CAIRO: Chairman of the National Telecommunication Regulatory Authority (NTRA), Amr Badawy, announced that bidders with local partners will have more weight than those without and will immediately receive 25 of the 1550 evaluation points. Badawy also denied that having an international partner with over 51 percent is a condition for making a bid.
This does not come as a surprise for foreign bidders who have already joined a consortium of Egyptian partners in the case that they would not qualify for the third license without a local arm.
MTN, the South African telecom operator, was the first prospective bidder to announce its Egyptian partners Raya Holding and Citystars on Feb. 9. They succeeded where UAE based Etisalat and Kuwaiti MTC failed in pressing the seriousness of their intent.
“There are a number of processes that have to be followed, MTN CEO, Phuthtma Nhleko told The Daily Star Egypt. “Most of all, we are looking for a level-playing field in the process. That’s what we are looking for. It has to be fair and it has to have a solid commercial opportunity for us.
Other foreign bidders have also announced their intentions. MTC has officially announced its plan to bid and has established an office in Cairo. Etisalat, Telecom Egypt and BATELCO have also announced their intentions and Saudi Telecommunication Company (STC) is eyeing the license.
STC could put the lid on the competition if the bid is to be run as an auction; the company has enough cash to outbid the highest bidder by a great margin.
The word on the street is that Telecom Egypt (TE) is the favored operator of choice by those involved in the selection process.
Speaking of which, Akil Beshir, chairman and CEO of Telecom Egypt, confirmed that negotiations are now taking place between his company and three other Arab and foreign companies for the purpose of forming a consortium. Telecom Egypt will continue to own the majority stake in case of any consortium formed. He also added that selling Telecom Egypt s 25.5 percent stake in Vodafone is subject to owning the majority stake of the new mobile network.
Whether the selection process is run as an auction (based on highest offering price) or beauty (by expertise), MTN believes that they can bring both to the bidding table.
As of September 2005, the company recorded market capitalization of $16.7 billion, with investments in network expansion toppling $4 billion.
“We have no difficulty financing a license of this size, or bigger, said Nhleko, indicating that MTN can afford the price should the license go to the highest bidder.
This is not the first time that MTN bids for a regional license. Not too long ago, MTN bid and lost to Etisalat for a Saudi operator by a small margin. Etisalat won the bid for the $3.5 billion second GSM and first 3G mobile license in Saudi Arabia. MTN placed second out of six short-listed bidders, with Egypt s Orascom coming in third.
MTN was also defeated by MTC this year, which won a controlling stake in Africa’s third-largest mobile phone group Celtel for $3.3 billion.
“I believe their winning bid was $3.3 billion and ours was $3 billion, said Nhleko. “What can I say, sometimes you win and sometimes you lose – although if you always lose, that’s bad.
After two straight losses in the face of the same competitors, a third loss could be a pride-injuring blow to MTN.
But MTN is keeping the faith. “Egypt is a new territory for us and we feel it is worth our while, said Nhleko.
It was actually thanks to the loss of their Saudi bid that MTN got friendly with Raya.
“When MTN bid for Saudi operator, it did so with Abdel Rahman Sharbatleey of CityStars, said Sameh Montasir, vice president of Business Development for Raya Holding. “For the third operator, we were already part of a consortium with Sharbately, and he was the one to introduce us to MTN.
“We chose to join Raya Holding because we believe they have strong operations in network integration and it’s a company run by people with good track records and credibility, said Nhleko of MTN’s decision to join forces with Raya. “Besides, they are strong players in the corporate sector, are listed on the CASE and thus have a lot of value in the market.
With competition heating up, the question as to why regional operators are taking such an avid interest in this particular operator has come up.
“We believe that the telecom market in Egypt is under-penetrated, said Nhleko. “Furthermore, it’s an important and large market, he added.
The current operators do not necessarily agree with Nhleko’s viewpoint on the industry. MobiNil’s CEO and Chairman, Naguib Sawiris told The Daily Star Egypt that a third operator will provide the same services as the current operators offer, (the Egyptian Ministry of Communication and Information Technology is set to issue 3G licenses to MobiNil and Vodafone-Egypt, with the same terms applied to the upcoming third operator both operators in the near future). Vodafone’s Director of Public Affairs, Omar El-Sheikh, also told The Daily Star Egypt that prices are already low compared to the worldwide telecom market; the attraction of the third operator is not in the interest of sparking competition or a price war. Rather, the allure of a third license lays in the profit it will bite off from the existing operators.
“You have to understand that we will not enter a bid that, in the end, will not benefit our shareholder, said Nhleko.
So far, 17 companies have paid the required $25,000 fee to purchase the third mobile operators’ specifications handbook, including a number of Arab, African and European companies. Additionally, April 17 has been set as the deadline for submitting bids and paying the $4.4 million bond guarantee.
While the fate of the bid still dwells in uncertainty, with international giants quickly teaming up with locals to make a solid bid, competitors stand in good company. NTRA will certainly have one tough decision on its hands come selection time.
