ICT Adoption gathers masses in Egypt

Since the Tunisian regime was dethroned last month, Egypt has been on fire. Hundreds of thousands of Egyptian protesters are taking to the streets demanding political change. As in the case of Tunisia, information and communications technology (ICT) tools such as online social networks, blogs, email, SMS and voice services have been used to prepare and organize the protests in Egypt. This led the Egyptian government to ban Facebook and Twitter, followed by a ban on all Internet service for several days (Jan. 27 to Feb. 1).

Ironically, the Egyptian government utilized some of these same ICT tools for their own benefit. Through Vodafone Egypt, in which it has a 36% ownership stake, the government has been sending SMS messages to the Egyptian people. These messages, which have provoked an outcry from some operators, emphasized the benefits of maintaining the political status quo.

This wide and effective use of ICT has been made possible by the development and growth of a competitive market structure in the telecom sector. Egypt enjoys a relatively strong ICT infrastructure, and the sector is far more developed than others in the region. There are three mobile operators providing competitive services at competitive rates. All three provide nationwide coverage, including 3G, covering about 75% of the country’s population. The uptake of cellular services has been impressive, especially for a low-income, price-sensitive economy such as Egypt’s, with cellular penetration reaching 78% by end of 2010.

The country’s fixed-line network coverage is fair, with around 9.4m fixed-line subscribers in the country (about 11%). ADSL services, which are subsidized by the Egyptian government, are offered at prices lower than US$6 and are the cheapest in the Arab region for the 256Kbps speed. In addition to the low Internet rates, illegal neighborhood networks are ubiquitous in Egypt. Market players estimate that each ADSL connection is shared by an average of four units. This has contributed to increasing Internet and broadband adoption in the country.

Exhibit 2: Mobile and Internet penetration in Egypt, 2008-2015

*with a 15-month contract. Source: Pyramid Research

Pyramid Research estimates that the ban on Internet services in Egypt has directly cost the economy about $5m, and the ban on mobile services for one day has directly cost the economy more than $14m. The indirect costs of the ban on connectivity in Egypt are substantial, as many businesses depending on online presence and cellular services have been affected.

These developments raise several crucial questions for the future of the Egyptian ICT sector:

• What is the upcoming political landscape of the country, and how will it affect the ICT sector?
• Will there be further restrictions in terms of ICT access and usage?
• What about government initiatives to increase ICT adoption and subsidize ICT services? Will these come to a halt, or will future governments include it in their agenda?
• How will these changes affect the operations of current ICT players?

Whatever the outcome of the unrest in Egypt, we expect continued growth in the country’s telecom sector, and social networks, with their need for more and more data usage, will be one of the main drivers of growth.

Source: Pyramid research