apple as competitive today and perhaps as cooperative some day in the future.

There'll be a call for the iPhone in Egypt some time in the new year, so we'll see how that develops.

So 3G

We have a different business model to Europe, where it's all about 'the data.' For us, it was voice. We didn't look at where there was need for internet services, but rather where congestion was highest, and that's where we built our 3G network.

Point two, for us, is the internet, and we divide this into mass market and business consumers. For business, it's been a great success so far. For consumers, it's been a great success in some ways and there have been misses in others.

Could you cite some specific examples?

The most encouraging thing to me -- and, I would think, to Egypt --is that our usage figures underscore how massive the internet will be in Egypt. It's going to be incredible in the same way that it is in Europe. It's just a matter of time and getting the access technologies right -- and getting the customers into the habit.

Since we launched 3G on May 10, 2007, we had over one million individual customers go into the internet through Vodafone Live. We had 1 million distinct internet users in five months. Of them, 500,000 are active every month, meaning they've gone online at least four times in a month -- that's how we define it, a once-a-week activity.

When you think about this, it's mobile broadband. How many fixed ADSL customers are there in Egypt? It's difficult to know. How many are paying their bills? About 300,000, yeah? So we have nearly double that -- and most of them are going into Vodafone Live and looking around, maybe download a ringtone, then they head off to surf the internet.

This is what I want: Come through our portal, then go into the world of the internet.

We charge LE 1 to go onto the internet, 5MB per day. It has really exceeded my expectations, and it says to me that the mobile internet in Egypt is going to be massive. I now know, strategically, that this is going to be a huge priority for us and for the country, and I didn't know that before 3G.

In terms of revenue? The impact on our business today is interesting and it's nice to have, but it's not going to change the world -- not yet. We'll have significant millions in a couple of years' time, both from genuine consumer interest --'I need something on the internet now' -- or from people just killing time. You see that a lot, people needing to kill time, and we're providing people with a very low-cost web browser.

On the other hand, mobile TV, which is a bit more complex and more expensive and sometimes the screen size isn't what expectedIt hasn't lived up to people's expectations, and the volume of demand we're facing hasn't lived up to our expectations. It's fine, it's ticking over, it's a nice little business, and it will build, but when you're in Europe, you're looking at the internet's good and TV's good and music's good. Here, it's very structurally different, and what you're going to see is the internet is enormous, and people want it bite-sized and mobile.

What about video calls?

Video calls are fine. It's in the middle of the two. It's never been a mass-market product anywhere in the world. It's a really nice product just for fun, but that never drives significant long-term demand. But one thing that's nice is to do an international video call. Personally, it's great to do that back to the UK. I do that a lot -- just being able to see my mum, for my kids to see my mum. Sure, you can do that on the web, but it's cheap and easy to do on the mobile.

On the consumer side, the 3G launch has, on the whole, been extremely successful.

And on the business side?

For corporates and SMEs, we've seen really unexpected demand from our own customers, and from many who weren't in our customer base before we launched 3G. They want to get their workforce using data applications linked to corporate applications linked through the VPN on the 3G backbone. Companies want to get efficient, and the speed of pickup has been great for us.

In a broadly stable market, we've always had the highest market share in business data, in things like the Blackberry and the data card for the laptop. But that stuff always had speed limitations on a GPRS network. Now, with 3G, there's suddenly this pent-up demand that's flying. We're not so much building market share at this point as much as we're building brand reputation as the partner of industry, the partner of business. That's where we're positioned globally, and that's where we need to be in Egypt.

3G is a platform, and it has immense potential.

Telecom EgyptTelecom Egypt -- interesting new shareholder. You're no longer on the CASE, so you're no long mandated to give us earnings figures--

No we're not, are we? [laughs]

--so you're leaving the bt100 next year. How has governance changed for you guys?

I think, on the delisting side, the difference isn't massive. We have now less dialogue with the analyst and investment community --it's less constant, less intensive. Now, instead of 60 or 70 people on an results call, we have six or seven people who really want to stay in touch with us so they can advise their clients on the market.

The board, the core governance, was previously VodafoneVodafone and a fairly broad range of non-executive directors. Now the board is made up of 55% VodafoneVodafone and 45% Telecom EgyptTelecom Egypt, so we have four Telecom EgyptTelecom Egypt board members, and that creates a different dynamic. It's a very consolidated view from a large, bulk shareholder instead of a diversity of views from a range of non-execs.

And TE is obviously extremely interested in how their shareholding is doing as an investment -- and, of course, in how VodafoneVodafone is doing in the market, because we compete. It's a very interesting dynamic, but it's a good dynamic.

Press reports say you're going after an international license?

