CAIRO: With the number of mobile internet subscribers growing at a furious rate in Egypt, the three mobile operators have been in a frantic scramble to attract new business, retain old customers, and carve out enduring market niches.
Philosophical differences between the two leading companies have sparked a critical debate over the future of telecom in Egypt. Both Mobinil and Vodafone have made strategic gambles on the direction the market is heading. Shifts in the market over the coming years will serve to validate or discredit each strategy.
New numbers out on each of the three companies, detailing their first quarter 2009 subscription numbers, shed light on how each is performing and what sort of marketing strategy each has adopted.
Mobinil, the largest operator, added 5.2 percent more subscribers in the first quarter of 2009, versus the last quarter of 2008. That brought the company’s total subscriber base to 21.17 million. Vodafone brought its total subscriber base to 18.89 million, up 7.3 percent over the previous quarter.
Etisalat, still the smallest of the three companies, experienced the strongest growth, adding 27.2 percent more subscribers, bringing its total to 4.53 million by the end of March 2009.
“Despite the global credit crunch, spending on mobile phones and new subscribers have remained strong in Egypt, with mobile operators averaging one million net subscriber additions per month, since the start of 2009, wrote Beltone Financial in a note.
In the hunt for customers and revenue, each company has worked to carve out a place for itself in the market.
Mobinil on numbers
Mobinil has charted a strategy driven primarily by volume. Remaining the leader in terms of subscriber numbers is key, analysts say, to the company’s success since it has a tendency to draw lower value clients.
Generally speaking, part of Mobinil s strategy is to maintain its leading position in the local market in terms of subscriber numbers, said Delilah Heakal, vice president and telecom expert at Pharos Holding.
To maintain its position, Mobinil has aggressively played up its Egyptian branding.
Mobinil focused a lot on branding, and leveraged on the fact that it is the only locally owned player, Heakal said.
In press statements and public speeches, Mobinil executives are quick to point out that the company is the volume leader in the Egyptian market.
“We are still growing and we are not seeing any change in daily demand, Hassan Kabbani, Mobinil CEO, told Bloomberg this week. “Mobinil is adding 1 million every quarter.
Vodafone on quality Mobinil’s primary competitor, Vodafone, has adopted a philosophically and strategically different strategy. Vodafone s focus is on quality customers. You can t say they don t care about their market share, but their focus has definitely been on quality customers, said Heakal. In this vein, Vodafone, which has roughly 2 million fewer customers than Mobinil, has targeted the kind of customers that are willing to spend more per month on their service.
Vodafone has the biggest share of market revenue, said Heakal, reflecting Vodafone’s success.
To accomplish this, Vodafone has pushed to become the mobile internet leader. To date, a staggering 2.5 of its 19 million customers are mobile internet subscribers.
Vodafone’s emphasis on internet dates back to when it launched its 3G services in May 2007. By contrast, Mobinil didn’t even purchase a 3G license until October of that year, launching its services the following year. “Although the [3G] licenses were expensive, for us they were a very compelling proposition because of our belief in the future of data and the need for speed, said Richard Daly, outgoing Vodafone Egypt CEO. Taking competition further
The newest addition to the mobile telecom market, Etisalat, has charted a course between the two companies in a strong play to grab market share.
The company launched in Egypt at the end of April 2007, taking its 3G services live at the same time as Vodafone. But while competing on the technology end, Etisalat reignited price wars with Mobinil at the beginning of this year, driving dramatically down the price per minute of a phone call.
These price battles are reminiscent of the competition several years ago between Vodafone and Mobinil to sink prices and grab a greater market share in anticipation of Etisalat’s 2007 launch.
Analysts agree that for Etisalat to succeed, it will have to play aggressively on both fields – volume and technology – if it hopes to compete with the two more established players.
Vodafone and Mobinil’s divergent tracks raise questions about where this dynamic industry is heading over the next five or 10 years.
And each company has its own take. Each one of Vodafone’s 20 million voice services clients is a potential mobile internet user, Daly said. By the end of March this year, Egypt boasted more than 44 million mobile subscribers. As the market approaches saturation, Vodafone believes that future growth lies in technology. Vodafone’s commitment to quality affordable internet, it says, will drive growth in the coming years.
Mobinil does have a 3G license and is also committed to mobile internet services, but it has banked on the theory that the seemingly-less lucrative voice services will continue to drive the industry, making volume king. I know there is a lot of focus on promoting mobile internet now, but I think we will continue to remain a voice dominated market, said Heakal. Mobile internet, I know it may seem like the next big thing, but it will unlikely be able to drive the industry forward at the rates we have seen historically, given Egypt s income levels and demographic profile.
In an effort to eat up volume in the voice market, Mobinil and Etisalat have driven prices lower, a competition that Vodafone has been loath to enter. “We’ve seen price reductions coming down in the market over the last year to a degree that we think is starting to put some of [the basic ability to maintain the network and growth] at risk, said Daly.