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connecting the dotcoms two years into the national cit plan, the communications and information technology industry looks set to be transformed by mergers “economies go up and down, but technology just marches on,” proclaims an advertisement for a new television program on bbc world. the maxim surely holds true for egypt’s communications and information-technology (it) industries, which managed to log growth of 17 percent last year, despite a generally flagging local economy and the global shock that followed september 11. minister of communications & information technology ahmed nazif cited the 17-percent figure at this year’s cairo telecomp exhibition, comparing it proudly to government statistics indicating overall economic growth in the range of 4 to 5 percent. the creation of nazif’s ministry in late 1999 (by severing telecom issues from the transportation portfolio and supplementing them with it) was accompanied by the launch of a new national communications & information technology plan, a wide-ranging five-year strategy to propel the economy forward by building a solid telecommunications backbone and a strong base of computer and internet skills. two years on, despite the listless state of the economy, the ministry, along with a diverse array of private sector companies, has made visible progress with the promised groundwork. still, the telecomp exhibition, held in january, attracted noticeably smaller attendance than its predecessor in early 2000, despite the boost in prestige conferred by the appearance of president hosni mubarak at the opening ceremony. might this be a harbinger of bad times ahead for egypt’s telecom and it sector? mohamed fares, managing director of raya telecom, said a slowdown was inevitable as long as the economy at large continues to perform poorly. “it is a new industry, still developing and not saturated,” fares said. “we will continue to grow, but not as much as we would have if the state of the economy was better.” in some respects, the year still looks promising for communications and information technology in egypt – though tensions in neighboring israel and palestine certainly aren’t helping. “how the conflict continues and what kind of events happen will determine the outcome,” said maja baligh, investment manager for the efg-hermes telecom fund. “if things calm down a little bit, it could be beneficial for the market.” the biggest news of the year so far has been the free internet, officially launched at telecomp and picking up steam steadily in the weeks that followed. after a deal with national fixed-line telephone monopoly telecom egypt that went into effect on january 14, internet service providers (isps) adopting the free internet model now receive 70 percent of revenues from calls to their sites. users, meanwhile, can now log on to the internet for free – except, that is, for the relatively paltry cost of a local phone call. content is king with users coming on line in greater numbers, and competition heating up, the country’s isps and their associated internet sites are finding that content – the text, pictures, services and other odds and sundries that distinguish egypt’s more than 30 free internet providers from each other – has become crucial to attract customers. “it’s the first time content providers can make real money, and it’s because of the free internet model,” said nagui anis, business development manager at the data carrier egynet, which owns stakes in two isps, internet egypt and soficom. a looming question now is, how much has the free internet model increased usage? “the real launch was in february; it took until march before the network was fully operative; and the boost will come in april,” said ahmed el oteify, business development manager at national telecommunications corporation (ntc) in an interview a month ago. both khaled bichara, ceo of linkdotnet, and karim ramadan, country manager for microsoft, said usage was up because of the activation of free internet. “it will take two years to build a critical mass of users and to leverage investments,” ramadan added. “egypt is one of three major markets in the region, and global experience lets us know what will work for advertisers.” online advertising is a key to generating revenue – something that has eluded many an isp, not only in egypt but the world over. but egyptian isps will need to muster all the experience and ingenuity they can to ward off the challenge posed by local media giant al-ahram, publisher of the country’s leading daily newspaper, along with a host of other newspapers, magazines and journals. al-ahram, rarely before thought of as an isp, is now offering its own dial-up service to its content-rich website. “competition is increasing, and al-ahram is very serious,” el oteify said. “they don’t care if they make or lose money,” he added, referring to al-ahram’s privileged position as a state-owned, government-subsidized entity. by running daily box-ads with its dial-up number on the front page of al-ahram newspaper, this new entrant to the internet service market has already grabbed a place among the top five isps in the country. linkdotnet is still on top, while nile online, yalla online, menanet, and the state-controlled te data have also made strong showings. combine and conquer for the private isps, a large market share will be of little value if the free internet model does not turn out to be profitable. opinions in the industry diverge slightly on how this could happen. “all the isps are taking losses,” el oteify said, “except for internet egypt, which pulled out of the dial-up market and now focuses on leased lines.” menanet’s ceo gamal marwan said it would be some time before his company showed profits from its venture into the isp realm. “we’re looking two or three years ahead to see a return on our investments,” he said. meanwhile, an anxiously anticipated consolidation of the isp market under the new revenue model is starting to take shape. one way an isp might be able to gain a competitive edge in the market is to expand the coverage area for its services, reaching remote parts of the country. but this will take a hefty investment – the kind of money that might be generated by mergers among the fledgling industry’s biggest players. “there’s lots of talk of consolidation and mergers, and we’re definitely looking into it,” bichara said. “it’s a business of scale, and our costs would be cheaper. for sure it will happen before the end of this year.” a merger between egynet and nile online has been in the works for about a year now, but hasn’t been completed because of the size and diversity of the two companies’ operations, which overlap considerably. but while a merger can be a major feat of administrative and technical reconstruction, mergers are needed all the more urgently as the notion of an ever-growing isp pie recedes into memory. “it is tough, mainly because the actual market is smaller than everybody thought at the beginning,” said anis of egynet. building on a free internet base, isps are also trying to set themselves apart through the acquisition of subsidiary dot-com firms providing attractive, distinct online services. a global lack of confidence in internet ventures since march 2000, however, has hindered the emergence of the portals, shopping sites and specialized content providers that might enhance the appeal of a particular isp. “there is no life in the dot-com market,” said ayman rashid, who two