Noor Data Networks is spearheading an effort to consolidate a group of service providers in order to enhance the dissemination of broadband services in Egypt.
According to the founder, Chairman and CEO of NOOR GROUP (NOOR Data Network’s parent company), Dr Basel Dalloul, and President and Chief Operating Officer, Fadi Jundi, fair competition in the local Internet market will improve the quality of services significantly.
What are your plans for the Egyptian market regarding Internet services?
In 2015 NOOR plans on expanding by providing high quality and dependable broadband Internet services to consumers; we also plan on negotiating with distinguished market service providers, to create a consolidated entity through acquisitions, share swapping or a hybrid of the two methods. NOOR will not turn down negotiating with anyone. Our objective is to create a strong service provider so that the number of service providers in Egypt becomes two or three companies including the owned service provider by Telecom Egypt which currently controls a market share close to 70%.
Did you begin the actual negotiations for the commencement of implementing the plan and what were their responses?
We are still in the early stages of negotiations; however, they have expressed interest. In the beginning, none of the companies were convinced of the idea and they considered it strange and unlikely, however after having digested the idea they are open to further discussions.
How will the suggested consolidation benefit the user?
Consolidation is a global trend. Many markets around the world are settling for two or three service providers, this cuts costs and improves the ability to reinvest in infrastructure technology, which in turn improves the quality of service. The presence of strong competitors in the Egyptian market will also reduce the price of the services provided.
When do you expect to reach an agreement regarding the plan?
We hope to conclude the blue print by year end, at which point we should have a much clearer picture of the specifics of the consolidation effort.
How do you plan on financing this consolidation effort?
We will finance our consolidation through a combination of equity and debt.
Why did you shift your original focus from the consumer market segment?
NOOR is among the first companies that introduced Internet to the Egyptian market. At the end of the ‘90s, it introduced the now regionally famous “Free dial-up Internet service” or what was known then as the 0777 numbers, which enabled all of Egypt to access the Internet for same price as a local call, in effect making the Internet free. NOOR also introduced Egypt to the concept of unbundling voice and data on the same telephone line to provide ADSL, or broadband service to the home. Unfortunately the government, at the time, decided to grant several more licences than were originally agreed upon. This caused us to revisit our strategy and get out of the two consumer services that we initiated, and shift our focus to the Enterprise market.
What do you think of the quality and price of Internet services in Egypt?
It is obvious that the quality of the Internet service is not good. Customer feedback on Facebook, Twitter and several other social media outlets concerning service providers, speak louder than anything we can say.
NOOR, for all intents and purposes provides services to the Enterprise and Commercial sector, where quality of service, service availability, professional technical support and customer service are of the utmost importance. We recently decided to get back into the consumer market we once created and are currently providing our customer base with the same professional and quality service we provide to our demanding Enterprise customers.
With respect to the second part of your question regarding price, we believe that the current prices do not reflect the quality of service required; in other words, the price is too high for the poor level and quality of service delivered. However, if the consumers were getting the service advertised and for which they are paying for, then we could say Egypt’s Internet prices are among the lowest in the Arab world.
The consolidation process will assist the National Telecom Regulatory Authority (NTRA) in their efforts to reduce tariffs on bandwidth including interconnection fees which can lead to greater penetration of broadband in the country. This in turn will lead to more job creation and have a direct impact of the national GDP. Broadband accounts for only 12% of Internet users in Egypt or 15% of households according to the Ministry of Communications and Information Technology (MCIT).
What is required from the government and the service providers to improve the Internet service level?
We believe healthy competition and a levelled playing field is an important element in improving the Internet service level as a result of economies of scale. A strong regulator enforcing fair competition that clearly delineates the rules of what the operators including the state monopoly can and can’t do, would be another. Allowing service providers unfettered access to state infrastructure (TE) would be an example of this.
As we mentioned before, reducing or eliminating unnecessary tariffs, such as interconnection fees would yet be another. Today close to half the cost of bandwidth is taken up by submarine cable interconnection fees. These submarine cables bring the Internet to Egypt, sometimes travelling thousands of kilometres under the sea, but when they land in Egypt, the State monopoly imposes a regulated tariff to connect these cables to our networks.
We estimate these fees, if all of the submarine cable capacity in Egypt were aggregated, would account for about EGP 70m. This number is hardly a big number for the State monopoly to eliminate. The impact of removing these interconnection fees, however, is huge. We estimate an increase in revenue of about EGP 1bn, due to increased usage resulting from the associated price drops and quality increases. There is also the added benefit of creating tens of thousands of jobs and increasing National GDP growth. According to a recent World Bank Study which was presented by the government, for every 10% increase in broadband penetration, tens of thousands of direct jobs are created and GDP increases by 1.38%. This is not insignificant.
There are so many things that can be done, but let’s start by allowing more cables (many which already transit through Egypt) to land in Egypt (creating even more price competition, further reducing costs), but more importantly, eliminating submarine cable interconnection fees.
What is your opinion about Telecom Egypt’s replacing copper cables with fibre to the sidewalk?
Switching to optical cables or what is known as fibre is essential but was ignored for a long time. NOOR believes this is a good step by TE and should improve service assuming these devices are well maintained, operated properly and that service providers are given fair and unfettered access to them. We applaud TE for this effort and look forward to working closely with them to deploy our customers on these devices. We also wish them well in their continued effort to deploy this technology in a much smoother manner than the way in which they began.
What are the negative points in TE’s process of installing fibre cables?
Mistakes were made in the way in which TE deployed the fibre technology, which to their credit they readily admit. TE’s own fixed line customers found themselves with new phone numbers overnight, without initially being informed. We believe a lot of the mistakes were part of TE’s learning process in deploying a new technology and we also believe that the speed at which this technology was deployed, also contributed to some mistakes.
A national entity for infrastructure is currently under construction, how do you see its effect on the market?
Anytime there is competition in the market place, it reflects positively for everyone. We believe that a new infrastructure company will also have a positive impact on TE itself, by forcing it to be more competitive, which means improving the quality of its service and the efficiency in which it gets things done. Competition, especially for incumbent infrastructure companies, is never a bad thing.
Your proposed an initiative to offer Free WiFi Internet in Alexandria when will it be implemented?
We have already signed an agreement with the Governor of Alexandria for the deployment of wireless internet free of charge in some service areas such as youth centres and fenced public parks; however, we are currently working to finalise some approvals with the NTRA to activate the service.
Do you have expansion plans for the Free WiFi Internet services?
Of course we do. NOOR will continue our initiative in Alexandria and will start another one in Cairo within the next few weeks, after getting the required approvals. We will also expand in a number of other governorates. The more we expand our Free WiFi Internet services means more Egyptians from every class will have access to high speed broadband, which we hope will positively reflect on people’s lives and have the good side effect of helping to improve Egypt’s economy.
How involved is NOOR in encouraging entrepreneurship?
NOOR established an incubator for young entrepreneurs at the beginning of this year. NOOR will carefully study submissions and choose candidates to support that both benefit our infrastructure and benefit the Egyptian people and economy.
What size investments do you make in your chosen incubator candidates, and how many entrepreneurs do you take on?
Our typical ticket size is EGP 1m, and we plan to invest in four other companies this year.