TE reduces rates to counter effects of loss of monopoly on services
CAIRO: The National Telecommunication Regulatory Authority (NTRA) will offer two international calling operators licenses to the private sector by the end of November, NTRA Chairman Amr Badawi announced Sunday.
Bidding condition statements were supposed to have been released as early as January 2006. The Authority has delayed their release several times in the past year among growing criticism the delays were made in favor of 80 percent government-owned Telecom Egypt (TE), which still maintains a monopoly on international calling services. TE s legal monopoly expired in December 2005.
The NTRA has been busy mainly with the third mobile license offering, says Amr Badawi. A decision will be made on the [International Gateway License] within this month for it to be offered by the end of next month at the latest.
International calling has, in recent years, accounted for more than 25 percent of TE s annual revenues. The company collected LE 2.3 billion in international calling revenues, or 27 percent of total revenues of LE 8.5 billion in 2005. International calling revenues include incoming international calling fees, mobile international traffic via its 25 percent share in VFE and fixed international calling traffic via its network.
To counter the effects of losing its monopoly on providing the service, TE has recently undertaken several measures, including increasing its stake in VFE to 49 percent via a stock market buyout. The move is expected to lead to the delisting of VFE off the Cairo and Alexandria Stock Exchange (CASE) as Vodafone Group remains the majority owner with 50.1 percent and just 0.9 percent remain free floated.
Telecom Egypt has also begun implementing drastic price reductions on international calls and has launched a wide telemarketing campaign to keep as many current customers as possible. The company s offers include a 6 percent discount on bills of at least LE 3,000, a 7 percent discount on LE 3,000 to LE 4,000 bills and 12 percent off on LE 4,000 to 6,000 bills.
I think we re doing to be in a good position to compete, says TE Chairman Okail Bashir. We ve already started lowering our rates and we should be able to make up for lost [international calling] revenues by continuing to broaden our customer base and leasing parts of our infrastructure.
New international calling operators will likely be required to lease TE facilities until at least the end of 2008, according to NTRA sources. Other analysts point out it is unlikely new market entrants will be able to develop the necessary infrastructure before the expiration of the period.
At lease two companies have so far made clear their intentions to bid for the International Gate Way Licenses once they are offered: VFE and new third mobile operator Etisalat.
VFE has just recently finished its acquisition of a 51 percent stake in Raya Telecom for LE 104 million. Although the company had little choice in TE s stock buyout which brought its share in VFE to 49 percent, company officials say they welcome the development which they say should put them in an even better position to bid for an international calling license
Internally nothing will change, says VFE Corporate Affairs Director Omar El Sheikh, referring to company administration. Externally, we will benefit from the synergies of the two companies. Like our acquisition of Raya, this will help us provide more advanced services to our customers. TE has been our partner and this will insure that TE becomes a long term partner with Vodafone.
On Sunday, TE s Bashir said his company was prepared to own a majority stake in VFE, a notion that was earlier rejected by Vodafone Group.
Still, TE says it is still looking to at least buy the remaining 0.9 percent of VFE shares still floating at LE 100 per share. In announcing its intention to strengthen its share in VFE, TE says the move was aimed at putting the company in a better position to compete in the increasingly developing Egyptian telecom market largely due to liberalization steps taken by the government.
In 2007, the market will see the entrance of a third mobile operator, introduction of 3G technology and two international calling operators licenses sold to the private sector.
El Sheikh says it s unlikely Vodafone Group will opt to sell any part of its majority stake in VFE.
The Egyptian telecommunication market is one of the most important assets for Vodafone Group, which is why the company s strategy is to keep a majority stake in order to maintain full administrative rights, says El Sheikh.
