Telecommunications Infrastructure in Egypt

Internet

Internet use is constrained by cost, language, rates of literacy, inadequate infrastructure and skills shortages, while e-commerce, still in its infancy, is beset by legal and regulatory hurdles. However, with strong support from the government, which hopes to turn the country from an IT laggard into an IT hub, Egypt is witnessing something of an Internet boom. There was an estimated 3.5m internet users in 2004, up from 535,000 in 2000. In a bold move, the government launched free Internet services in January 2002. The consumer no longer pays fees to Internet service providers (ISPs), but instead pays only the price of a regular call--extremely cheap by international standards. ISPs lease access ports from the state fixed-line monopoly, TE, and purchase a dial-up number, which they then market to consumers. In return, TE pays the ISPs 70% of the revenue from connections made through their phone number. However, the measure is controversial with ISPs who complain of high leasing rates and say their profit margins are low. Many of the smaller ISPs among the 64 in operation when the new system was introduced have since closed.

To encourage the development of the Information Communications Technology (ICT) industry, the government has lowered import tariffs on computers, computer equipment and software to 5%. Domestic hardware manufacturing capabilities are limited--essentially hardware is either imported completed or in parts and assembled in Egypt. In late 2002 the government launched "the affordable personal computer initiative", which aims to raise the ownership of computers from 1.5m (one-third of which were owned by businesses) to 6.5m within five years. The scheme allows buyers to pay in instalments over a period of up to three years at a below-market interest rate. Under the scheme 18 local companies assemble the computers using largely imported parts. About 65,000 computers were sold through the scheme from its launch to March 2004. However, as with most industries, personal computer (PC) sales have suffered because of the depreciation of the Egyptian pound (25% in 2003 alone and 45% since the start of 2000). According to the Ministry of Communications and Information Technology (MCIT), PC sales were around 300,000 in 2002. A massive, five-year e-government programme that aims to modernise state administration was launched in 2002 and is expected to continue at least until 2012. Under the national ICT plan the government had set the highly ambitions target of raising software exports from US$100m in 2002 to US$1bn within three years, and to US$2.5bn by 2009. The programme envisaged establishing a series of dedicated ICT parks or smart villages. The first such village, a E2bn, 450-acre project in Giza, opened in September 2003. It aims to produce 30,000 job opportunities and exports of up to US$600m/year. The MCIT has also enticed a number of large ICT firms to operate training and certification programmes in Egypt, including IBM, Microsoft, Cisco and Lucent Technologies (all US). There are about 6,000 students enrolled in such schemes--which last anything from three weeks to six months--at any one time.

Mass media

Under Mr Mubarak the opposition press has enjoyed greater freedom of expression, although constraints persist and journalists have been imprisoned. With a circulation of around 850,000, the semi-official daily Al Akhbar is Egypts best-selling newspaper, followed by the more establishment-oriented AlAhram, with a circulation of 500,000. Although the press is subject to the control of the Higher Press Council, the four main publishing houses, the AlAhram Group, Dar al-Hilal, Dar Akhbar al-Yom and Dar al-Gomhouriya control most of the press, competing as commercially independent units. Of the opposition press, comprising some three dailies and 40 magazines or periodicals, Al Wafd, the mouthpiece of New Wafd, is by far the most popular, and has a circulation of around 50,000. Al Shaab, the Socialist Labour Partys paper, which has been suspended since May 2000, is the voice of the Islamists, while Al Ahali represents left-wing and often satirical views, and Al Ahrar the liberals. An independent newspaper Al Masri al-Yom was launched in June 2004. Economic news and views are covered in the state Al Ahram al-Iqtisadi or the private Al Alam al-Yom. Newspaper penetration is still low, at around 40copies/day per 1,000 people. With illiteracy rates still high, television is the most influential mass medium. More than 89% of households possessed a television in 2000, while 70% of Egyptians are believed to listen to the radio.

