The auctioning off of Egypt's third mobile licence promises a heated battle, writes Niveen Wahish It seems that every single contender who applied to operate Egypt's third mobile network is fit for the task. This week, the National Telecommunications Regulatory Authority (NTRA) announced that nine companies have qualified technically to bid for the third license. Only two were disqualified. The names of those who qualified include major operators such as the Kuwaiti MTC, Etisalat of the United Arab Emirates, Telenor, the Qatari Qtel, Telecom Italia, MTS of Russia, TurkCell of Turkey and Wataneyia International of Kuwait. Although expectations had been that the technical valuation would downsize the number of competitors, one telecommunications expert who preferred to remain anonymous said that it is "not difficult" to technically qualify, as long as companies abided by the requirements of NTRA published in the information booklet. The deadline for submitting the request for proposals was 4 May. In order to technically qualify, a company should receive a score of no less than 700, out of 1000. There is as well the provision that such a score must not account for less than 85 per cent of the highest technical score awarded. The companies which qualified are now eligible to participate in financial bidding for the license. With nine contenders still in the race, the telecommunications expert foresees that a heated auctioning process will take place. Although financial bidding for the license has been set for 4 July, NTRA has not yet announced how the process of bidding will take place. Amr Badawy, head of NTRA, has so far said that the auction will take place by means of several rounds. The lowest financial offers will be eliminated with every round. If a tie occurs, the technical evaluation results will be assessed, and the bidder with the higher technical score selected. Last April, Badawy had announced that the minimum amount required for raising a bid will be LE100 million. Medhat Khalil, chairman of Raya Holding which is one of the partners in the consortium, along with MTN of South Africa, is against the very principle of auctioning in this case. He says that an auction "could blow the price out of proportion". Khalil says that submitting the financial bids in closed envelopes would have been more suitable. He fears that an open auction will lead to an exaggeration in the value of the license, ultimately reflecting on consumer prices. The anonymous expert on a similar note also warned that prices could overshoot in an open auction, thus "keeping the wise competition out of the market". He assessed that the value of the license "should not drastically exceed LE2.5 billion" which is the minimum starting price set by NTRA. "Any operator should bear in mind that the license is not an end in itself, and that they still have a sizeable investment cost." He estimates that such a cost would stand at LE2 to LE3 billion, which is the sum needed just to start "rolling out the network". The expert added that in the past three years, MobiNil invested around LE5 billion, only to increase its network's capacity. In addition to the starting price of the LE2.5 billion one-time upfront fee, NTRA is also charging the operator a three per cent revenue sharing charge, as a form of annual licensing fee. This revenue sharing percentage will increase by .2 per cent for every 100 million over the LE2.5 billion. But many of the companies who have qualified for the bid have already placed these considerations in mind. Tawfiq El-Baradi, CEO of the National Telecom Company (NTC) which is a local partner of Telenor of Norway, says that their consortium already has a business plan based on market research. "There is a limit to what we can pay," El-Baradi stresses. Qualifying technically as well, are Telecom Egypt and its partner Telecom Italia. Should Telecom Egypt win the auction, it would have to relinquish its 25 per cent share in Vodafone Egypt. This tranche is valued at around LE5 billion. The company's CFO Aly Salama of Telecom Egypt has stressed that if TE wins the auction, "it will have no second thoughts about selling its share, otherwise, why incur the costs of bidding in the first place." The telecommunications expert believes that the consortium that wins as a result of overbidding may be hurting itself badly "unless they have very deep pockets". Nor does he believe that the consumer or the quality of service will be affected, given that the winner is held accountable by NTRA regarding the quality of the service provided. If the company raises its price, moreover, it will not be able to attract subscribers. In addition, the expert said that a high value for the license would raise the bar for the two existing companies in acquiring the 3G license. Badawy had previously announced that the value of the 3G license will be 20 per cent of the sum paid for the third license, and 40 per cent of the revenue- sharing formula.
