Floating the crest

More than two years after MobiNil's debut on the Cairo stock market, rival Click-Vodafone is now testing the waters for a public offering. Niveen Wahish spoke to Click CEO Mohamed El-Hamamsy
El-Hamamsy
When Click GSM was launched as Egypt's second mobile phone operator in November 1998, its competitor, MobiNil, already had around 100,000 subscribers. At that time, a leeway of even a few thousand mobile phone subscribers was considered weighty and market watchers were keen on seeing how the new company will carve itself a niche.
Those events are now history. Click GSM, now marketed as Click-Vodafone, is closing up behind its competitor. With both companies having witnessed exponential subscriber growth, today Click-Vodafone has slightly less than 1.2 million subscribers, while the Egyptian Company for Mobile Services (MobiNil) has slightly more.
This growth is owed to the smart policy pursued by both companies of offering continued discounts on services, thus rendering them affordable to the middle and lower classes.
Rawheya, 40, a maid and a cook, is one of the people in that category. Everyday, she cleans a different house. Until a year ago, Rawheya's clients had to go to a lot of trouble to get in touch with her. But now that she has a mobile phone, her clients can reach her any time. Rawheya is among countless others in similar professions, such as plumbers and electricians, who do not have home phones and who now rely on mobile phones, according to Mohamed El-Hamamsy, CEO of Click-Vodafone. "Mobiles are filling an existing need that is felt very strongly by sectors not able to avail themselves of telephony," he said. A mobile phone, once considered a status symbol afforded only by the more affluent segments of society, has now become a work tool, indispensable to people in lower-status professions, he said.
"Everyone was surprised by the market absorption," El-Hamamsy said. "The company has done much better than its business plan had projected."
But despite its overwhelming success, the company has not yet recovered the $515 million it had paid for the licence. "It is going to take a number of years for profit to cover these expenses," he said.
According to El-Hamamsy, Click has made use of a loan facility amounting to LE1.3 billion through a group of banks led by Banque du Caire to expand its network and build a new state-of-the-art headquarters in the Sixth of October City.
Meanwhile, both Click-Vodafone and MobiNil will be hard pressed to maintain their subscriber growth when their exclusivity period expires in 2002. Telecom Egypt, the public sector phone company, will launch its own mobile phone service next year.
According to El-Hamamsy, smaller countries have been seen to take in three operators, "so our market can." As the third operator promotes its services, the market will expand and become more competitive.
At present, mobile teledensity is estimated at three per cent of the population. According to analysts, El-Hamamsy said, the figure is expected to reach 18 to 20 per cent by the year 2008.
Click-Vodafone's share of that figure, he said, will depend on the number of operators at that time. But, nonetheless, he believes that market share will tend to be spread more or less evenly over the number of operators.
With more than two years of market experience up its sleeve, Click-Vodafone is now considering floating a percentage of its 120,000 shares. However, El-Hamamsy declared, no decisions have yet been taken in this regard. Existing shareholders -- including Vodafone (60 per cent), Mohamed Nosseir's Alkan Group (10 per cent) and investment bank EFG-Hermes and affiliates (10 per cent) -- are discussing how much of the company would be offered.
The company's major shareholder, Vodafone, does not intend to decrease its stake, El-Hamamsy stressed. "Vodafone is very happy to invest in Egypt, which it thinks is a great market with a lot of potential," he said. "It intends to stay and expand the business."
Click hopes the current process of appointing its financial advisers will be completed by early May, El-Hamamsy said. The advisers will be in charge of preparing all the floatation documentation and, more importantly, of advising the company on the best window of opportunity for the floatation, taking into consideration the volatility of stock market conditions worldwide.
Once Click is on the market, El-Hamamsy expects its shares to do very well, since "the company enjoys good financial results." He said he could not disclose figures because the company is not publicly traded and is preparing for the floatation.
"We think we have a good product, but consumer feeling towards the industry and the market in general is going to have an impact," he said.
One thing is certain: if the company markets its shares as boldly as it has marketed its products, it is sure to thrive. On one of its campaigns, Click offered MobiNil subscribers free Click lines. "When you are trying to expand the market, you make offers and promotions that can be seen as aggressive," El-Hamamsy said, adding that the company has been satisfied with the results of its marketing policies.
In addition to its assertive marketing, Click is rushing to offer the latest services in its competition for subscribers. It has utilised new technologies, such as the Wireless Application Protocol (WAP), enabling subscribers to access the Internet, check on their bank accounts, book cinema tickets or check the movement of stocks using their mobile phones.
Although people using such services find them extremely useful, they remain a small percentage of the total subscriber base.
El-Hamamsy attributed this to the fact that Egyptians are still slow to use new technologies. However, he does not believe that having invested in them was premature. "You have to introduce the technology so people can get used to it," he said.
This concept, however, might not apply to everything. It will be some time, for example, before Third Generation (G3) mobiles are introduced in Egypt. "The idea is just being studied here," El-Hamamsy said.
He explained that G3 requires different frequencies necessitating permission from regulatory authorities, as well as a licence. "It's a slightly different technology from the transmission point of view," he said.
According to El-Hamamsy, Egyptian operators are now looking at the introduction of GPRS, which is the technology for faster data transfer.
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