Egypt's mobile connections outstrip their fixed-line counterparts following a big jump in low-income subscribers (page 2 of 2)

Despite this aggressive growth, the mobile penetration rate in Egypt will remain as low as 18 per cent by the end of 2005.

New market developments

Three notable changes will soon take place in Egypt's telecommunications market, according to Mr Francis. Firstly, at least one further fixed line operator is likely to be licensed in 2006. Secondly, it is anticipated that a portion of the government's stake in Egypt Telecom will be sold. Thirdly, a new mobile operator is expected to launch its service during the first quarter of 2007. Telecom Egypt will be allowed to enter the bidding with an international partner. Acquiring a mobile licence would make Telecom Egypt more attractive to potential investors.

While bidding for the third GSM licence is likely to take place in early 2006, it will be interesting to observe how this will unfold. The appointment of a 'pro-reform' cabinet in mid-2004, the appreciation of the Egyptian pound and an evolving mobile culture are factors which would support this development. Nevertheless, the operators' declining ARPU, the previous unsuccessful attempts to sell a stake in Egypt Telecom, and even the recent (July 2005) Sharm el-Sheikh bombing, could undermine these positives, and deter potential investors from placing high bids. Moreover, the motives behind Egypt Telecom's 2003 decision to abandon its plans to enter the mobile market will also play a role in moulding the outcome of this sale. Russia's Sistema and China Mobile are among many foreign companies currently eyeing this deal.

Mobile Handset Market

Nokia is the leading mobile handset brand in Egypt followed by Samsung. In terms of distribution, with the exception of Nokia, Samsung and Motorola, the other handset vendors (including Sony Ericsson, LG, Bird, Siemens, Sagem and Alcatel) are currently adopting a closed distribution channel in order to distribute their handsets in the Egyptian Market.

According to Mr Francis' colleague and Asia-Pacific telecommunications analyst, Joe Leong, "the strategies to adopt a closed distribution channel by second tier handset vendors are in line with their practice in many Asian countries". However, Mr Leong cautioned that relying too heavily on a single distribution channel could be potentially risky.

According to Mr Francis who met with the Egyptian distributors, "some fledgling small scale dealers in Egypt have come and gone". He explains that securing reliable and cooperative distribution partners is vital to succeeding in the MENA handset market.