When it comes to telecommunications, we have very aggressive plans
CAIRO: The Egypt Invest 2005 forum embarked yesterday on sessions discussing efforts undertaken by the government, hand-in-hand with the private sector, to improve the climate for trade and investment. One of the sectors on the agenda is that of information technology (IT) and telecommunications.
Most would agree that the government has taken tremendous strides in that area, a commitment noted by the creation of the Ministry of Telecommunications and Information Technology and the appointment of then Minister Ahmed Nazif at its helm in 1999.That, however, was merely a starting point in a sector considered to have great potential for growth, and one that attracts the keen interest of investors – both local and foreign.
One of the speakers enlisted to discuss immediate and long-term investment opportunities in the sector is Medhat Khalil,chairman and CEO of Raya Holding.
Considered one of the frontrunners operating in the field of IT and telecommunications, under Khalil’s leadership Raya has built one of the principle components of the sector.
Today, Raya operates in three areas of business, IT, telecommunications and retail and distribution, with operations that ventured across Egypt’s borders into the region. The Daily Star Egypt met with Khalil to discuss the current and future developments in the IT and Telecommunications sector, as well as Raya’s role within the field.
Khalil begins by commending the current government’s role in improving the environment in order to allow the field to flourish. “We are very optimistic with the new government and the steps they are taking.Definitely this year is better than the year before, and the year before much better than the previous year. This government is far ahead of the last government., said Khalil. “We are definitely in much better shape.
Khalil attributes much of the development in the industry to initiatives the government has taken,and is continuing to take, with regard to e-government – that is automating its processes – and large-scale initiatives such as introducing free Internet and the “A Computer for Every Home program. Accordingly, the Ministry of IT and Telecommunications, in Khalil’s view, “put in place quite a few, very crucial key milestones in building the IT industry in Egypt.
Raya has played its role in supporting these government efforts and has emerged as one of its largest partners in implementing e-government projects.
Raya tackled the time consuming bureaucracy of Egypt’s largest judicial facilities, the North Cairo Elementary Court, and developed and implemented a Web site presenting online services and information – ranging from application forms, timetables of court sessions and the status of lawsuits and court rulings – increasing the courts’ efficiency. The government has been automating the traffic systems – issuing drivers’ licenses, vehicle licenses and tickets for traffic violations – and, in the foreseeable future with Raya’s combined efforts, the public may be able to go online to access records, follow up on penalties and possibly even making payments.
A recent success that has secured Raya’s relationship as a partner in egovernment initiatives has been their role in kicking – off the first phase of the Finance Ministry’s automation project. The LE 1.66 billion project entailed Raya implementing an Automated Budget Preparation System to aide the ministry in efficiently constructing the government’s budget.
Aside from the government’s aggressive steps to streamline and automate their processes, the private sector is also jumping on the bandwagon.” For any kind of private sector [company] to grow, he will have to have the information system – to have a proper information system, he will have to use information technology. So for a country like us, if any private sector industry would want to grow, to be able to compete on the international level, then they have to have a strong automation and information system. These initiatives, regardless of whether taken on my government or private entities, are generating business and growth in the sector.
The most prominent development in the IT and telecommunications sector in Egypt, however, one that is whetting investors’ appetites, is the deregulation of the telecommunications sector. Telecom Egypt (TE), the governmentowned sole provider of fixed landlines in Egypt, announced earlier this week the largest ever share offer brought to the Cairo and Alexandria Stock Exchanges (CASE).
Valued at a minimum of LE 4.5 billion,the sale of 20 percent of TE is anticipated as one of the largest divestments by the state following the recently resuscitated privatization program that had been derailed in 2004.
Khalil agrees that the government’s deregulation of the telecommunications sector is spurring the growth of investment in the sector. Aside from the much talked about license for a third mobile phone operator, there are other opportunities for investors. “The government is planning to issue to licenses for international traffic, so you will find quite good investment for this area.The [other] area is the land operator, everyone is looking to be the second land operator in Egypt, noted Khalil.
