Raya and Telekom Malaysia team up to provide an IVPN to local clientslooking to connect with Asia. With yet more deregulation set to attract newmultinationals and the best infrastructure in the Arab world, is Egypt setto become the region's telecommunications hub?
The distance between Asia and the Middle East is about to become much shorter as Raya Telecom and Telekom Malaysia (TM) embark on a new landmark partnership to provide their customers with a direct international virtual private network (IVPN) between the Middle East and Asia Pacific countries.
"When a business has offices and sites in the Asia Pacific, the existence of a high-performance network connecting all its branches together is essential. The link must be high speed, secured and fully adaptable to the organizations' needs," says Raya Holdings CEO Medhat Khalil. "We never had this kind of direct connection before."
TM, one of Asia's largest telecom operators with GSM, fixed-line and ISP operations in Malaysia, Hong Kong, Thailand, Korea, Japan and China, has chosen Egypt as the site for its first MPLS (multi-protocol switching) node. This node, capable of carrying secure multimedia traffic, will become one of the company's backbone nodes in the Arab region.
"An MPLS node is state-of-the-art equipment. We are talking about an annual investment in excess of $1 million for the equipment and operational costs of phase one alone," says Mohamed Fares, managing director of Raya Telecom. "TM is not coming here with scraps of equipment left over from other operations."
"TM's IVPN service will be a pioneer in the provision of a direct connection that runs on one seamless and secured network to the Asia Pacific from the Middle East," says Telekom Malaysia CEO Dato Baharum Salleh. In an e-mail interview with bt, Salleh explains that TM's previous link to the Middle East had been based solely on the bilateral voice and international private-leased circuit business. "This is our first significant direct presence in the Middle East. We decided that it was high time that we start catering to the high volume of IP traffic from the Far East destined for not only the Arab region, but Africa as well," adds Salleh.
"In recent months, Middle Eastern countries have begun to quicken their pace of deregulation in the telecom sector," Fares adds. "Egypt leads the way with the Telecom Egypt IPO and a third GSM operator on the way, two companies who operate pay phones, three companies who issue calling cards, and eight licenses for the ISP or data business. All that's left to deregulate is the international data and voice service, and hopefully this will be done the end of the year as stipulated in the GATT agreement," he adds.
(When that happens, Telecom Egypt will lose its current absolute monopoly on international calls.)
According to Fares, Asian telecoms have been eyeing the Middle East and North African markets with a great deal of interest lately, eager to snap up their shares of the pie along with the Americans and Europeans. TM is so far the only Asian firm to make a serious investment in a local market.
Salleh admits that the timing of the investment had everything to do with fact that countries in the region are liberalizing their telecommunications sectors. "This liberalization gives us the opportunity to better meet the demands in our markets to have IP access to countries in North Africa and the Middle East," he says.
In March 2005, TM issued a limited tender to select a partner in Egypt. Raya was in competition with other Egyptian data operators and was tapped to become TM's partner after due diligence closed in September. The two companies plan to officially launch their new service in early December 2005.
Raya's role will be to commission, deliver, configure, support, operate and maintain the equipment necessary to build TM's new infrastructure in the country. "This equipment will be co-located inside Raya's data center. TM will have their remote monitoring tools on it, but we are actually fully in charge of their investment in Egypt," says Fares. "Our second role will be to provide them with a high-speed connection direct from Cairo to Kuala Lumpur. They would also like to capitalize on the Raya brand, so it will be our job to market their services under our brand," he adds.
"Raya Telecom was selected to partner with TM because of the similarities between the two companies in terms of service quality, business philosophy, and market share strength," says Salleh. "We also firmly believe that Raya Telecom is one of the most innovative, enterprising and experienced telecommunication groups in North Africa."
According to Khalil, another factor which may have led TM to choose Raya, is his company's regional presence: With offices in Saudi Arabia, the Gulf and Algeria, Raya is perfectly positioned to assist TM with any regional growth plans they might have.
