Tuesday, Jun 28, 2011

(This item was originally published Monday.)

By Shereen El Gazzar

Of ZAWYA DOW JONES

DUBAI (Zawya Dow Jones)--In a move aimed at helping offset declining traditional voice revenues, mobile phone operators in Egypt are targeting money transfer services as a potential profit generator.

Of the Arab country's some 80 million inhabitants, analysts estimate that only about 10% of the population own and use a credit card. Mobile money transfer services, which recently received an initial green light from authorities in Egypt, could assist the millions who don't have access to a credit card or bank account, while also helping line the pockets of mobile operators.

"In a country where a small number use credit cards, there's a potential for mobile payment as an alternative for the circulation of cash," said Hassan Kabbani, chief executive officer of the Egyptian Co. for Mobile Services, better known as Mobinil, the country's biggest mobile operator by subscribers.

The launch date for mobile money transfer services, or MMTS, in Egypt, is still to be determined, but comes at a time when similar systems started in Africa have proved a raging success.

"I believe mobile money transfer is an important service that will give a boost to the Egyptian economy and will be one of the top value added services for mobile operators in Egypt in the coming three years," said Khaled Hegazy, external affairs director at Vodafone Egypt.

Final approval for the launch of MMTS in Egypt is pending an improvement in the overall security situation in the country, according to the National Telecom Regulatory Authority, or NRTA. A popular uprising earlier this year put an end to President Hosni Mubarak's 30-year regime.

"We have given operators the approval to launch mobile money transfer services in the country, on a principle that there's no launch until we feel that the security is established properly," Mohamed El Geweeny, the NRTA's vice-president of telecom policies said.

African countries such as Kenya were early adopters of mobile money transfer and are keen advocates of its benefits.

Kenya's biggest mobile operator, Safaricom, offers one of the continent's best-known and most successful mobile-money-transfer schemes called M-Pesa. In its most recent full year results, Safaricom said that M-Pesa had 13.8 million users at the end of March and accounted for 12.4% of Safaricom's revenues in the year to March 2011. Cumulative money transfers via M-Pesa amounted to almost $10 billion, it added.

"Typically in emerging markets, many or even most people do not have bank accounts, but they are increasingly likely to have a mobile phone, so there is a potential market for services that allow people to conduct transactions such as money transfers and bill payments via their mobile phones," said Matthew Reed, a senior analyst at Informa Telecoms & Media in Dubai.

AFRICA EXAMPLE

Analysts expect Egyptian mobile operators, like their African peers, will embrace the chance to tap into the burgeoning mobile money transfer market, especially given Egypt's underused banking system.

According to Cairo-based investment bank Naeem Holding, banking penetration in Egypt runs at about 15%, while mobile phone penetration is around 87% and expected to reach 100% by 2013.

Mobile money transfer in Egypt will work by allowing individuals to deposit money in their mobile accounts, with a maximum limit set at 3000 Egyptian Pounds ($504.7). Users can then transfer the cash to an individual, who can collect the money at the phone company's physical outlet. Mobile operators will take a small transaction cost from each money transfer.

The second phase of MMTS in Egypt will eventually allow subscribers to pay utility bills using a MMTS account.

Mobinil said it will introduce MMTS in partnership with lender BNP Paribas, which received central bank approval for the service earlier this year.

For Mobinil, which has struggled to grow profits over the past few quarters as an increasingly crowded domestic market has steadily eroded revenues, MMTS could provided a much needed alternative income stream.

"Mobile-money transfer services have become an important area for mobile operators, especially those in emerging markets, as those operators seek to develop new non-voice revenue streams," said Informa's Reed.

For the time being however, the contribution from mobile money transfer is initially seen as small but is expected to increase over the next few years.

"For the industry in the region, it will take 2-3 years for mobile money transfer to pick-up and take a significant dimension or contribution," said Mobinil's Kabbani.

Some analysts said while revenues from mobile banking may be slow to build, there are other benefits for operators from the service such as increased customer loyalty which could lead to lower subscriber churn. Also, the service should stimulate general mobile data use.

"Cash transaction services may be the obvious first step, but an entire range of services including savings, lending, and trading could be offered later on," said Ahmed Adel, a telecoms analyst at Naeem Holding.

-By Shereen El Gazzar, Dow Jones Newswires; +971 444 61684; Shereen.elgazzar@dowjones.com

Copyright (c) 2011 Dow Jones & Co.

(END) Dow Jones Newswires

28-06-11 0347GMT