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TE finds way around mobile license with MVNO agreement
Published in Daily News Egypt on 12 - 10 - 2010

CAIRO: Telecom Egypt (TE) is preparing to enter into an agreement with Vodafone Egypt to buy minutes at reduced prices and resell them in the market under the Mobile Virtual Network Operator (MVNO) licenses that the Telecom Ministry plans to issue.
According to independent daily Al-Masry Al-Youm, Egypt's Telecom Minister met with the CEO of Vodafone on Sunday to discuss increased cooperation along with the reselling agreement.
CI Capital telecoms specialist Mohamad Hamdy told Daily News Egypt that Telecom Egypt has made it clear that it plans to be an integrated telecom services provider, and this move would make them more competitive by enhancing value-added services to their portfolio.
“Since TE already owns 45 percent of Vodafone Egypt this would be the fruit of a strategic alliance between them,” said Hamdy.
David Mikhail, telecom research specialist at Cairo-based investment bank Beltone Financial, said that the agreement would be mutually beneficial.
“It would offer Vodafone a relatively low cost revenue stream from the sale of MOUs [minutes of use] to Telecom Egypt,” he said.
MVNOs, Mikhail explained, are mobile operators without an allocated radio frequency and, most of the time, without a telecom network infrastructure. MVNOs offer contracts with existing mobile operators (in this case Vodafone) to buy minutes of use (MOU) for resale to end-consumers.
“The increase in network use can help [Vodafone] achieve economies of scale to use their network more efficiently. Its even more beneficial for TE as it provides them with the much desired access to the mobile sector they have been searching for without the high costs of setting up network infrastructure themselves,” Mikhail added.
The use of the MVNO structure is “popular in Europe and can also be found in North America, but [it's] not really seen much elsewhere yet. Many are predicting the high growth markets of Africa will warrant their introduction, however. Some say ARPUs are too low in Africa to economically support,” he added.
Giving an example of how fixed-line operator Telecom Egypt can use these minutes to their advantage, Hamdy said that they would probably bundle internet, land line and mobile services together, diversifying their product portfolio with this new product.
“It would be a good step for the telecom sector as we know that TE was always interested in mobile services and since a fourth license for a mobile operator is not feasible in such a saturated market, this type of partnership is the best option for them,” Hamdy concluded.
Commenting on how MVNOs might affect the end consumer Mikhail said that they are essentially another mobile operator.
“The increase in competition [from potential MVNOs] can only help the Egyptian telecom industry and the end consumer at this point, especially with the disappointing news recently that no new licenses would be issued for another three years. We should see a drop in prices and a boost in mobile penetration,” Mikhail concluded.

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