"Both companies can really capitalize on this deal in the long run," says Khalil. "But it's still too early to determine if Raya will be a party to TM's further regional aspirations."
Fares explains that there will basically be two types of services offered: consumer and corporate. The consumer service will mainly target the far eastern community living in Egypt who want quick, reliable access to Asian content. The service may be accessed through either a dial-up or ADSL internet connection. Customers would simply connect to Raya's network, then TM's network in the Raya data center, at which point they would get directly routed to Asia through a very high speed connection.
Previously, such connections were made via Europe and the US. If customers already have a Raya ADSL subscription, the new service is at no extra cost --all they have to do is specify that their preference route is the Far East.
Even though consumers can make use of the new direct access to the Asia Pacific, the service is actually tailored to corporate clients whose data transfer needs were not currently being met. "From a business point of view, communications with the Far East were problematic. It was costly, low-quality and cumbersome," says Khalil.
"Today, there are lots of Asian companies and banks in Egypt, as well as local companies who act as agents for Korean, Chinese and Japanese companies. These companies demand services that allow them to regularly transfer information between their branches in Egypt and the Far East," says Fares. "We have designed different corporate packages that would suit everyone from the small agent to the largest Asian enterprises."
According to Fares, Raya conducted a detailed survey on the number and nature of Asian businesses in Egypt, but he refused to disclose exact figures, claiming only that there is both current demand and future potential for the services that Raya and TM are about to launch.
"The availability of an efficient infrastructure will definitely be one of the main catalysts for furthering economic ties between Egypt and the Asia Pacific. It will indirectly attract more Asian enterprises to consider not only Egypt but the whole region as a trade destination," says Salleh.
"This is a very positive note that we can use to market Egypt. I'm sure that the government will understand its value and importance and that they will be able to capitalize on it as well," says Khalil.
One of the services on offer for corporate clients will be a secured virtual private network that can link multiple branches worldwide allowing them to stay in constant contact with everyone they work with. "Through the internet, you can exchange sensitive financial, operational, sales and technical information and be 100% assured that it is secured," says Fares.
"Inventory and financial systems can be shared between the mother company in Asia and its satellite offices here. Some companies and banks really have mission-critical applications that necessitate such a solution. Courier companies like DHL and FedEx, which are not Asian companies, have regional hubs in the Far East. They will definitely be one of the best candidates for such a service," he adds.
The cost of the corporate service will range from a few hundred to a few thousand dollars per month depending on the category of service. Several options and packages will be available. "All this translates to more effectiveness, convenience, flexibility and cost savings for the modern multinational," says Salleh.
Raya already has a similar partnership agreement with British Telecom (BT) that allows Raya customers in Egypt to connect to their branch offices in Europe powered by BT.
"This deal is very significant for Egypt because, first of all, TM decided to put its node here instead of elsewhere in the Middle East," Khalil says. "This is due to factors like Egypt's superior communications infrastructure, its human resources and technical expertise and the most recent government initiatives that have made doing business in Egypt a much simpler endeavor. This is actually the third such move because Econ and BT have also brought their nodes here. Egypt is now officially the telecommunications hub of the Middle East. It is a real achievement that we have managed to pull this off despite some very tough competition from Dubai and other competitive countries in the Gulf, including Qatar and Bahrain."
The move is also a vote of confidence in Raya. "Now we can really say that the world is connected by one supplier in Egypt, which is Raya. We can provide integrated world class communications services to any multinational regardless of their country of origin," says Khalil.
TM plans to use Egypt as the launching pad for entry into other regional markets, with immediate priorities including Saudi Arabia, Bahrain, Turkey, UAE, Chad and Sudan.
"The general direction is not to have multiple nodes in each and every country but rather to connect through a few backbone nodes like the one they have installed in Egypt. So as a second phase of this project there will be further investment in the country as TM brings traffic from other Arab and North African countries into Egypt as their gateway to the Far East," says Fares.
This not only translates into more foreign direct investment, but strengthens Egypt's position as a regional telecommunications leader.
By Hadia Mostafa
© Business Today Egypt 2005
