January 2000

Egypt Update Memo

The following report outlines new developments in the past three months and the state of on-going developments.

Major changes took place in the last three months (from October 1999 to end of the year) in the domains of information technology and telecommunications, including the establishment of a new ministry responsible for telecommunications and information. These are described below .

1. On-going developments in institutional structures

The Egyptian government witnessed a ministerial change last October which affected primarily the sectors of telecommunications and technology developments. The new government will undertake the responsibility of taking Egyptian society into the second millennium with an information-based society.

A national technology development program is being proposed by a committee headed by the president of the country. It includes a number of key officials in the fields of telecommunications, information and technology such as the ministers of information, communications, telecommunications, industry and the chairmen of the IDSC, CAPMAS, etc. The purpose of the technology development committee is to establish the Egyptian information society, and this can be achieved by increasing and encouraging investments in the technology infrastructure such as the telecommunications networks, Internet and telephone systems, and info-structure(national databases in all the ministries and organizations that can improve performance as well as decision making).

Among the objectives of the committee is to invest 1.1 billion Egyptian pounds in the next five years on major information technology projects to position Egypt as a technology center in the Middle East region and Africa. This is expected to create new employment positions for Egyptian graduates, and to establish technology areas in the new industrial zones, as well as to promote the use of technology in all sectors whether private or public. The government foresees a return on investment of 1 billion Egyptian pounds at the end of the five years.

2. Ministry in charge of the telecommunications issues

The government established a new ministry called the Ministry of Telecommunications and Information, headed by Dr. Eng. Ahmed Nazif. The new ministry will strive to enhance the usage of technology and information systems in all the government organizations. This, in return, will help simplify the provision of service to citizens, eliminate bureaucracy, and maximize productivity. The ministry created a number of working groups during December. The private sector and Telecom Egypt massively participate in these groups which comprise the following :

• A legal working group which is assigned the drafting of a new Telecommunication Act for Egypt. This would recommend a stronger private sector participation in the operation industry, as well as many other issues such as the quality of services. The draft is expected to be ready late January.

• A technical planning working group aimed at assessing the current infrastructure and the convergence towards an integrated master-plan for telecommunications in Egypt. It is a plan that covers all telecommunications players, these being the GSM operators, the payphone operators, the data communication operators as well as Telecom Egypt. This plan should be ready to be implemented by next June and should take care of interconnections between the various players now and in the future.

• A business development and service definition working group that works in the short term on marketing and pricing recommendations for existing and new services offered by Telecom Egypt. The private sector will help bringing these new services to the end users. An example is the Intelligent Network (IN) services which use the premium rate and toll free services (800) in greater Cairo. The premium rate, based on revenue sharing between Telecom Egypt and the ISPs, has been already announced and introduced with some providers while the 800 service will be introduced soon for the different business sectors. Pilot implementations have been already completed. The ISDN primary rate using 128kb/sec has been tested at the national and international level and is being priced this month at an affordable level. ISDN primary rates up to 2 Mb/sec will be tested and announced soon. This will help the international video-conference with bandwidth-on-demand facilities. The long term objective of the said working group is to help on issues like the development of a business plan for telecommunication services in Egypt, taking into consideration the privatization of Telecom Egypt which is expected to take place in the first quarter of the year 2000

• The fourth working group is concerned with human resource developments in telecommunications and IT, and negotiates a new human resource development plan in cooperation with multinational organizations.

3. National regulatory authorities

Major changes have occurred in Egypt’s telecommunications sector since the telecommunications law 153 of 1980 was replaced by law 19 of 1998. Important steps have been taken to separate operations from regulatory activities. The main elements of the regulatory framework were embodied in law 19 which was followed by a presidential decree no. 101 on April 4^th., 1998, establishing the Telecommunications Regulatory Authority (TRA), headed by Mr. Abdel Rahman El-Shaer. Telecom Egypt was incorporated as a joint stock company under Egyptian Companies Law 159. Presently the following telecommunications service providers operate in Egypt, functioning under the Telecommunications Regulatory Authority:

• Telecom Egypt
• Two licensed GSM companies (Mobinil & Misrfone)
• Two licensed providers of payphone services (Menatel & Nile Phone)
• Two VSAT Service providers (Local Alkan Trading Group and NEC)
• Low earth orbital satellite systems (Iridium)

Telecom Egypt has announced its need for local and international financial and consulting firms to pre-qualify for consulting services in the field of privatization of telecommunications companies. 21 companies have paid for the tender documents, including: Arthur Andersen, Morgan Stanley, Credit Suisse, First Boston, HSBC Investment Banking, Merrill Lynch, Chase Manhattan Bank, etc.

In order to privatize telecommunications services in Egypt, Telecom Egypt has opened the following areas to the private sector :

• Pre-paid international calling card services: Currently Global One, American Express and MCI provide international calling card services.
• Pay phones: Two private companies, Menatel and Nile Phone, provide pay phone service in Egypt. Each company plans to install 20,000 lines within the coming five years.
• Mobile Phones: Two private consortia, MobiNil and MisrFone, operate Egypt’s GSM 900 cellular phone systems. It is estimated that in August 1999, there were 550,974 cellular subscribers in Egypt, and it is expected that this number will reach five million in the next ten years.

Internet service was first introduced to the Egyptian market in 1993. Currently, 58 Internet Service Providers (ISP) are operating in Egypt. The total number of Internet subscribers currently exceeds 200,000. Over 90% of these receive free Internet service as either government employees or public sector university students.

In a further step towards the liberalization of the telecommunications market, the board of directors of Telecom Egypt , the state owned telephone company, decided in their meeting in October 26^th., 1999, to eliminate subscription fees that were previously required on fax machines. The decree also allowed telephone subscribers to connect fax machines onto their residential telephone lines. This was restricted in the past and only allowed at offices or factories, after paying an annual subscription fee of $73.50. The said decree also states that fax machines are allowed to be brought into the country by airline passengers.

Since the ministerial change in September 1999, the ministry of industry has undertaken the task of technology development. This reflects the concern of the government for raising the standards of Egyptian production, and facilitates the development of new Egyptian technology-based industries. The ministry is aimed at introducing state-of-the-art technologies in the various industries in order to minimise production costs and raise existing quality levels.