And Raya is joining the scores of investors looking to get a slice of the pie.
“We are hoping to get one of the two licenses that the government would issue for the international traffic.We are, today, putting quite good efforts in putting a consortium together to bid in the third mobile license. So we are investing heavily in the telecommunications part of the business.
In comparison with telecommunications, IT investment is in-coming, but according to Khalil, “not as much as we’d like to see. Khalil believes there is one crucial barrier still needing to be overcome. “But our human resources are not on the proper standard, so if we improve our educational system this will help us a lot to double and triple our investment we are bringing into this country.
As Khalil goes on to explain, “We now have the Ministry of Information Technology and Telecommunications, we have the Ministry of Administrative Development.They are doing a very good job, they are pushing the industry. My own point of view is that the Ministry of Education and Higher Education is not keeping up with this effort. At the end of the day,if you bring very good,sophisticated systems to schools, if you don’t have the student and teacher who are interested and know how to use this technology, then you haven’t gained advancement.
On this topic, Khalil is extremely passionate.Without effectively educating the up and coming generation, we are not realizing our potential, our key competitive advantage we hold in the region. “When the percentage of CVs that are submitted to our company would fail the basic English language test, at maybe 80 percent or higher, then I am frustrated.When they don’t pass the basic aptitude test, then I am frustrated.What frustrates me is the educational system, the education improvement, which we are not really focusing on so far, stated Khalil emphatically.
Though the lagging educational development poses a barrier to the growth of the IT sector, the potential is there. “We are most suited [in terms of human resources], and investment is coming. Raya’s success over the past years is evidence that hurdles can be overcome.
With Raya Academy, Khalil has taken steps to tackle the issue. “We established our own educational institute.We have to bring fresh graduates up to the proper level in order for them to be productive in the industry, he explained.
“We also provide such services to the government; we help the Ministry of Information Technology and Tele
communications provide educational training for fresh graduates.
Given their plans for the accomplishments and ambitious plans for the future, Raya’s forecast for the IT and telecommunications sector remains optimistic.
“When it comes to telecommunications, we have very aggressive plans. Today we are one of the major service providers for data telecommunications, for corporations and consumers. We have our own ISP.We do have the largest market share when it comes to providing connectivity services to corporation, and virtual private networks to different companies. We are investing in the Voice Over IP, not adding their ambitions in capturing some of the business from the telecommunications deregulation. “And this is with Egypt, because we think that inside Egypt, the room is still huge for investment in this area.
Their IT investments, on the other hand, are taking them outside of Egypt – with plans to expand into Saudi Arabia, UAE, Qatar, Kuwait, and Algeria, not to mention their representative office in the United States that is luring in business for their software development services.
One area Raya is investing in heavily is their call centers. “We are growing our people now, and we are building a huge facility in 6th of October to accommodate 700 or 800 people. We grew from a few agents a couple of years ago, maybe 20 or 30, to more than 600 today. Raya’s call center serves are provided to local, regional and international customers.
Today, Raya’s track record speaks for itself. Raya was established in 1999.
After Khalil had founded Protech – an Egyptian company working on providing Network services, automation and auto archiving – he realized the difficulty in having to compete with sector giants like IBM and MCR – Khalil came up with the idea of merging several smaller companies in the same business, to create one large entity that can emerge as one large multinational- like company.
Under Khalil’s leadership Raya’s revenues have grown from LE 88 million in 1998, to LE 1,129 million in 2004.Starting with a headcount of some 280, today Raya has human resources in excess of 2,100.Having gone public about six months ago, their share price has appreciated approximately 30 percent during that period, and is one of the top 10 most traded shares in the domestic stock markets.
Raya’s accomplishments, combined with its relentless ambition, can be taken as an indication of the bright future ahead for Egypt’s IT and telecommunications sector.