Regional business development director at Transsion, producing Itel and Infinix mobile brands, Mohamed Ismail, said that the Egyptian market has many opportunities for growth. According to the company’s plans, its market share will be increased from 20% to 30% by the end of 2017.
In an interview with Daily News Egypt, Ismail said that the company has an ambitious plan to begin manufacturing its phones locally. The company is now negotiating with the Information Technology Industry Development Agency (ITIDA) to agree on the size of a plot of land in Borg El-Arab before signing final contracts. The plot of land is expected to be located on 4,000-5,000 sqm.
How do you see the current investment climate in the Egyptian market?
The investment climate has changed since the beginning of 2016. Several points have been amended, such as the new investment law, the Supreme Council for Investment’s decisions, and, of course, the flotation of the Egyptian pound. We hope that the investment law will be passed before the end of this year.
Once these steps are fulfilled, the investment climate in Egypt will be attractive.
We are only lacking simple steps, next to the passage of the investment law, such as removing the limits imposed on US dollar-deposits and the withdrawal and cancelling caps on transfers. These restrictions affect local manufacturing because the components and production inputs are imported.
How is floating the pound beneficial to investment?
After floating the pound, a clear exchange rate emerged. There is not a big difference now between the price at one bank and the others—that is almost a unified price. Before the flotation, the official exchange rate was set at EGP 8.88 per dollar and on the unofficial market it was EGP 17.
The flotation will help stabilise the price of the US dollar and enable companies to pen their marketing plans, set their price tags, and decide on a profit margin more easily.
How long is the duration for importing now?
The duration varies according to the commodity. In the mobile phones sector, devices take about 3-6 weeks.
What growth opportunities do you see in the Egyptian market?
The Egyptian market is the second largest in Africa after the Nigerian market. The population is very large at 90 million people, with youth accounting for most of them. Literacy rates are high compared to other African markets. Moreover, more people use the internet and mobile applications. These are all attractive factors.
Even better, market saturation of smartphones and tablets runs lower than surrounding markets, which creates investment opportunities. The market is also heading towards 4G services, which would increase the spread of smartphones, as they represent only 40-50% of the entire mobile phone market.
The Egyptian market sees the sales of 18 million devices per year, which is proof of its large size.
What were the main challenges during the past period?
One of the most prominent challenges was the increasing price of mobile phones. This was caused by two reasons: the high global price of screens, due to the high demand on large screens, as well as the entry of new players, which caused demand to grow more than supply—eventually causing prices to increase.
In addition, the instability of the exchange rate caused prices to go up. And, of course, the implementation of the value-added tax (VAT) forced prices to increase.
What economic incentives do investors need to begin local manufacturing?
The draft investment law is good. The flotation of the pound will also attract investors to begin manufacturing locally.
You recently signed an agreement with ITIDA for cooperation in the design and development of electronic manufacturing. What are the updates on that?
Our partnership with ITIDA aimed at the development of the electronics industry in Egypt. Local manufacturing is not easy, especially if we want real industry. The goal of the partnership is to study ways to develop electronic manufacturing in Egypt.
We signed a memorandum of understanding for that in May. We are now discussing a classified agreement to sign a final contract with ITIDA.
What are your plans for local manufacturing?
We plan to begin local manufacturing in Egypt to make it an export hub to Africa. There are already two factories in Ethiopia and Nigeria, but the government incentives and facilities motivate us to expand manufacturing in Egypt.
The factory will be built on an area of 4,000-5,000 sqm. We will need a larger area if we move towards manufacturing home appliances. Negotiations on the land size are still ongoing with ITIDA.
According to our plans, we will begin manufacturing by the end of the first half (H1) of 2017. The local components will account for at least 40%. We will feed the market in the first six months and begin exporting in 2018.
The capacity of the factory will be 1.5 million devices in the first year, and we will boost it to 6 million devices per year after three years from the inauguration.
What competitive advantage does Egypt have that attracts companies to manufacture here?
Egypt signed free trade agreements with other countries, which gives it a competitive advantage in customs exemptions. These agreements include Agadir, COMESA, and the Greater Arab Free Trade Area. Furthermore, Egypt enjoys the availability of educated labour that can be trained to participate in electronics manufacturing.
How do you see the mobile market sales growth in Egypt?
A specialised statistic shows that Egypt imported 18 million mobile phones in 2014. The number dropped in 2015 and is expected to reach 15 million devices by the end of 2016. This is because of the decline in customers’ purchasing power, which forces users to keep the same device for longer.
The competition is strong in Egypt. How would you compete to raise your market share?
The presence of competitors in the market is healthy. It also gives clients more options to choose from.
We have had a vision since 2014 to be distinguished amongst the rest of the brands on the market. We do so through providing the best mobile phones by using the best components at affordable prices. We also compete with entertainment applications, as our studies showed that smartphone users spend most of their time playing games.
Our strategy is to provide a variety of products that match the needs and requirements of clients. We offer many products for clients to have the option of choosing what they want. We are also cooperating with the three mobile operators, and coordinated with Orange to supply 4G-ready devices.
What about after-sales service?
We now have five main centres and over 100 assembling hubs. We also have a free pick-up and drop-off service to help clients who live far away from our centres.
We plan to increase the number of maintenance centres to 10 centres during 2017 with plans for expanding in the Delta and Upper Egypt. This is enough for us now, especially as phones never spend more than one week in maintenance.
What are the main characteristics that Egyptian consumers consider when purchasing phones?
Screen size, RAM space, processor, camera, and battery life.
What is your share of the Egyptian market?
Our market share now is roughly 20%, including all of our brands. We aim to increase that to 30% in 2017.