years ago became egypt’s first – and almost last – successful internet entrepreneur by creating the home-delivery site otlob.com, which was bought by it worx, a software house operating out of cairo’s nasr city free zone, in april 2000. otlob could soon be re-sold to isp linkdotnet, which is also looking to take over egypt’s first portal website, masrawy.com. in april, link ceo bichara said it was too early to confirm either of the two deals, but that link was “seriously negotiating many projects,” and important announcements could be expected soon. masrawy’s creator, ehab heikal, confirmed that negotiations with link were under way. when the global dot-com market crashed two years ago, egypt’s industry was hurt – but not too badly. a few start-ups went down the drain, and institutional investors became pickier about backing it ventures. yet egypt’s market was still relatively isolated from the global market – a factor that might hinder growth, but which has also helped to buy time for nurturing local assets. “the downfall has not hit us, and we are going to learn from mistakes in the us and europe,” said ramadan, country manager for microsoft. “we will exercise caution and test markets and services before investing.” pcs out of reach pretty much everyone involved with egyptian it agrees that online activity would take off if personal computers became more affordable. most computers in egypt are either wholly imported or only partially assembled locally. currently, a machine that can work effectively on the internet costs around £e 2,000 – and that’s a cheap one, though still far out of reach of the average egyptian consumer. only 200,000 pcs are expected to be sold in egypt in 2002, according to hesham tantawi, general manager of computer product distributor absis and chairman of an egyptian computer-hardware industry association. he put the current number of installed pcs at around 600,000 – excluding old, obsolete 286 and 386 processors. but the it ministry is currently hard at work on an “affordable pc” project with the aim of increasing internet penetration around the country. foreign companies will be invited to give egyptian engineers and technicians advice on how to manufacture computers locally, a sure way to bring prices down. a few local manufacturers are already ahead of the ministry. one of them, boraq, has teamed up with intel, the world’s largest manufacturer of semiconductors, to produce a line of pcs in egypt. though the boraq-intel initiative emerged independently, it could dovetail with the ministry’s affordable pc initiative. “the price of pcs still has a floor of £e 2,000,” said boraq general manager tareq issa. “to get that figure down by half, which is the ministry’s ambition, is still a big no-go nowadays, so another approach certainly has to be tried.” the boraq-intel machines look unlikely to unlock the mass market. the first two models on offer are a basic “plug and play” office computer, priced around £e 3,000, and a deluxe version that can accommodate games, dvds, and research and analysis programs. hazem el zorkany, vice president of boraq’s parent company, metra computer, however, insisted that boraq’s policy is “to avail computers” to the wider market. one proposal that the company is currently looking into involves monthly payment plans for government employees. already, free internet has encouraged people with more cash on hand to go out and buy their own computers. “we’ve seen 5 to 7 percent growth [in sales] in the past couple of months,” el zorkany said, referring to the effect of the new arrangement between telecom egypt and the isps. “consumer electronics, such as mobiles,” he added, “are vulnerable to recession, but computer sales are growing steadily.” to make computers more widely affordable, tantawi said the government should strip customs and sales taxes on pcs as well as pc components, and thus reduce vendors’ costs by 22 percent. such a move would also go a long way towards solving the problem of smuggling and under-invoicing, which are currently rife in the industry. what’s in store on the telecom front according to el zorkany, predecessors of the national cit plan can be traced back to 1987, when the idea of tech-driven economic development was sketched out by atef ebeid, then minister of cabinet affairs and minister of state for administrative development, and hisham sherif, then head of the cabinet information decision support center (idsc). back then, ahmed nazif was sherif’s deputy at the idsc. along with it investment, the government’s development plans have focused heavily on upgrades of physical infrastructure – the “backbone” that supports everyday phone calls as well as all kinds of internet use. telecom egypt, besides diversifying into the isp field and giving more thought to customer satisfaction, is continuing to upgrade the country’s fixed-line phone infrastructure through long-term partnerships with private telecom multinationals. according to recent announcements by te chairman akil beshir, a specialist company is being contracted to recover faulty lines – those masses of cable that are so often found in bundles hanging from the outside walls of buildings around cairo. te is also preparing to enter the mobile market, having secured the country’s third mobile-phone network license in a cabinet decision last year. officials say te will launch its mobile service before the end of this year. sources at the ministry of communications & it have admitted that the mobile license was awarded on the basis of necessity for te rather than any kind of “best-bid” scenario. as satellite technology becomes increasingly practical even for providing the connections to standard home and office phones, “fixed” and “mobile” services will inevitably converge. within five years, the two will be virtually indistinguishable, a ministry source said, adding that te had to get into mobile services in a big way to ensure its survival. although the monopoly on the domestic fixed-line phone service appears unassailable, at least a couple of private telecom corporations picture themselves as rivals to te at some point in the future. raya holding heads the list of would-be challengers. the holding company’s latest venture is raya telecom, with paid-in capital of £e 40 million and a plan to expand this to £e 200 million in the foreseeable future, according to fares, the new company’s managing director. “our vision is to become the major alternative operator in egypt in the field of data, multimedia and voice,” fares said. ntc, part-owned by the jordanian-based hatif telecom, is another contender, with aspirations of expansion throughout the middle east. “we want to become the mci or at&t of the region,” said ntc chairman hussein el kholy, drawing a hubristic analogy with the leading phone providers in the united states. the other obvious rival to te – if such a thing is possible – would undoubtedly be orascom telecom (ot), owner of mobinil and other mobile-phone networks in the middle east and north africa. te is not about to be toppled from its pre-eminent place in the national telecommunications hierarchy, but private competition around the fringes of the telecom universe is surely helping to keep the national phone colossus on its toes.
an april publication issued by the ministry of communications & information technology outlined recent successes achieved so far under the national cit plan launched at the beginning of 2000:
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