A third generation (3G) mobile network may not be that far off after all. Nine months ago, the Ministry of Communications & Information Technology (MCIT) commissioned the National Telecommunication Regulatory Authority (NTRA) to study the feasibility of launching the service in Egypt. Last month, it announced the results were in.
"National and international companies will be invited to bid for a license to build and operate a third mobile phone network in Egypt that will provide both 3G and 2G services together," the ministry said in a statement.
The main difference between the mobile network generations is the speed at which voice and data are transferred via the network. The higher transfer rate of 3G networks allows them to offer additional features, such as high-resolution video data transfer. Put in perspective, 3G technology makes videoconferencing feasible, while simultaneous voice, data and image communication on older networks suffers considerable time lag.
MobiNil and Vodafone Egypt currently offer both 2G and 2.5G communication through their GPRS services. Earlier this year, Minister of Communications and Information Technology Tarek Kamel told Business Monthly that by 2007, when the duopoly of MobiNil and Vodafone Egypt ends, the Egyptian mobile communication market would have probably evolved enough to merit the launch of 3G service. "The rapid rate at which the number of mobile subscribers is growing indicates two things: first, the desire of Egyptians to own mobile service; and second, that there is great room for growth in the market," he said.
By 2009, the number of worldwide 3G subscribers is expected to reach 700 million. With a population of 71 million and the number of mobile service subscribers at just 8.8 million, Egypt's potential for growth of the sector is astounding. In fact, the penetration rate of mobiles in Egypt is currently estimated at 12 percent, compared to in Lebanon and the Gulf region, where penetration rates exceed 30 and 50 percent respectively.
It's estimated that around 300,000 new users subscribe to mobile services each month. According to government estimates, the number of mobile subscribers will increase to 20 percent by 2008.
According to the NTRA feasibility study, a new 3G network could secure as much as 20 percent of the Egyptian market share. In a press release issued by MCIT, the successful company should offer CDMA 2000 or UMTS/GSM network technology. Either network technology should be both 2G and 3G compatible.
The press release also stated that companies will have a 3-4 month period to conduct feasibility studies and prepare a proposal to be submitted to the NTRA. The successful bidder will be selected in early 2006, with services to become commercially available during the second quarter of 2007 at the latest.
The call for bids stipulates that, should the current two mobile operators request it, they will be permitted to upgrade their services to 3G provided they pay the extra licensing fee. The licensing fee is expected to hover around E 2.5 billion, but the cost of upgrading could be far more.
According to Daniyah Darwish, a telecommunication analyst with EFG-Hermes investment bank, there are only two other markets in the Middle East that currently have 3G operations - the United Arab Emirates and Bahrain. "UAE's Etisalat introduced its services in 2004 because the UAE has a goal to be the first to introduce all sorts of new services and products in the region," she told Business Monthly. "At the same time, the company, which had monopolized the UAE's mobile sector, knew that it was getting competition in 2006 and it saw launching 3G as a pre-emptive strike to hold on to its market share and raise the bar for whomever was entering the market. As for Bahrain, Vodafone MTC also launched its 3G services 2004."
Darwish explains that the decision to launch 3G service in Egypt is interesting considering that the only two 3G operators in the region are in the Gulf countries where the population base is smaller, the mobile penetration rate hovers around 90 percent and the income per capita is more than three times greater.
She says that when you consider the profile of the markets with 3G operations and the fact that it's still too soon to assess whether or not these operations will recover the initial investment to build the new network, the decision by MCIT to call for bids for a 3G operator has probably come too soon. "Right now, our penetration rate [in Egypt] is 12 percent, so while there is room for further penetration, those who don't have mobiles already will not be able to afford 3G services."
Motorola was the first company to introduce 3G handsets and is now one of many brands incorporating the technology into its products. Osman Abou-El-Nasr, Motorola's general manager and regional account director for the Global Telecom Solutions Sector, admits 3G applications and handsets are expensive. But, like everything else, their prices are subject to economies of scale.
"While they were originally expensive, the prices of the handsets have dropped dramatically. This was also the case when 2G mobile phones were introduced. They were a lot more expensive than they are today. But that's the way that technology goes."
As for the launch of 3G in Egypt, Abou-El-Nasr explains that its chances for growth in the local market are similar to the chance of the penetration of mobile phones in the market five years ago. He says that when mobile services were first introduced, there was no way for anyone to predict that the penetration of the service would grow so fast.
It's too soon to see who will bid for the network, although Etisalat, which a couple of years ago landed a very coveted contract in Saudi Arabia, and Kuwait's Al Kharafi Group are both rumored to be interested. In any case, Darwish predicts that most of the bidders will be international companies. She says MCIT is probably hoping that by allowing a third operator to launch 3G services it will encourage one of the larger international companies to bid.
Nor is it clear whether the existing two mobile operators plan to upgrade their networks to become 3G compliant. It is widely believed that neither the MobiNil nor Vodafone Egypt GSM networks are upgradeable, so if they do decide to launch 3G services, they will have to start from scratch.
Rehab El-Bakry
Business Monthly 2005
