Mobile market review – Egypt 2009

Egypt is by far the biggest telecom market in North Africa and one of the largest in the Arab region. Egypt’s telecom revenue represents an estimated 4.0% of its GDP with mobile revenue generating 56% of the total and a 44% generated by fixed services. The buoyant economy of the last 4 years has helped stimulate a steady growth in the Egyptian fixed, mobile and Internet telecom market.

Taking a deeper look at the mobile market, there are 6 levers that should be analyzed in detail to fully understand the market dynamics: 1) Population evolution and potential market growth, 2) SIM penetration vs. active clients, 3) revenues, 4) pre vs. post mix evolution, 5) ARPU and 6) churn. The following document will give you mmC GROUP’s perspective in each of these variables:

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Having analyzed each of the levers, we have identified the following trends for the 2009-11 Egyptian market:

A) Revenue growth deceleration

  • The addressable market, limited by the significant population below the poverty line, will continue growing between 2.2% and 2.0%  the following years…
  • … but present market growth (near 20% both for revenues and subscribers) are not sustainable in revenues once surpassed the full penetration over the addressable market
  • As a result of the expected market saturation, the market revenues will tend to stagnate in the following years

B) Increase of the multi-SIM effect in prepaid causing ARPU dilution and churn increase in this segment

  • Once surpassed the full market penetration over the addressable market, the multi-SIM effect will increase
  • Dilution of ARPU due to the incorporation of low-value subscribers to the prepaid segment

C) Nevertheless, some prepaid subscriber niches will retain a relevant part of the segment value.

  • A segmented approach to the market should be addressed by the operators to increase the value of specific sub-segments in the prepaid market
  • Potential turnaround of the postpaid to prepaid migration trend
  • A gap reduction between prepaid and postpaid prices will be required to avoid the postpaid to prepaid migration, and even to reverse the trend, recovering former postpaid clients.
  • This price reduction will have a negative impact in ARPU due to the lack of price elasticity…
  • … nevertheless other ARPU stimulation alternatives should allow to retain and even increase the postpaid ARPU

I will be sitting with different executives this week, pulsing this info with them. Will let you now their feedback once I come back. Until then, happy reading.

Flying to Cairo. Best regards,

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