The Arab Television Service started broadcasting in 1960 and there are currently two national and six regional channels in operation. Using the pan-Arab satellite, Arabsat, in December 1990 the Egyptian Satellite Channel began transmission of Egyptian programmes throughout the Arab world. In 1991 the US Cable News Network (CNN) started transmission in Egypt on a subscription basis. In April 1996 Egypt launched its first satellite, Nilesat, which offers 84 television channels and 400 radio stations. A second satellite was launched in August 2000. The first private satellite stations, al-Mehwar and Dream, began transmission in November 2001, and the first private FM radio stations, Nile FM and Negoum FM, began broadcasting in June 2003. There are eight state-run radio networks. A new duty-free Media Production City has been established in 6th October City near Cairo as part of Egypts plan to challenge the dominance of Saudi and Western satellite broadcasters.

Telecommunications Infrastructure

The modernisation, expansion and liberalisation of telecommunications services and related infrastructure is a national development priority. A US$1.1bn, three-year plan to make the country a regional information technology (IT) hub was announced in 2000 and Egypt signed the World Trade Organisation (WTO) Basic Telecommunications Agreement in June 2002, thereby committing itself to greater liberalisation of the sector. The telecoms network has undergone extensive modernisation in recent years. Egypt became the 59th member of the WTO IT Agreement in April 2003, which commits it to removing all tariffs, duties and charges on IT imports by January 2005. Between 1981 and June 2004 the number of fixed lines in operation, run by the state-owned land line monopoly, Telecom Egypt (TE), increased from 510,000 lines to 9.2m (raising penetration to about 13%). The goal is to improve teleaccessibility from 40% to 90% by 2010.

MobiNil, a consortium comprising France Telecom Mobile International, Motorola (US) and four local partners--Orascom Telecom, the Al Ahram press group, Motorolas agent in Egypt, Systel, and Alcatels agent, Raouf Abdel-Messih--took over the state mobile phone network from TE in May 1998, although Orascom Telecom later bought out Motorola. The consortium inherited 83,500 subscribers and a waiting list of around 25,000 others. By June 2004 subscriptions had risen to 3.6m. A second private consortium, Vodafone Egypt, comprising Vodafone (UK), AirTouch (US) before its merger, Mobile Systems International (UK), CGSAT (France), the local Alkan Group, the state-owned Banque du Caire, and the investment house EFG-Hermes, launched operations in November 1998, and by June 2004 had 3m subscribers. Overall, mobile teledensity had risen to 9.3% by June 2004. TE had wanted to launch a third national mobile operator in 2003 with a strategic partner once the period of exclusivity for MobiNil and Vodafone Egypt ended in November 2002, but its plans faltered owing to a lack of international interest and because of cost considerations. A compromise was found under which TE agreed to relinquish its licence and instead buy a 25.5% stake in Vodafone Egypt with the reimbursed E1.9bn licence fee. Vodafone and TE agreed to establish jointly a new company, Wataneya, to hold 51% of Vodafone Egypt. Vodafone ensured that it would retain a 24.6% shareholding in Vodafone Egypt directly, in addition to its stake in Wataneya, thereby retaining management control. As part of the agreement TE has consented to stay out of the mobile-phone market until November 2007. Instead, Vodafone Egypt and MobiNil will each pay the NTRA E1.24bn over four years for the use of TE's vacant frequency, allowing for expansion and improved service.

Legislation introduced in 1998 removed Telecom Egypts monopoly and made it a joint stock company. Officially valued at US$6bn-7bn, an initial public offering of 20% plus 5% to the companys Employees Shareholder Association, was postponed in October 2000 because of poor market conditions. TE has since said it wants to sell a stake of up to 34% to a strategic investor. However, these plans do not appear to have made much progress. This is partly the result of a period of global telecoms industry consolidation following the technology- market crash of 2000. However, it may also prove difficult to attract multinationals unless they are given some kind of managerial control. The government appears determined to retain a majority stake in TE. The telecoms law passed in February 2002 gives the government a free hand in selling a stake in TE, but stipulates that the state must retain more than 50% of the company. The local Alkan trading group introduced a satellite telecoms system in October 1996.