Egypt - A new dawn for the telecommunications market

Egypt’s telecommunications regulator has invited offers from telecommunications providers, to be submitted by the first week in August, to participate in a new unified licence for provision of communications services. Currently, state owned operator, Telecom Egypt, has a monopoly over landline services (but is not able to provide mobile services) and leases use of its network infrastructure to Orange Egypt, Vodafone Egypt and Etisalat who all work in the mobile phone sector (but are restricted from providing fixed line services). The unified licence will allow all operators to provide both fixed-line and mobile services, at higher speed, and will help redress Telecom Egypt’s current monopoly over the fixed-line sector. This is likely to be a key investment opportunity in the Egyptian market – the bidding has already attracted interest from potential new entrants such as China Telecom Corp. and Saudi Telecom Co. Whilst such international interest in the sector could increase competition and benefit customers, operators may need to adapt the way in which they operate in an increasingly competitive environment.

Data protection continues to be a key challenge. In order to improve their offering, telecoms operators are likely to use a number of complex tools, such as employing advanced analytics to collect information to better predict customer behaviour and with a view to allocating resources more efficiently. Although this grants operators more scope to up-sell and cross-sell their products, it also results in them holding more personal data with the resultant need to ensure it is adequately protected. Egyptian law contains certain provisions relating to data protection. However, these are not as wide reaching as the data protection laws contained in the UK Data Protection Act 1998 and the EU General Data Protection Regulation (due to become directly effective on all EU jurisdictions in May 2018). For this reason, international telecoms operators and investors should ensure their local operations employ data protection policies at least as comprehensive as those used in their UK and European businesses. Such consistency of policies will allow them to maintain global compliance and prevent wider group breaches due to local operations, in Egypt and elsewhere.

The wider scope of the unified licence may lead operators to develop new infrastructure and unique service offerings in order to build market share. These operators will need to sufficiently protect any intellectual property created as a result. Although Egypt has developed rules in relation to protecting IP (it is a signatory to the Convention establishing the World Intellectual Property Organisation 1967), it is important for all investors entering new jurisdictions to ensure they fully understand the local landscape for intellectual property protection to ensure value in their investment is maintained - Egypt is no different. Similarly, global trademarks and other universal protection should also be sought.

The full scope of opportunities and associated risk to investment will turn on the specific agreements that each of the telecoms providers agree with the regulator and the effect of ongoing and future developments in local and international regulation.

The introduction of the unified licence in Egypt is a large step forwards and the reduction in the state-owned provider’s control of the sector should be a welcome sign of Egypt opening up for further inbound investment opportunities.