By Mahmoud Radwan and Raghda Helal
French telecommunications company, Orange, has a 99% stake in Egyptian mobile and telecommunications services provider Mobinil. In an interview with Daily News Egypt, Mobinil CEO Yves Gauthier talks about the rapidly expanding information and communications technology (ICT) sector in Egypt, particularly in the broadband sector, and the company’s plans for the coming period.
What is the reason behind Orange increasing its share in Mobinil?
It was an agreement between the shareholders back in 2012, as a matter of fact, so it was planned.
Increasing Orange’s investments in Egypt indicates that the company has shaped a vision for the Egyptian market. What is this vision?
It shows that Orange believes in the Egyptian market. Today Orange has 99% of Mobinil’s shares, which is a temporary situation, because Orange has an intention to seek an Egyptian investor in Mobinil after the economy stabilises.
What is the expected impact on Mobinil in terms of management and operations after executing the acquisition deal with OT?
There is no expected impact on Mobinil’s management, because Orange previously controlled a majority 94% share in the company, which is similar to the currently owned stake. There may be some changes in the board but there will be no change in the management of the company.
What do you say about the timing of this acquisition, especially as Egypt faces many political and economic challenges nowadays?
There is never a bad time to do good things. This step was planned beforehand, and I think it happened at a good timing despite the challenges which the country faces. Meanwhile, looking at the region, Egypt is not the only country to face these challenges.
Foreign investment in Egypt has been low since the 25 January Revolution. Do you expect Orange’s deal to change investors’ point of view towards Egypt?
I don’t think it will change their point of view. However, the situation is quite stable in Egypt, so a lot of companies, not only Orange, look forward to invest in the country as it develops, and I think it will be good to increase their investment in the country. Orange already believes that Egypt is a strong country and a strategic one, and it is one of the strongest counties in the AMEA regions (Africa and Middle East). For us, Egypt is a promising market in the coming years. Egypt has a population of approximately 90 million people, and is increasing by 2 million per year. Today, the usage of the broadband is low, but this growing population means that the Egyptian market is a promising one.
Orange has stated that it is planning to increase Egyptian investment in Mobinil. What are the required steps to execute this plan?
Today Orange has 99%, and will probably look for increasing the Egyptian investments when the economy is stable. For Orange, the important thing is to manage the company, and in terms of management today there is no doubt that Orange will manage the company for the coming years. After the market stabilises, perhaps in three to four years from now, we will have a vision which will be executed, whether we have 99% or 80% of the shares. The execution will not be changed.
What do Orange’s efforts to increase its share in your company mean for Mobinil?
For Mobinil it doesn’t change anything, as there is no impact on the management or the strategy. For Mobinil it will have a minor change in the board only.
What is the importance of Mobinil to Orange?
Mobinil in the AMEA region represents roughly 30% of Orange’s customers and more than 27% of the revenue, so it is a strategic asset for Orange.
Is Mobinil achieving the results aimed by the Orange group?
Yes, in 2014 we achieved better results than were planned in the initial budget by the group. In terms of revenue, we over-performed the budget. EBITDA also exceeded expectations. Even the net result, which was negative, was still better than in the initial plan. I think in the major financial results, they are better than the initial forecast.
What is your vision regarding the telecom market in the coming period?
I think that the market will develop in the broadband sector, as we see each year. For example, in 2014, the growth in data was 140% compared with a year earlier, in terms of traffic, which is huge increase, and we see that this will continue in the coming years. We also believe that there are a lot of promising technologies, for example machine-to-machine, mobile money and cloud computing. I mean, there are big new usages that will come and will help the business to grow.
What are the investment opportunities your company sees in the telecom market?
We invest between EGP 2bn–EGP 2.5bn per year, and this will continue after we invest a big part in the network, since I believe that if you want to be a good competitor you must invest more in the network. In the last two years, we ranked as the best network and we will continue to invest more in the coming years.
What is the role Mobinil can play to achieve government aims in developing the Egyptian economy?
Our contribution to the Egyptian economy is our investment in the country which is mainly in the network quality, broadband, new technologies. We will probably also develop the data centre, and there will be development in the Cloud so there will be investment in those areas.
The telecom sector is considered one of the fastest growing sectors in the market, how can the Egyptian economy benefit from this growth?
The Egyptian economy does benefit, because our growth means we are employing more people so we are doing more business. More investments mean more people are employed and obviously this helps the economy grow, and the growth domestic product (GDP) of the country increases. If we look today at the total spending in the telecom sector in Egypt, and compare it to the GDP, it is relatively low in comparison with the West and Europe. Therefore, we hope in the future that ICT’s weight in GDP increases. We believe that investment in the broadband and new usage will help the development of the country.
So, what is the best percentage of Egypt’s GDP, in your opinion, to spend on the ICT sector?
The Ministry of Communications and Information Technology predicts that it could double the weight of ICT in the GDP, and I am optimistic, since I see that the sector contributes well to the development of the country. If we reach spending rates of 5% to 6% per year, this would be very good.
