The Ministry of Defence is looking to marginalise Egypt’s telecommunication companies to expand its control over the industry’s infrastructure, according to a report published this week in Al-Borsa newspaper.
The Ministries of Defence, Communications, Finance, Electricity, and Transportation are working on finalising plans for a new EGP 3.8bn entity that will develop the national telecommunications infrastructure. It is expected the plans will give the military a 60% stake in the organisation.
Publicised as an initiative to boost market competition, the entity will seek to unseat current industry monopoliser Telecom Egypt (TE), which is itself 80% owned by the government. This comes in a bid for control over the telecommunications industry, but the role of the military suggests the move may be security driven.
A first version of the proposal, which Ernst and Young participated in drafting, had the collection of ministries taking 60% of shares, with Egypt’s three mobile network companies taking shares of 11.5% each, leaving 5.5% for TE. The latter was reported as displeased with this cut, asking for double the plan’s quota.
However, Al-Borsa reported that the Ministry of Defence has disagreed with the initial proposals, asking for at least 50.1% of shares.
Daily News Egypt previously reported that the Ministry of Communications wanted to reduce the Ministry of Defence’s share in the first draft, in light of telecommunication companies’ objections. That this did not happen suggests the driving force behind the new entity is coming from the Ministry of Defence.
Under the new draft, telecoms companies will not have any role in extending or installing communication cables. They will, instead, only being able to rent cables from the company, in which they can collectively hold a 20% stake.
Dr Abdel-Rahman El-Sawy, Professor of Communications Engineering at Helwan University and Deputy Chairman of the Egyptian Chamber of Communication and IT Industries, was unimpressed by the current proposals. Asked whether the size of the military stake in the new entity poses worries for security and privacy, El-Sawy told Daily News Egypt: “Yes, it would give that impression.”
“If the desire is to improve the efficiency of the industry then I believe it would just be better to increase government support of Telecoms Egypt. Creating an entirely new company is like competing with yourself,” El-Sawy said.
“I am 100% against the military and other security agencies having any role in the telecommunications industry. For one, it has bad implications for investors. When you are an investor, it’s very clear how to engage with companies you are dealing with – you go to the office. It’s very difficult to deal with governments in these situations.”
However, El-Sawy feels that the relationship between the close telecommunications industry and the government is not peculiar to Egypt, just more obvious.
“Actually, it is known all over the world that security agencies influence communications,” he said. “Look at the US, the president can ask for information from Facebook and they will give it to him.”