Telecom Egypt: Great History… Promising Future…

Discussion with Mr. Akil Beshir, Chairman & CEO of Telecom Eygpt

Beshir was appointed Chairman of Telecom Egypt in June 2000. Previously, he was General Manager and Managing Director of Giza Systems Engineering from 1978 to 2000. Beshir holds a B.Sc. in Communications Engineering from Cairo University as well as a Professional Diploma and an MA in Management from the American University in Cairo.

Mr. Beshir on prospects of Telecom Egypt

Firstly, let me say that I think that the telecommunications market in Egypt will probably double in the next three years. We expect it to be around 40 million by 2010.

As you know, we are not directly involved in mobile services. However, all of the recent movement and development in the mobile market is good news for us. Let me explain why: As a fixed-line operator, there is a perception that within this industry there is no growth potential. This is definitely not the case for Telecom Egypt. As a fixed-line operator we have several growthdrivers, and mobile services are one of them.

Let me go through the growth drivers with you: The first is increased penetration. We still have overall quite low penetration, but compared to other emerging markets, 15% penetration is not bad. I think we can expand, as we still grow and find ways to add 1million subscribers every year.

The second growth driver is tariff rebalancing. We still have very low tariffs, although they are very profitable, and we have cross subsidies. We for instance subsidise local calls from the international area even though we will have to deal with the liberalization of international calls in the near future. So, we continually have balance our tariffs to increase profitability.

The third growth driver is broadband. Broadband still has very low penetration. We only have 250,000 subscribers, but this is actually limited by two factors. One is the cost of connection,). The other constraint is PC penetration.

The fourth driver is expansion, which is really exercised in two forms. The first form is geographic expansion into other countries. We currently have two operations in Jordan and Algeria, and are looking for further expansion opportunities.

Finally the fifth and last driver is mobile services. The growth of the mobile market in Egypt is probably the highest in the world. It has been growing at a rate of 56 % during the last couple of years. Telecom Egypt benefits from this growth in three ways. First, in services, and specifically, wholesale. All operators have to use our infrastructure. More business means more transmission and more lines, etc. The introduction of the third mobile operator in Egypt has been very good, as we have had to upgrade our transmission network. In 2005, 20% of revenues came from wholesale and last year it rose to 30%.

We also benefit from mobile growth in the area of interconnection, because we receive shared revenue in calls between fixed lines and mobile.

Thirdly, we see growth within this area through our shareholding in Vodafone, which is a very profitable company. Last year, for example, we were expected to have a 3 or 4 % increase in revenues, and we actually had 11%.

Mr. Beshir on criteria for stability and growth in the Egyptian Market

I think we have a quite stable economic and political situation. If you look at all the economic indicators-GDP, growth rate, foreign currency reserves, foreign exchange rates, and interest rates they are all very positive. Actually, I think we are the most stable county in the whole region. This is actually witnessed by the foreign direct investments. There has been a boom last year of 6.2 billion dollars of FDI. This is an indication of how people perceive Egypt as an investment opportunity.

Mr. Beshir on the future of Telecom Sector

If I put on my Vodafone hat, I am very confident that Vodafone is very capable of facing, if not leading the competition. In the fixed-line service we don't have competition yet. International calling is a very important segment of our business -it makes up 26 or 27% of revenues and a much higher percentage of profits.

As two or three licences will be awarded by the end of the year, we will surely lose some market share, but we are trying to minimize the impact and make it up by increasing our revenues in other areas.

Mr. Beshir on his Management Style

I was brought into Telecom Egypt as chairman/CEO in June of 2000 by Dr. Ahmad Nazif, the current Prime Minister, who was then the first minister of communication for information technology. I had spent all my life in the private sector, and I have applied this mentality to Telecom Egypt. I had 57,000 employees at that time, and productivity was quite low as we only had 4.6 million lines. In spite of being overstaffed, we had to hire more than 7,000 people because we had a great shortage in some crucial skills.

We now operate with less than 55,000 employees after implementing our plan to streamline the company. We started a management training program called the "Leadership Development Program," which was designed and delivered by an American firm called IRE, and is currently in its 4th year. Every year we graduate 25 leaders of the future, which are selected very rigorously. They are potential young managers aged between 30 and 40. These future leaders are put in a very intensive training for 10 months including 1 month of internship in the United States. When these individuals graduate, you can see the difference. They are put in different areas and levels of management to lead the company. Actually, this May 28th we are graduating the 4th class.

Obviously, selecting the right individuals for the program is the most important thing. I had to train my top management to be able to do this selection.

I guess this change was not that difficult for me to implement, as I had a free in making all these changes, I was delegated by the minister and supported by the prime minister to make whatever changes I needed.

I think my biggest achievement, if I may say so, has been in human resources development when I started; there was no marketing at all. People thought that because we had a monopoly, we didn't need marketing, which was completely wrong because we had many services available that people didn't know about. I therefore created the marketing department, and we focused on a campaign to change Telecom Egypt's image. We focused on creating an image that we were not government, but a company that cared about its customers.

Mr. Beshir on the Egyptian Spirit

I think the Egyptian people are, at large, enthusiastic. Years ago, they realized the need to change and reform in every sector and every areapolitical, economic and so on-because most people were convinced of this need to change and saw the potential.

I am among the people who are very optimistic about the future. And I will say that most of the educated people I know also think this way. It is the first time that I remember that we have a government that is thinking long-term. This understandably usually includes short-term pains. If you understand this and can see the indicators, then you will be satisfied with the direction Egypt is moving in. Yes, inflation has increased and we have some problems. But, if you look at all the things I just mentioned, I see a much brighter future for Egypt.

Thank you very much!

For more information visit:
Telecom Eygpt, website at www.telecomegypt.com.eg
Or email us on telecomegypt@telecomegypt.com.eg