Given the frantic tower activity in SSA, North Africa seems to have lagged behind the rest of the continent in terms of the transfer of passive infrastructure assets to independent towercos. With political unrest marring business development over the last three years, some of the critical regulatory and governmental infrastructure has been delayed, impacting the development of the market. However with parliamentary elections taking place soon and more stability coming to Egypt, plus MobiNil’s deal with Eaton Towers, there is scope for significant growth in this attractive market. TowerXchange spoke to Tarek Aboualam, whose career in the Egyptian telecoms industry has included time heading up Telecom Egypt and Mobiserve, and asked his thoughts on where the market will go next.
TowerXchange: How do you feel the political situation in Egypt has affected the telecoms market?
Tarek Aboualam, Managing Partner, Tirocon DMCC:
The political situation and turbulence wasn’t good for the market in the short term. Telecoms wasn’t affected as much as other markets due to the nature of the services offered, but from a big picture point of view you need investment and long term plans which are made tough by political instability.
Telecoms is also a very dynamic market and needs to grow – it’s immature in Egypt so needs strong government and a regulator willing to make hard decisions to let the market move on. In my opinion this is what affected the market more than anything else. Over the last four years we’ve heard talk about implementing a new licensing framework (a unified license framework allowing the current four licensees to provide fixed and mobile services), but it has not happened yet.
Since last year we have a President who is here to stay and in March there was a big economic conference in Sharm el Sheikh where heads of state and businessmen came together and announced that there were many opportunities for investment, so steps are being taken in the right direction. Maybe in 2015 we’ll see a resumption of the previous growth stories we had in the Egyptian economy. We also have now a new MCIT minister who came to office almost a month ago from the private sector and who is willing to leave no stone unturned to ensure the ICT sector becomes the pillar of the economic growth.
TowerXchange: How will a fourth operator entering the market affect the status quo?
Tarek Aboualam, Managing Partner, Tirocon DMCC:
Until last month official announcements were that Telecom Egypt will be offered the fourth operator role immediately – first a GSM license without towers then after two years they will maybe launch a 4G auction then see what happens.
Currently the new minister is focussing mainly on enhancing telecommunications services to the end-users and increasing the broadband penetration as well as on reviewing the long term strategy for the sector. The fourth license issue seems to be getting a lower priority. In all cases, TE getting the fourth license shouldn’t change the tower market dynamics in the short term but in the medium term all operators will need more infrastructure for data capacity. I was the CEO of Telecom Egypt before my last role so I may be biased! But there is still room in the market based on data growth.
No operator would like to have more competition but it’s good for everyone provided the framework is right. It will be good for the market and good for consumers. The multi-million dollar question is how long it will take. No one knows, but our parliamentary elections will take place in September so changing the landscape now would be tough. I assume that after parliament is elected things can move.
I believe both MobiNil and Eaton will benefit a lot from being the first mover in this direction. There are many barriers to entry for the followers
TowerXchange: How does will the MobiNil tower sale change the market?
Tarek Aboualam, Managing Partner, Tirocon DMCC:
I think the introduction of the towercos model is a development which should have happened much earlier in Egypt and was delayed due to the political instability given the long term nature of this investment. We now have around 20,000 towers in Egypt and operators are all seeking to reduce capex, freeing cash and enhancing coverage to meet the end-users increasing hunger for data!! The magic solution for this contradicting mix is to introduce the towerco model. MobiNil are brave to introduce this and I think Eaton Towers made a smart decision by grasping this opportunity at this point of time.
In Egypt the regulator issued many licenses in the last few years for different local service providers to build, rent and manage towers and many players are already activating their license. However, none of them has the financial capacity to buy thousands of towers like the big international towercos do so in my opinion the local players need to partner with the international towercos and maybe focus more on O&M services.
TowerXchange: There used to be a fuel subsidy in Egypt which made a big impact on tower opex. What’s the situation with that now?
Tarek Aboualam, Managing Partner, Tirocon DMCC:
There was one and there is still a smaller one. For the first time in 30 years it was partially removed last year. The government announced plans to remove it altogether eventually as it’s not working but the exact timings aren’t clear yet. Knowing the financial situation, I assume this will happen after the parliamentary elections.
The removal of the subsidy won’t be easy but we will just have to sharpen up on efficiency. Prices are going up and will put pressure on operators and on their service providers. There are some technical solutions; we need to have better management and control systems, use renewable energy, solar, battery hybrids et cetera, which has already started in Egypt. In general grid access is good, but the problem now is that there is a problem in power generation capacity, so you see power cuts every day in the summer. There is a plan in place to increase power generation but we have to rely more on our own solutions in the mean time.
TowerXchange: How do you think the MobiNil tower sale will affect the rest of the Egyptian market?
Tarek Aboualam, Managing Partner, Tirocon DMCC:
I am quite confident that the two other operators as well as other international towercos will be eager to follow in MobiNil and Eaton Towers’ steps. No one wants to keep cash tied in towers without real value add. If you can get the same service with less complexity by partnering with an international towerco, why keep the cash there?
I believe both MobiNil and Eaton will benefit a lot from being the first mover in this direction. There are many barriers to entry for the followers. Closing such complicated deal takes a lot of time and energy from all parties until you reach a win-win commercial formula. After closing the deal, executing it on the ground for the first time in Egypt is another major challenge as more parties get involved and you have to deal with a lot of technical, operational and regulatory issues but I am again confident that Eaton Towers’ experience and MobiNil’s determination will ensure the success of this project.
