Egyptian government and telecoms operators sort out differences

The telecommunications sector in Egypt has seen a number of regulatory reforms in recent years, all of which have impacted investment and strategic development. ADSL wholesale leasing rates, access to the new fibre network and the potential for a unified licence have, at times, been the cause of friction between the various stakeholders. The mobile GSM operators, the incumbent fixed-line operator and the regulator often have competing interests and must work together to resolve them.

Interconnection

One of the most prominent issues in the sector currently is that of interconnection pricing, or the cost of connecting to another operator’s network. Interconnection pricing is a good barometer of the competitive state and health of a telecoms industry. In Egypt, such charges have historically been determined by bilateral agreements between the operators. In 2008, however, the regulator – the National Telecom Regulatory Authority (NTRA) – tried to intervene in the market to uphold the position of Telecom Egypt (TE), which was that the rate charged to connect to the network owned by the mobile operator, Mobinil, be reduced.

Mobinil opposed this decision, partly on the grounds that any reduction in interconnection pricing should also take account of the prices charged by TE for mobile operators to lease capacity on the fixed line, and partly because it contravened an existing legal agreement. Consequently, Mobinil sought arbitration. The dispute, which has continued for seven years, has grown into a disagreement over service level contracts, with both sides seeking damages for lost revenue. In March 2015, arbitration partially ruled on the complaint, finding against the original imposition of new rates by the NTRA, but also finding that the continuation of the original Mobinil rate under the bilateral agreement was unacceptable.

Consequently, the court called for both parties to agree on an independent expert to rule on damages and the requisite outstanding payments. The dispute, which drew in the two other mobile operators, Etisalat and Vodafone Egypt, and saw Etisalat set aside provisions for interconnection disputes, continues.

Wholesale

Interconnection is not the only area where the various actors have differing viewpoints. Similar debates have emerged over the role of TE in providing wholesale access to bandwidth capacity and gateways. The government has been pushing to lower rates to increase internet affordability for the average consumer. As the wholesale market is TE’s bread and butter, the company has been reluctant to comply. “Decreasing wholesale prices would harm TE’s valuation,” Karim Riad, telecoms analyst at Beltone Financial, told OBG. However, after protracted discussions, the fixed-line operator announced a reduction in leasing rates in June 2015. This was swiftly followed by the announcement of new ADSL retail packages by TE Data, the ADSL retail arm of TE.

Service Quality

This will be welcome news, given the findings of a 2014 study published in Al Ahram newspaper, which showed that Egypt lagged behind other major markets, including Saudi Arabia, Tunisia, Turkey and the UK, in terms of average internet speeds (2.22 MB ps) and cost ($18.58 per MB). However, according to the Ministry of Communications and Information Technology, new measures which set internet speeds at a minimum of 1 MB ps, combined with a low-cost offering for 10 GB of data, will ensure that Egypt moves up the rankings.

Given the disparity with other major markets, the government is continuing to push on internet pricing and accessibility. The former minister of communications and information technology, Khaled Negm, told the press the new pricing regime “is the first stage in the fees structure change, and it will be followed by another reduction in six months. The aim is to meet the needs of all segments of society and achieve an internet penetration ratio of 50% by the end of 2016.”

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The Report: Egypt 2016

Telecoms & IT chapter from The Report: Egypt 2016

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