Fwd: ETEL to pay EGP2.5bn for mobile license, given one year to exit Vodafone Egypt; mobile operators to pay EGP100m for fixed-line license

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From: "NAEEM Research" <research@naeemholding.com>

Subject: ETEL to pay EGP2.5bn for mobile license, given one year to exit Vodafone Egypt; mobile operators to pay EGP100m for fixed-line license

Date: April 2, 2014 at 3:45:05 PM GMT+2

Telecom Egypt (ETEL) to pay EGP2.5bn for the mobile license and has been given one year to exit Vodafone Egypt; mobile operators to pay EGP100m for fixed-line license

The Minister of Telecommunications and Information Technology (MCIT) alongside with the president of the National Telecommunications Regulatory Authority (NTRA) have officially announced the following:

*         ETEL will pay EGP2.5bn for phase-one (scheduled for two years) of the unified license to be able to introduce mobile service through other mobile operators

*         Mobile operator to pay EGP100m each to get the right to introduce fixed-line services through ETEL's network

*         4G spectrum to be introduced in 2016-2017; fees is yet to be announced

*         ETEL to get one year to negotiate divesting its stake in Vodafone Egypt (VFE)

*         Network leasing prices are yet to be agreed between ETEL and the mobile operators

It is worth noting that none of the mobile operators have attended the conference. (Source: Various)

Our take is neutral - awaiting reaction from mobile operators and ETEL

*         We are wary of the reasons behind the mobile operators absence (during the conference) and the implications of this latest move

*         Therefore, we reiterate our concerns if the govt. is trying to overpass the current disputes between operators and ETEL, without reaching an amicable settlement

The license fees seems exaggerated

*         Although the fee of EGP2.5bn would not be a burden on ETEL, given its strong cash position, the pricing seems exaggerated for a two year license; besides the fact that ETEL is yet to pay lease rentals to access the mobile operators networks

*         Bear in mind that Egypt's mobile market is maturing fast (penetration at the end of January 2014 was c. 121% and marginal ARPU below USD3), therefore, targeting low-end subscribers with an average ARPU of c. USD2 doesn't look economically viable and promising

*         After phase-one, ETEL should pay extra fees for the 4G spectrum. We recollect that back in 2010-2011, VFE and Mobinil paid c. EGP3.4bn for the 3G spectrum

*         Therefore, the mobile license including the 4G spectrum might cost at least c. EGP6bn

*         Nevertheless, we have our doubts on the mobile operators accepting to pay another EGP3.5bn for 4G spectrum and their reaction, if the 4G technology comes cheaper than the 3G technology benefiting ETEL

*         In such a scenario, the government may have to compensate Etisalat Misr for changing the goal posts after it paid EGP16.9bn (USD2.7bn) for the third (2G & 3G) license in 2007. It would be difficult for the NTRA to ignore this as a pricing guideline for any new licenses

Network sharing remains the key issue – no details have been announced

*         We continue to believe that pricing of the leasing network would remain a key issue to be agreed on between ETEL and the operators, owing to the population geographical distribution, the quality of coverage and security

*         Accounting for the network sharing lease rentals is the key for the new business cost forecasts. The ongoing interconnect disputes between ETEL and mobile operators, which started back in 2007-2008 and didn't get settled yet, suggests that the pricing phase would be a tough ride for ETEL and the NTRA

 

 

 

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