By Mahmoud Radwan
Mobinil believes that the new national infrastructure entity will strongly contribute to improving prices and generating communication sector activity while also keeping up with technological developments in global markets. The company is interested in obtaining a global gateway licence as a new source of income, after recent losses, attributed to debt interest, were valued at EGP 1bn annually.
The company is preparing a study on potentially selling its mobile telephone towers as assets or increasing capital within two months, as part of a financial restructuring process. These options are among the one suitable alternative that will be chosen by the beginning of next year, according to a statement issued by managing director of Mobinil, Yves Gauthier, to Daily News Egypt.
What do you think of the proposal of sovereign parties managing the national infrastructure entity?
Mobinil doesn’t mind sovereign parties managing the communications entity that is being formed. However, it’s not about who manages, but about managing the entity optimally, particularly because it will be beneficial for telecom companies as well as the Egyptian economy.
The government previously announced the launch of a new national infrastructure entity, conditional upon the involvement of all telecommunication companies. The Ministry of Defence will also be involved through its subsidiaries. The entity’s main mission is to establish communications cables across Egypt, and licensing within the entity will cost about EGP 300m per company.
How do you view the local preparations for fibre cable infrastructure?
The local market is experiencing issues in establishing the fibre cables in terms of prices and speed. Prices suggested by Telecom Egypt for fibre cables, the only company that can install them, are exaggerated, and the installation process is slow.
The infrastructure of mobile companies in Egypt utilise microwave transmission, not fibre, and Egypt is the only country in the world that does so.
How effective would it be to establish a company specialised in constructing the infrastructure?
Establishing a company specialised in setting up fibre cables and constructing the infrastructure will provide competition for TE, which will both improve price and service quality, and Mobinil wishes to be part of this.
Mobinil seeks to be part of the national infrastructure entity, and is interested in utilising the services provided. Discussions of share rates, timing and services offered are ongoing between all parties.
We have requested, during the discussions, to obtain a share that is no less than the shares of other companies involved.
What about the bonds that the company proposed five years ago?
Mobinil will pay the value of the bonds on time, which is in two months. We respect contractual commitments, and will pay by self-financing without resorting to loans. Mobinil offered bonds for five years in 2010 worth EGP 1.5bn, and the payment deadline is January.
What is the reason behind successive losses for the company despite its being the second largest supplier of mobile services locally?
Mobinil achieves strong profits and operation costs are increasing at good rates. But debt interest paid by the company continuously diminishes these profits so that the company registers losses in the end.
The amount of interest paid by Mobinil is significant, which is the main reason behind the losses incurred over the past three years. The rates range from 12.5%-13% of loans at a total value of approximately EGP 1bn per year.
Mobinil achieved net profits of EGP 352.5m during the first nine months of 2014 compared to losses of EGP 403m during the same period last year with a 12.4% decline in losses.
Company revenues reached EGP 7.7bn during the first nine months of 2014 compared to EGP 7.4bn for the same period last year.
What is the volume of the loans that Mobinil has taken out at present? What is your restructuring plan?
The volume of loans is approximately EGP 8bn and the company is currently undertaking a financial restructuring initiative. This is represented into three options which include increasing capital, selling assets, and subsidising revenues to increase them.
Mobinil is working to study the three alternatives to eventually implement one. This will contribute to a decrease in company debt and an improved credit rating. The option of Orange’s main shareholders increasing Mobinil capital and researching an appropriate time to do so will also be discussed.
Mobinil’s paid capital has reached EGP 1bn, with 100m shares worth EGP 100 each. As for the company’s ownership structure, Orange will own 94% and Orascom Communications and Media 5%, while other shareholders will be granted the remaining 1%.
Mobinil strives to gather EGP 3bn through the financial restructuring process, and it is expected that an alternative will be chosen by the end of the year so that it may be implemented at the beginning of 2015.
Mobinil is negotiating with investors to sell various company assets including metal structures of towers as part of the restructuring plan.
What is your position on the global gateway licence?
Mobinil is very interested in obtaining the right to provide international communications services, and the licence will certainly influence Telecom Egypt profits. Financing for the cost of the licence will take place through the restructuring plan which is presently underway without a need for new loans.
