NEW TELECOM LICENSES FALL SHORT OF ENDING TELECOM

UNCLAS CAIRO 001928

SENSITIVE
SIPDIS

DEPT FOR NEA/ELA AND NEA/EEB
DEPT OF COMMERCE FOR IT MAS AND NTIA

E.O. 12958: N/A
TAGS: ECON EFIN EINV PGOV EG
SUBJECT: NEW TELECOM LICENSES FALL SHORT OF ENDING TELECOM
EGYPT'S MONOPOLY


1. (U) KEY POINTS

- Egypt is issuing new tenders for bundled voice and data
services for the rapidly growing housing-compound market.
The GOE expects $1 billion to be invested in these services
over the next five years.

- For the first time, the telecom tenders will be based on
revenue-sharing agreements rather than large upfront license
payments.

- Though this is a positive step for deregulation, the GOE is
maintaining Telecom Egypt's fixed line monopoly and granting
it exclusivity in bundled services in the larger compound
communities.


2. (U) On October 1, the Egyptian Ministry of Communication
and Information Technology (MCIT) and the National
Telecommunications Regulatory Authority (NTRA) announced the
tender for two new licenses for "triple-play" or "compound"
services, the first of their kind in Egypt. The licenses
include the provision of bundled value-added services (voice,
data, and internet) to Egypt's higher-income consumers
located in gated "compound" communities. Bidding is open to
both Egyptian and international competitors. The licenses
differ from previous ones as they are based on a
revenue-sharing model rather than the model of a large
up-front payment that has been used with all previous license
offers. These licenses require eight percent revenue sharing
with the GOE and no "significant" upfront fees. MCIT expects
the investment by the new licensees to reach US $1 billion
over the next five years. The tender's closing date is
January 12, 2010.


3. (U) The new licenses will only cover small, gated
communities in Egypt. Specifically, the two new licensees,
as well as Telecom Egypt, will be able to compete for housing
communities with 50-5000 units. However, Telecom Egypt will
remain a monopoly to provide services to communities with
more than 5000 units.


4. (SBU) COMMENT: The addition of "triple-play" operators to
the market could open the way to break Telecom Egypt's
continued fixed-line monopoly. Although Telecom Egypt will
still operate in larger gated communities as a monopoly,
Egypt's decision to open up competition within the smaller
gated communities is a small step in the right direction.
The CIT Minister Tarek Kamel has stated that the economic
crisis has prevented MCIT from offering a tender for the
second fixed-line license as previously planned. However,
MCIT actually postponed working on the fixed-line license
prior to the onset of the economic crisis and has yet to set
a projected timeline for when they hope to offer the new
license tender. While MCIT has made one positive decision,
the hesitation to fully open up fixed-line services to
competition means that Egypt is still far from full telecom
de-regulation. End comment.
Scobey