Egypt telecom market: Targeted triple-play services may increase mobile operator revenue

Telecom Lead Middle East: Despite the economic downturn, the mobile telecom market in Egypt witnessed high growth, with an average growth rate of about 23.1 per cent since 2008, mainly due to aggressive pricing competition among the three market participants – Mobinil, Vodafone and Etisalat Misr.

At the end of 2011, Egypt had approximately 83.8 million mobile subscribers. This number is expected to double over 2011–2018.  However, fixed-line voice services are set to decline due to the shift from fixed to mobile lines. Broadband is now expected to be the key driver of fixed-line services in the country.

According to Frost & Sullivan, the market earned revenues of USD 6.35 billion in 2011 and estimates this to reach USD 11.22 billion in 2018.

The introduction of new triple-play licenses in the country is expected to generate USD 1 billion investment over five years in the telecom market. These new triple-play licences promise innovative services for subscribers.

In October 2010, the regulator announced winning bidders for two new triple-play licenses. The first license was signed with Link – a consortium including Mobinil and Orascom Telecom. The second triple-play license was signed with Tele Tech, a consortium led by Vodafone Egypt. New license holders will compete with Telecom Egypt as it already offers triple-play services.

While these are positive signs, there remain certain market challenges. For instance, the significant prevalence of pre-paid and multi-SIM subscribers causes high churn between operators. Subscribers seek to benefit from promotions offered by different operators.

During the forecast period of 2011- 2018, one of the main challenges for operators across the mobile telephony market will be churn reduction. The current aggressive pricing competition is unsustainable and causes multi-SIM usage by subscribers. This is an important issue for operators as the next stage of growth is expected from low-income subscribers.

Pricing is a key driver for the uptake of mobile services, but quality of service has become a key consideration for subscribers. Quality of service has increasingly emerged as the major competitive differentiator amongst Egyptian operators.

High service quality will enable operators to better manage churn. It will also drive subscriber retention.

By Frost & Sullivan Research Analyst Jonas Zelba
[email protected]

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