Does Mobinil have any suggestions to the Egyptian government to support the Egyptian Telecom market?
To support the telecom market, I think the government has to facilitate our investment. Today, it is a bit difficult to put up new sites, a little bit difficult to put fibre optic cable in the ground, so if tasks like these become easier for the operator, there will be more investments.
Are there any challenges in the telecom market that should be overcome?
There are challenges because there are changes in the market due to the common licence. For us, this is a major change as it means that there will be one more mobile operator and potentially three more operators in the coming years. I hope that the growth of the market or the redistribution of the revenue will maintain the business of all existing operators because if, at the end, one of them disappeared because of this new licence, it would mean its failure. The success of the licence means that the market allows all operators to grow.
What is Mobinil’s investment plan to increase its stake in the Egyptian market and its market share, in light of increasing market competition?
I think the market share will not be gained by investment in the market share but by the services offered to the customers, and the service is through network quality. It also depends on the products that you offer through innovation. To increase the market share, it’s not just a matter of money, it’s what you use the money for and how you serve the customer.
What progress has been made towards obtaining the fixed phone licence?
We are still studying it. Our intention is that we will take the fixed licence if it is a profitable business and for it to be profitable, it will depend on what we can do with this licence and how much we will pay for it. Today, we are not extremely encouraged to acquire the licence. We have asked NTRA [the National Telecom Regulatory Authority] for modification of the licence, and we will decide after we have received some clarification.
With the increased demand on energy and the crisis Egypt is facing in this aspect, do you have any new suggestions to the Egyptian market?
This crisis shows that if the economy has to grow it needs energy, so I think it is one of the government’s priorities to have enough energy in order for industries to provide good service.
Are you with or against using coal to provide energy in the country?
What are the developments on the local roaming agreement?
Until now we are still in discussions, and no agreement has been reached on this issue.
What are the developments towards establishing a national entity specialised in telecommunication infrastructure?
We are in favour of what we call “infraco”. We are supporting the project as we believe it’s good for the country, so we aim to be part of it. As for the different parties, it will take time to formalise total shareholders for the funding, so in terms of supporting it yes we support it.
When do you expect the project to be completed?
I think that this project should be finalised in the coming three months.
Why do you find this project to be important?
Because today, you have only one company that can install fibre optic cables which is Telecom Egypt, and I think that the country needs to have more of these. The only way is to have competition in this field to put in place infrastructure. For example, the backbone of the mobile operator network in Egypt is through the use of microwave [technology], but across the world, mobile operators’ backbone is fibre optic cable, and therefore if we are unable to prepare a good backbone we won’t be able to offer a good service when we launch, for example, LT, since we won’t have the capacity to carry the required data. This project is crucial for the country to enlarge the fibre optic cable field in the economy.
Is Egypt a risky country?
This is a relative issue. If you compare Egypt with developed countries, it will be riskier, but if you compare it with Libya now, it is surely much better. For me, if we have a revolution that brings deep changes in the country, it is only normal that returning to stability would take time. I believe Egypt is on the way to becoming more stable, but it will take some time. Also, the stability of the region contributes to the stability of Egypt. I also personally believe that because Egypt is strategic, its stability could bring stability to the region.
How do you see the investment environment nowadays in Egypt?
What was Mobinil’s role at the Summit?
The role of Mobinil is to present our vision in the telecommunications sector in Egypt, and to participate in the discussions.
Could we hear about any new acquisitions or merging after the Summit?
No I don’t think so. There will not be big announcements, as the country wants to bring leadership and investors together in discussions. We will speak about our success and our challenges and it’s important to converse with others.
What is your message to foreign investors?
Egypt is a country whose population grows by 2 million people a year. There is a good telecommunication infrastructure for mobile phones, a strong banking system and a clear vision by the government. Therefore, I think it is a country that you should invest in. It also seems that the country is moving more and more towards stability.
How do you see the economic challenges currently facing Egypt?
I think the most important challenge is unemployment. We need tourism to come back by implementing new big projects like the Suez Canal, and we need to have some investment in different areas.
How could you see telecom sector nowadays? Does it need many investments?
The telecoms sector will always need huge investments. All operators invest between EGP 2bn–EGP 2.5bn per year, so multiply it by the four operators in the market and it will be EGP 10 billion a year, which is a huge amount.
What is your vision on the launch of the 4G licence?
It is necessary to grow broadband so this licence is a priority for Mobinil.
What are Mobinil’s investments each year to build and upgrade its network?
The network invests roughly EGP 2bn per year, as more than 80% of our investments yearly is on network.
Has Mobinil agreed with TE on the rates of renting frequencies and base stations?
No. I expect that we will first have to discuss the national roaming which is still incomplete. After that, Telecom Egypt will be ready to deploy the network which will require several steps: firstly, they need the licence; secondly, the frequency and finally they will have the deployment programme. We have not yet begun talks about renting our website. I think those steps will take two years.