ITU TELECOM WORLD 2009
WEDNESDAY, OCTOBER 7TH
REGULATORY ROUNDTABLE: REGULATING IN TIMES OF CRISIS
TALKING POINTS OF DR. AMR BADAWI
Courtesy
First I wish to thank you for having me among this distinguished line-up of your panel
today. It is really a pleasure and honor.
Addressing the basics
Speaking of the crisis, I wish to highlight two major elements. Firstly, the crisis made
everyone realize how integrated the world economy is. This interdependency between
economies (even if far distant on the development scale) was never recognized enough
before the crisis. This is why even the strongest economies now realized the risk of
having such integration without proper harmonization amongst them, especially in the
financial sector. A lesson we learned long ago in the telecom sector due to the very basic
nature of interdependency of telecom networks in different countries--I believe.
Secondly, one has to recognize also that although this crisis affected all economies
worldwide, this effect was actually a bit different from one economy to another--in terms
of both magnitude and sectors most affected. In some countries the effect was mild to the
extent that revenues and profits went slightly down due to the global recession, and hence
it was not the best time to consider capital investment in new projects. While in other
countries which, I consider, were on the coastline of the financial Tsunami, the challenge
for businesses was to even remain in business; a challenge that even some of the big
players couldn’t fulfill. Understanding this difference is critical to our understanding the
ramifications of the crisis
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The Crisis and the Telecom Market in Egypt
And here allow me to elaborate how it was different in Egypt’s telecom market. NTRA
has been encouraging a competitive telecom sector in Egypt, and between the years 20072008 the telecom sector was growing at ___% annually, revenues in Q1-2008 reached
____Billions Egyptian pounds (nearly ____ USD). With a third new entrant in the mobile
sector in 2007, the mobile subscriber base in Egypt grew by __% over the last two years.
The new entrant alone was able to acquire over [10] million subscribers in just two years,
which accounts for __% market share. Also, internet users grew by __%. The outlook
was just as one can hope for, and hence NTRA announced plans for a second fixed
convergent nation wide operator license in [month] 2008. It was a significant step in a
market where there is only one fixed incumbent operator, with a population of over [75
million inhabitants].
When the global, initially financial, crisis started glooming at the end of Q3-2008, it was
a decisive moment for NTRA either to go on with the original plans regardless of the
global alarming atmosphere, hoping the crisis will only affect the US and maybe the EU,
OR to rethink the new situation realistically. And here we had to go back to the basics of
why regulators are there in the first place. Isn’t it to watch for the public interest in the
sector? That public interest is not decided only by how many operators, but also by the
greater benefit the telecom/ICT sector is contributing to the growth of the Egyptian
economy at large. Risking an underpaid auction at this critical time, and risking even an
under financed rollout at that scale seemed to be unrealistic. And that is why we decided
to halt this new license. And here I have to say I never expected the media and the public
to receive it as well as they did. It assured us we are on the right path.
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Later on, it was officially here. The financial crisis became an economic crisis affecting
every economy, and it was on the ground not just some pessimistic speculations. In
Egypt, tourism and Suez canal were among the first to witness steep decreases in
revenues. Consumer spending also witnessed considerable decreases, partially due to the
media effect and hopeful consumer expectations of lower prices on everything. Though,
the banking sector in Egypt remained fairly strong and stable, greatly due to the early
restructuring that banking sector witnessed in Egypt since 2004.
On the other side the telecommunication sector and, surprisingly for some, the housing
sector were leading the economic growth, with ___% growth in the telecom/ICT market
in Q1-2009. The resilient competition in the market, and the potential for further demand
were among the factors for this growth. It also showed us how telecommunication
became a basic commodity even in an emerging market like Egypt. Between Q1-2008
and Q1-2009 subscribers grew by __% in mobile services, and internet users by __%. It
is also noteworthy, that among the ‘unintended effects’ of the crisis is the decrease in the
costs of personal computers, which led to an increased demand on broadband services.
Pricing strategies of major operators also played a noteworthy role in this growth. The
per minute price for mobile came down from 30 piasters to 5 piasters (1 Cent) last
month—accounting for an 83% decrease. In the broadband market, the price for a 1Mbps
monthly subscription went down from [EGP 280] to EGP 140.
Recovery Stage
Now with the financial and economic outlook in slightly better shape, we found ourselves
in a situation where we have to have the flexibility and agility to respond to the economic
atmosphere and also the market conditions. While the strategic need for a nation wide
second fixed operator still remains, the needed capital investment currently remains an
issue. The more pressing demand in Egypt is actually for high speed networks in the
growing gated communities.
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Only last week, we announced plans for two licenses to provide convergent fixed line
services in gated communities across Egypt. And this time it’s not on an auction basis,
we decided to make it on a beauty contest basis. Judging whom to grant these two
licenses only on the basis of an auction might not get us exactly where we aspire. I think
this is critical because the triple play experience remains lacking in Egypt’s market.
Furthermore, on the more macro level, I’m confident that this step will give way to even
further growth in the housing sector in Egypt, which is among the leading sectors as I
mentioned earlier, which leads to further overall growth of the economy.
Q&A Part:
 How will the regulatory and the competitive landscapes change out of this crisis?
-- Among the very few positive outcomes maybe of this crisis, I believe this crisis has
shifted everyone’s paradigm about regulation as a concept, and as a practice. Those
regulating and those regulated are only two sides of the same coin. They both target
market growth – sustainable market growth. This new paradigm compel us regulators and
operators to maintain the open dialogue. It served us in Egypt and I’m confident it will
everywhere else.
 _Is this license you have mentioned a complete second fixed license breaking the
monopoly of Telecom Egypt , the main operator in Egypt.
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