No, no! Where did that come from? Look, there is no license available for bidding yet. You would think there was, but no.

Local press reports are adamant that MobinilMobinil is going after it, though Alex [Shalaby, MobinilMobinil's CEO] hasn't confirmed it yet, and there was a press release out of GITEX saying [EtisalatEtisalat CEO Saleh] El-Abdouli will be going after a license. Then there were reports that VodafoneVodafone would, too.

Let me give you the facts: The regulator has clearly announced that there will be an international gateway license for sale. That process is well on its way. EtisalatEtisalat has clearly stated that they intend to bid for and acquire one of the licenses. The other two operators, to the best of my knowledge, have taken a wait-and-see approach.

We have good dialogue with the government and we have very good dialogue with the minister and the regulator, and we are always talking with them about what interests us or not, what could make us interested in a business proposition.

We expect them to announce the official terms of the international gateway license registry at some point very soon. Until they make that announcement, I'm not sure there's anything they could offer that would see us bid for an international license.

We are in extremely tight partnership with Telecom EgyptTelecom Egypt and we are extremely happy with that partnership. In a more competitive environment, Telecom EgyptTelecom Egypt understands that it has to be more competitive in price and quality and, assuming that that materializes, then we won't take an international gateway --there is no reason to.

Business-wise, it's great that the monopoly is over -- it speaks volumes about the maturity of Egypt's business climate and regulatory approach. But Telecom EgyptTelecom Egypt is a good partner. We are very happy with them, they sit on our board and we discuss things very frankly. We cooperate and compete, we understand that. It's not always easy in a mature environment, but they have a vested interest in our success and we're working well together going forward.

There's now free WiMax in Sharm El-Sheikh and Luxor. What does that mean to VodafoneVodafone? Is it something you need to dip your toes into?

The Vodafone Group keeps tabs on all emerging technologies. And while even corporates as large as VodafoneVodafone have to make local choices in local markets, the group's position will have a large influence on what we do in Egypt.

For example, group wasn't big on call tones because they're not big in Europe, so they were skeptical. 'Why bother,' they asked. 'Because it's the kind of thing our consumer base will love,' we said. And we were right. So it's a dialogue.

On WiMax, Vodafone Group has taken a wait-and-see posture. At the moment, WiMax is an unproven technology. In the laboratory, it looks like it has potential to be a good, high-speed data --and maybe voice -- network, but it hasn't been proven in the field. It needs to demonstrate quality and price. Is it going to be a better way of carrying voice and data? If it's better quality and cheaper in price, then why wouldn't we be interested? But is it of better quality and cheaper price? Both propositions remain unproven.

Here in Egypt, we're in a healthy dialogue with the regulatory body on what would be good for Egypt and why WiMax could be good for Egypt. For us, the objective has to be to create a really strong communications infrastructure that carries high-speed data and good quality voice. The second is to make sure that the companies doing that are profitable.

I think the government and the NTRA recognize that if WiMax is a technology that is coming, then it needs to work in conjunction with the existing infrastructure. Operators realize that if WiMax is going come and it is going to be licensed, then they have a choice to make. Do they embrace it and work with it? Or do they compete against it? If you ask me, my sense is that WiMax in the longer term will be a complementary technology, and that it can help in countries like Egypt where you have outlining areas and you want to reach them with internet connectivity. I think WiMax has a role to play there. Exactly how that will work or how robust the technology and the handsets will prove is unclear.

You mention the regulator. How would you characterize the state of regulation in Egypt? Has that changed in our time here? As outsiders, our perception is that the regulator has become both a bit more activist and a lot more transparent, a lot less opaque than it once was.

It's difficult for me to comment on change in a couple of years, but I wouldn't characterize the operator as being opaque. I find the regulatory body that I deal with to be mature and open. We have a very healthy dialogue with the regulator pretty much every week. Dr. Amr Badawy is to me an extremely intelligent and capable guy. I didn't know his predecessors, but I can see change in the marketplace today. Some of the pricing regimes that exist today, when we come up for renewal or are opening them up for change, the regulatory bodies are very keen to make sure that the new licensing regimes are logical and cost-based.

The most important thing for VodafoneVodafone in dealing with the regulatory authority is predictability -- a long-term set of principles that can guide our ability to plan.

It is a complex environment for me in that my 45% shareholder is fundamentally owned by the government, and of course it has the potential for grey areas and indecision, but in practice, I don't really experience that. I don't think I have anything different to say about the regulator here than my counterpart in the UK would have to say about his.

Number portability: Where does that stand? Wasn't it supposed to happen a while back?

I am not sure if it was supposed to happen a while back. Number portability is coming and it is quite complex. I think people underestimate the complexity in many ways -- commercially and technically.

