Chairman Mohammed Hassan Omran talks to The Daily Star Egypt about the recent bid and future plans CAIRO: The number that the Etisalat-led consortium offered to win the third mobile network license is still having its effect on the market. The consortium won the bid by putting forth a LE 16.7 billion offer, exceeding all analysts expectation and posing questions regarding Etisalat s plans for the market and the competition with incumbent network operators Mobinil and Vodafone.
We have made a calculated bid, says Mohammed Hassan Omran, Etisalat chairman, in an interview with The Daily Star Egypt. Yes it is high, but it is within the range we have calculated.
Calculations are based on the GDP per capita and penetration rates of existing networks, among others, he explains. It wasn t because the company had more money, he adds. The other bidders are supported by their government. They will have more money than we do.
The price was set very high, says Nermeen Ameen, head of investor relations at EFG Hermes. Etisalat based this on evaluations of how much the deal was worth. Obviously they judged that this was a cost worth spending . I believe that the price was largely market driven.
But others were shocked with the high price. Ian Grey, chief executive officer and managing director of Vodafone Egypt, told financial Arabic Daily Al Alam Al Youm that he was surprised with the number offered by Etisalat. He told the paper that this represents a bigger challenge in generating return of investment. Especially as Etisalat still has to go through the costly process of establishing and operating the network
In Saudi Arabia, most of the analysts said that we have submitted a much higher bid than expected but we have achieved even better than we have forecasted, says Omran.
Etihad Etisalat Company (EEC) is the owner of the second GSM (mobile) license in Saudi Arabia, receiving the license in 2004 after a coordinated and aggressive program was conceived; it won the bid with a $3.457 billion offer. There are more than 1,800 base stations in 42 cities and a network of sales channels in over 1,600 locations in the kingdom. Under its brand, Mobily, the mobile network was first initiated in Saudi Arabia on May 25, 2005.
The company s subscribers reached two million within six months of operation. Now there are more than three million subscribers.
Omran is reluctant to disclose exact strategies for the company s future operations in Egypt or for generating a return of investment, but he offers three key points.
Referring to the company s operations in the UAE and Saudi Arabia, he says Etisalat can capitalize on its subscribers and their links to their families in Egypt. We will add some more Arab market . We can capitalize on capturing a very good market.
We can also capitalize on offering certain business solutions, based on the Arab market need, says Omran. We can also become innovative as we have done in Saudi Arabia.
Walaa Hamza, telecom consultant, says that the bulk of growth comes from the prepaid segment (prepaid cards associated with lower income consumers). But this segment, Hamza continues, is characterized by low revenue margin, and to attract these consumers, Etisalat has to offer good packages for these users.
Hamza also notes that while higher-income consumers would take notice of the service quality, lower-income consumers would be only concerned with the pricing.
Omran says there would be packages to suit different incomes.
Competition with the incumbent network operators is expected. Communications Minister Tarek Kamel said a third network operator will increase competition. Prime Minister Ahmed Nazif said that the competition will be in the best interest of the consumer, whether in service quality or pricing.
But, does this mean that there will be an upcoming pricing war?
“Everybody says that there will be, says Ameen, Yet, this could change Etisalat’s operations overseas which will charge differing rates from the Egypt tariffs, leading to a discrepancy in pricing mobile users. This could harm companies working in the telecom market in Egypt, but ultimately provide competition and lower tariffs which will benefit consumers.
Consumers welcomed the third network for the promise of a more competitive market, and for them competition means a reduction in prices. But, as much as consumers would like a pricing war, signs indicate otherwise.
According to Hamza, there will not be a real pricing war. The network operators are not the only deciders of prices, he explains, The National Telecom Regulatory Authority monitors the prices, and will not allow the prices to drastically fall, he adds.
Nonetheless, a reduction in prices is expected, notes Hamza.
Omran also downplayed the element of pricing in competition. The company s edge in the market would be derived from the quality of its network services, the quality of customer service and prices, he explains.
Incumbent network operators had previously downplayed the effect of a competition in pricing. They did, however, commend the positive effect the competition would bring to the market.
