It was a wild year for Egypt's telecom industry with price wars, international disputes, and a rapidly changing industry. The most dramatic - and least satisfying - story of the year came in the form of an international dispute between France Telecom (FT) and Orascom Telecom (OT) over the fate of Mobinil. After repeatedly rejecting FT's appeals in 2009, Egypt s regulator in mid-December approved an offer by a France Telecom unit to pay LE 245 for outstanding Mobinil share. An international arbitration court ordered OT to sell its stake in Mobinil's holding company to FT. The consequence has been an ongoing soap opera in which Naguib Sawiris, who heads OT, has argued that FT's price per share offer is insufficient. While shareholders initially reacted favorably, they have recently reacted in a bearish way to OT because of the ongoing fight. Orascom said it opposed the regulator s decision and will not give up Mobinil. One of the biggest pieces of news out of the sector this year came in September, when Egypt invited bids for two triple-play licenses for cable, telephone and internet services, which are set to generate $1 billion in investments in five years. Bids are due in January and operators would start work in the second half of 2010. As the voice market begins to approach saturation, the industry is stutter stepping to a crossroads. The total number of mobile phone subscribers in the country reached 52.93 million in October. Since the entrance of Etisalat into the mobile market, the three major mobile companies, which include Vodafone and Mobinil, have taken each other head on in a battle for market share. That fight came to a head this year. Traditionally, Etisalat and Mobinil have contended for market share, while Vodafone has tended to stay out of the mix, preferring to pursue value customers. All of that changed this year. "For the first time, we saw Vodafone come in and play along, said Delilah Heakal, a vice president and telecom expert at Pharos Holding. With all three companies pushing prices down, margins have continued to narrow. Despite that fact, Mobinil has thrived. The company now boasts 24.6 million subscribers. That's more than a quarter of the country's population. It recently posted 30 percent year-on-year growth. Mobinil's earnings reports may serve as a bellwether for the rest of the industry, considering that its chief competitor, Vodafone, does not publish its earnings. The problem for all three of these companies is that their margins continue to shrink as prices keep falling. Furthermore, the new customers they're each hunting for, by and large, are from low-income segments of the population that are not likely to spend much on their mobile phones. Until the industry's direction makes a dramatic course shift, though, all three companies will increasingly be squeezing the sponge dry. "The cost of growth is going to become higher for all operators, said Heakal. After a fight earlier in the year over the price per minute of a call, the companies have generally shifted to offering deals that center around on-net calling plans. That strategy has favored Vodafone and Mobinil, both of which boast larger networks. Heakal said she expects to see limited plays on service prices in the new year, but she noted that those battles are quickly becoming financially untenable. Instead, she expects 2010 to usher forth a barrage of seasonal, retention, and on-net offers. Analysts estimate that the market has reached 65 percent penetration. The three companies are also expected to battle over technological innovations, catering to the high end of the market that is already largely saturated but susceptible to switching companies depending on the latest innovations. While the three mobile companies continue to thrive, Telecom Egypt, the country's fixed line operator, has continued to struggle. The biggest setback for Telecom Egypt, said Heakal, is that it's "struggling from fixed to mobile substitution. As consumers move to mobile telephones, they are increasingly abandoning the fixed line. Telecom Egypt, though, isn't giving up the fight. It offered calls at 15 piasters per minute in November for fixed to mobile calls. It also reduced prices for national long distance calls. In late December, Telecom Egypt told a local newspaper that it will need to provide mobile services to compensate for declining landline subscriptions. Telecom Egypt s fixed-line subscribers fell 15 percent to 9.6 million in the year to September. Third-quarter net profit fell 13 percent. The company has continued to lose subscribers throughout the year, and it recently announced that it expected to end the year with net disconnections. Telecom Egypt continues to be buoyed by its support of Vodafone expansion, for which it earns in return for providing infrastructure to the mobile giant. All of this promises that 2010 will be another eventful year for the telecom sector - one of Egypt's most dynamic industries.