There are not many services that we have that are entirely built around data interchange, to get all the operators to build technical links to each other, and to the clearing house and Telecom EgyptTelecom Egypt. That is a really complex piece of work, and it takes time. The technology teams are working together to do that.

At the same time, of course, it is a very competitive commercial and marketing proposition. But it is coming and we are ready, commercially and technically. Indeed, we think it will be good for VodafoneVodafone.

It doesn't change the world, and some proportion of people change operators and then change back because the grass wasn't quite as green on the other side, but it doesn't structurally change the market and it is a service that only a minority will use. There isn't this pent-up demand for a huge wave of customers to rush out the door and change operators.

But it does give them choice, and we never had a problem with choice.

How are things with the national roaming agreement with EtisalatEtisalat? MobinilMobinil took some fire in the press for allegedly holding up the reaching of this kind of infrastructure-sharing deal, and Alex [Shalaby] came out pretty decisively in saying the deal would have to be fair to all parties.

I can't comment on MobinilMobinil, but we have a commercial agreement with EtisalatEtisalat that they run on our network in some places and it's working well. They're using it a bit less than we expected but they are using it to some extent. Not much to say there.

How many employees did VodafoneVodafone lose to EtisalatEtisalat? Have you, like MobinilMobinil, threatened or taken legal action against employees for violating their non-competes?

It is like number portability: You lose some, you gain some. We had a 150 people leave us to go to EtisalatEtisalat, and over a 100 of them were from the call center. Very few were middle management -- extremely few -- and there was just one senior manager.

Other than that, nobody in the whole marketing management department left. At the end, we have 4,000 people and just few people left. We don't hope people leave, but if the employee wants to go work for another company, I think the best thing to do is to let them leave. There is no prize for keeping somebody that doesn't want to work here.

One of the challenges here is that we have a very ambitious workforce -- everyone wants to be promoted and it is a pyramid-based organization, so it is difficult to fulfill everyone's aspirations. We have non-compete clauses, and my rule of thumb is that if somebody leaves VodafoneVodafone in the local market, then they don't come back. There are plenty of people who asked to come back. We are very confident in the work environment.

What question haven't we asked you that you had hoped to be asked?

You haven't asked about where Egypt fits within the group, and I think Vodafone EgyptVodafone Egypt within the Vodafone Group is an interesting question, because we have become one of the biggest companies in the group. Twelve million customers puts us at number six or seven, so we are extremely important and one of the fastest-growing in Group.

Our success has encouraged VodafoneVodafone into emerging markets, and we have just done a very big acquisition in India; the reason we are confident is that we know we can get great advice from the team here.

Egypt as a country can be extremely helpful to the group, because this is a very talented workforce and it is very low cost. You know, we now have over 500 staff providing call-center help for other countries. We have a call center for Australia with a couple of hundred people working through the night to provide Australia with services through the day -- all at lower cost and higher quality.

We've recently had Vodafone UK over, and I am sure we will be providing services to them. These are customer support centers. We also have a Vodafone Group intranet called Vista, for which Vodafone EgyptVodafone Egypt provides technical support. We also have major companies to which we provide customer support to their global operations.

I have a vision that this call-center business will employ thousands of people. It is great for Egypt, for Vodafone EgyptVodafone Egypt and for Vodafone Group -- everyone is happy. The government is also encouraging this to happen, and Tarek Kamel has been really supportive of our role in being a role model for Egypt as an offshoring destination.

The call centers are not the core competence for VodafoneVodafone in the rest of the world, but they are among ours here in Egypt. We've become world-class in call centers, faster than the rest of the business community has. It's a significant part of our business and I see it as a growth strategy, so it is a new dimension.

What about bundling fixed internet and wired or triple play? You folks bought out Raya's fixed-line business.

Fixed internet is really important in Egypt and we're going to play a role there. We have to, because we need the full spectrum of services. But I personally believe mobile internet has got unusual potential in this country and VodafoneVodafone is perfectly positioned to do that. Fixed internet is also really important and it would be part of that complementary package.

Looking back, the past near-decade has been really remarkable, but we're still a very young company with LE 10 billion turnover. We have more than 12.2 million customers now. Real customers -- just for the avoidance of ambiguity. We talk in very concrete terms, we don't want to fool anybody. It's much easier for us to understand how many real customers we have, how much revenue, therefore who's using what.

For the half-year to September 30, we've posted LE 5.038 billion in revenues, up 33% over the same period last year, and we've added 1.2 million subscribers in the first six months of our fiscal year.

There will never be any delusions about numbers at VodafoneVodafone.

Patrick FitzPatrick and Hadia Mostafa

© Business Today Egypt 2007

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