It may not come as much of a surprise that Mobinil, the only mobile operator listed on the Egyptian Exchange (EGX), was among the index’s top ten performers. A long-favored stock by investors, the mobile operator has consistently been a strong performer since it was first listed in 1998. And the secret to this strong performance might be simpler than most would appreciate — mobile phones have simply become a vital part of day-to-day life for most Egyptians.

Shedding the image that mobiles are an item of luxury, mobile penetration within Egypt has been increasing steadily since Mobinil, which was also the first private mobile operator in Egypt, bought off the government-operated mobile network. At the time, the network boasted a grand total of some 28,000 subscribers. Egypt’s population at the time was estimated to be 50–60 million.

“No one ever imagined that the [mobile] penetration rate would get to where it is at right now in Egypt,” says Hassan Kabbani, CEO of Mobinil.

“In 1998, when we [came up with] the slogan, ‘A mobile in every hand,’ lots of people were skeptical. They thought we were crazy. Now after 12 years, if we look around us, we’ll see that almost every Egyptian is carrying a mobile.”

SIM cities in Egypt

According to Kabbani, there are more than 81 million active SIM cards in Egypt at the moment. In fact, mobile penetration stands at 120% when taking into account the addressable market, which traditionally excludes anyone below the age of nine and anyone living below the World Bank’s moderate poverty line of approximately $2 (LE 11.92) per day.

“This is definitely due to the multi-SIM phenomenon,” he explains. “There are people who are carrying more than one SIM card from more than one operator. And you add to this a data line, [which subscribers use to access the internet via mobile]. It’s no longer a luxury to have a mobile. It’s no longer a luxury to have a data line.”

Kabbani has witnessed a shift in the relationship between Egyptians and mobile lines since the entry of private mobile operators into the market in 1998, which helped cut costs and made it more affordable to users. He explains that Egyptians have now come to see mobiles as a necessity. This is largely reflective of the way that individuals not only in Egypt but around the world have started communicating and even consuming information.

“We are in a mobile world,” he says. “We can’t wait until we are in a physical location to get access to what we want. We want to know something and we want to know it now. We want to call someone and we want to call him now. We can’t wait until he is physically in his office or home to call him. This period is over.”

He argues that nothing represents the shift in the way Egyptians communicate and consume information more than the events of January 25, where all the changes that are currently taking place in the country were instigated through modern communication tools and methods, including accessing data and information on the internet through mobile phones. And he projects that this pattern will continue to grow.

In fact, with more than 81 million SIM cards currently active, growth within the mobile sector is likely to come, not through simple telephony services but through availing technology that will allow consumers to access the internet and other applications via their mobiles, as opposed to just through computer terminals.

Mobinil: Mobile and motile

Egypt is one of the countries with the lowest per-minute rates for mobiles telephony in the world, he explains. And while all three mobile operators within the country have managed to cater to high-end users — those who generate the highest average revenue per user (ARPU) — have also managed to accommodate those who spend less.

They did it by launching a large variety of competitively-priced products and services that meet the needs of the financially-conscious consumer.

But having stretched that to the limit, Kabbani says that it is unlikely that mobile operators will aim to lower their prices much further as they would be selling below cost. Instead, he argues that all three operators will find other ways to generate revenues in order to continue to grow financially. This growth will likely come from data, the technology that allows users to access the internet or transfer data via their mobiles, as opposed to simple voice telephony.

“Data will definitely eat more of the capacity [of the networks] than voice,” he says. “If that is the case and we see consumers more interested or having the appetite for more data and internet [services], then this needs to generate enough revenue for operators to secure more capacity to meet this interest.”

He adds: “Reducing prices does not always necessarily mean a healthy situation, because if we reduce prices so that we are no longer covering our cost, then operators will no longer be able to bring [to consumers] more capacity and new technology.

“So we need to have the right balance to make sure that we can make the services affordable and available to all while making sure that we remain profitable in order to make sure that we can invest for the future.”

“Pick up on Line 1”

It will be up to the three operators currently in the market to ensure that the balance between affordability and profitability is sustained. After all, competition in the market has always been one of the keys to the continued growth of this sector.

With three operators acting as driving forces in the market, the rumors of the possible issuing of a fourth mobile license was one that surprised Kabbani. While the CEO is very much in favor of competition, he argues that there are other areas within the telecommunications sector that need more competition.

“This is not what we need to be talking about today,” he says. “We don’t have an issue of developing mobile telecommunication services in Egypt. We have more than what we need already. And we have enough competition in that sector. I personally believe that competition is needed in different areas of telecoms [such as] fixed [telephony] for example. We need more fixed infrastructure — we need fiber [optics], we need more international [connections], which will help us further develop telecom services. So these are priority over issuing a fourth [mobile] license.”

And while Mobinil remains the only listed mobile operator on the Egyptian Exchange, Kabbani says that as long as Egyptians continue to depend on their mobiles for various modes of communication, the company’s stock is likely to continue to do well.

He says this has been part of an international pattern since investors see telecommunication stocks as solid investments. In the case of Egypt, as citizens continue to consume telecom services, the stocks of this sector are likely to do well.

With an increase in both supply and demand, prices will inevitably rise. Having said this, Kabbani believes that 2011 will be a tough year for the economy as a whole, telecommunications included.

“Our industry is more resilient than others, but then again, […] we are not completely isolated. If I talk about Mobinil and our network that serves 31 million Egyptians, it is nothing more than a reflection of what’s happening in Egypt today. So if we have fewer [tourists], we will have less roaming [revenues]. If we have less economic activities and fewer companies are doing less business, then we will generate less [revenues] from this sector.”

“If some Egyptians are not working and not generating income, then we will have less revenue from [these] consumers. Whereas, when the economy is doing well, then we see this reflected in our business.”

Having said this, he remains optimistic and confident in the abilities of the Egyptian economy to recover. But the speed at which this recovery takes place will depend on ensuring that the right policies are passed by the government. bt