What is the volume of investments directed toward updating your mobile network?
Investments will be regularly injected into this field at a value of more than EGP 2bn, and if the investments are not supplied, the mobile network will collapse.
What is your opinion on mobile service prices in Egypt?
Customers should be aware that mobile prices in Egypt are among the most inexpensive in the world, and the local market is the second most inexpensive country behind India. Customers still believe that prices are high despite this.
Preserving low prices and high-quality service is not easy, especially in light of heightened pressure on the network. The network is influenced by many geographic factors as well as customers’ moving between various mobile points. The number of customers and usage rates has also expanded, and thus data transfer traffic this year has increased by 140% compared to last.
France’s Orange has provided quality mobile networks to its subsidiary companies and Mobinil is distinguished among this group, as it is considered to have one of the highest quality networks.
Mobinil issued a list of the highest-quality mobile companies according to a report published by the National Telecom Regularly Authority (NTRA) at the beginning of 2014.
Does Telecom Egypt play a role in decreasing service quality?
Of course it plays a role. Telecom Egypt’s network, which mobile companies depend on to deliver several services, worsens the quality of services provided to customers, especially since the Egyptian network is vulnerable to breakdowns and cable theft as well as power outages during the summer.
How were Mobinil services affected on the famed day of intense power outages?
On that day, electricity was cut in most of Egypt’s governorates. It was a Thursday in September 2014, and 1,300 of Mobinil’s stations were impacted on that day, which witnessed extremely high outage rates. Approximately 600 stations went out of service by the end of the day.
What is your vision for the unified licence?
Mobinil is currently evaluating the unified licence and has some notes on the draft international global gateway as well as the fixed default licence that will be offered. Our notes pertain to price and conditions.
The licence offered for the global gateway for Mobinil will cost EGP 1.5bn plus EGP 20 for each subscriber and 6% of total profits. According to the NTRA, the licence will be granted to the company after its value is paid, under the condition that it does not go into operation for two years.
Under the unified licence, Telecom Egypt will rent the network to the three mobile operators – Mobinil, Vodafone, and Etisalat – so that they can offer mobile services, and the national company will purchase minutes and information units from the three operators to resell them to customers.
Telecom Egypt will not be the owner of the mobile network, instead utilising the three existing networks. This means that a fee will be charged when calls are made to the mobile operator renting the network.
Preparations are underway to create notes on the global gateway and the default fixed licence to be presented to the NTRA.
What are the advantages of the unified licence from Mobinil’s perspective?
Mobinil believes that the advantages are represented in obtaining the global gateway licence which will allow the company to compensate for losses anticipated as a result of a fourth mobile operator entering the Egyptian market.
Mobinil is entitled to provide fixed line services in exchange for EGP 100m and 3% of fixed line service profits as well as EGP 10m in insurance. This will also include EGP 300m for the construction and basic communications infrastructure operation licence. Mobile operators, upon paying the value of the licence, are entitled to offer fixed-line services in Egypt through the Telecom Egypt network.
What are your expectations for the development of Egypt’s mobile market?
Smart phone usage will increase in Egypt and will be followed by growth in data transfer profits for mobile companies. Smart phone prevalence rates on the local market are less than 20% at present compared to 90% in other countries of the world, which indicates that opportunities for growth exist. It is expected that Egypt’s economy will witness a revival next year, which will contribute to continued growth in company revenues.
What is your vision for the 4G licence?
4G services represent a natural development for the communications industry, and all mobile companies will strive to obtain the services in order to gain new capacity. Economic feasibility will be determined according to the conditions of the licence, and whether they are offered for new services, capacities, and frequencies.
The NTRA announced that 4G licences will be offered at the end of 2016 through a bid.
Mobinil is very keen on obtaining a 4G licence, although there are currently no frequencies available from the state.
The government must confirm that frequencies are vacated so that they may be granted to mobile companies which will then be able to absorb customer and usage rate increases.
The company has requested all capacities that will allow it to absorb increases and improve service quality, including frequencies with 1,800, 2.6, and 900 MW capacities. Currently, the cash liquidity required to pay the value of additional frequencies is available.