Competition remained rife in the telecommunications sector in 2010, resulting in mergers and acquisitions as well as price wars, leaving consumers coming out on top. No doubt, the year kicked off in full swing with the protracted slugfest between France Telecom (FT) and Orascom Telecom (OT), as each battled it out over control of Mobinil's shareholding rights. The two and half-year maelstrom culminated in both firms agreeing to shake hands and make amends in April through an agreement in which FT received consolidation of Mobinil, while OT treating its participation as an equity investment. The sale of LinkDotNet in September to Mobinil was the progeny of the FT and OT affair, with FT netting $130 million through the sale, and having to fork over $300 million in a settlement fee to OT. OT continued to dominate the spotlight not thanks to its legal row with the Algerian government by sending two different bills in the mail for back taxes, amounting to $230 million it claims OT owes, which was scaled down after a reassessment from the previous $600 million demanded. OT's headaches continued in June when its plan to sell assets worth $10 billion to MTN, the South African telecoms provider, went bust after the Algerian government blocked the sale, which included OT's Algerian unit, Djezzy. Rounding out the year and topping all of 2010's headlines was the recent announcement in August, that VimpelCom, the Russian mobile operator, would seek to acquire Weather Investments, OT's parent company, as well as Wind Italy, both owned by the tycoon Naguib Sawiris, to the tune of $6.6 billion. Yet, the Djezzy saga has relentlessly plagued OT, as the Algerian government is refusing to negotiation with VimpelCom following a $7.8 billion offer by the Russian firm, which contrasts sharply with the Algerian government's $2-3 billion valuation. According to the latest news this week, citing government and telecommunication sources, the Algerian government would likely make an offer for the firm by mid-2011. This issue has been a piercing thorn in the side for the Weather Investments, VimpelCom deal. So far, Telenor, a Norwegian telecoms provider, which has a 36 percent stake in VimpelCom, has objected to the conditions of the current deal, creating an element of doubt around the agreement. Mobile consumers Mobile subscription rates were unable to keep pace, with 2009 delivering strong results, adding 14 million new customers, while 2010 fell short, with 11 million. Vodafone grabbed the lion's share, with 28.8 million subscribers, overtaking Mobinil, which now has 27.9 million, and Etisalat trailing behind, with 7.3 million as of September. Nonetheless, statistics from the same month indicated that Mobinil's cut of the market share is a sliver larger than Vodafone's, with each preserving dominating market positions at 44.4 percent and 44.1 percent, respectively. Amr Elalfy, director of research at CI Capital, stated that his firm anticipates penetration rates to augment from 72 percent in 2009 to 85 percent this year. In the eyes of Delilah Heikal, vice president of research at Pharos Holdings, these dynamics illustrate that “the sector is entering a period of early saturation.” Thus, she continued, 2010 was characterized by a relative slowdown in growth and marked by a ratcheting up of competition, resulting in high costs for telecommunications providers to land new as well as keep their customers. On the flip side, fixed line contracted by 4 percent to 382,000, which he attributed to Telecom Egypt adopting a tighter credit policy as well as wireless on-net minute rates approaching fixed-to-fixed rates. Internet penetration rates surged ahead to 26 percent, reflecting a 30 percent year-on-year jump, which signifies that 20.3 million Egyptians are surfing the web according to the latest figures from September. It is safe to expect further impetus to this trend as a result of the government allowing three bids for three triple play licenses — a bundle package that wraps cable, telephone and internet together for residences. Elalfy highlighted that in the local internet arena, “competition is still setting in,” which is palpable when considering that Telecom Egypt's TE Data has managed to remain in the pole position, with 62 percent of the market in its pocket, while LinkDotNet represented 16 percent, with fringe players making up the rest. In the midst of the crossfire between the telecommunications operators, in March, the National Telecommunications Regulatory Authority (NTRA) banned Skype services on mobile devices as being illegal, the NTRA executive director, Amr Badawy, publicly stated, as international calls must go through Telecom Egypt. The result has been price per minute rates “having fallen by double digits,” Elalfy, noted, which in turn squeezed operators profit margins and revenue growth, forcing them to cut back on infrastructure spending and quality of service. With such maneuvering transpiring owing to diminishing market place shoulder room, 2011 portends to be a year that will keep everyone on the edge of their seat.
