Eliot Benman
Last updated: 17 September, 2012

A resilient sector in uncertain times

Communication and information technology (ICT) has been one of Egypt’s fastest growing sectors in recent years. The industry has been bolstered by government support, growing interest in mobile internet, and the introduction of 3G services. 

In 2003, ground was broken for Egypt’s Smart Village located west of Cairo. The 470 acre area symbolizes the increasing importance of the ICT industry, gathering the Ministry of Communication and Information Technology with the head offices of major telecom operators, IT companies and banks among green spaces, a lake and waterfalls. 

Egypt has three mobile service providers: Mobinil, London-based Vodafone, which continues to lead the industry in market shares and revenues, and UAE-based Etisalat, which entered the Egyptian market in 2006.

Telecom and IT took a heavy blow early on during the revolution. On January 28, the government ordered a communications shutdown in Cairo and some large metropolitan areas in an attempt to end the street protests. Mobile services returned the next day, but an SMS and internet ban continued for five days. Industry leaders say that the shutdown was out of their hands and determined by a legal mechanism. They insist they protested the decision strongly.

The telecom industry lost about $91 million during the communications blackout, according to the Organization for Economic Cooperation and Development. Telecom services were also hit by the temporary shutdown of the banking sector and the Egypt Exchange.

Telecom operators and IT companies ended 2011 with drops in revenue, but a post-revolution jump in internet use portends a promising future for the industry.

In April 2011, the Ministry of Communications and Information Technology (MCIT) reported that internet penetration rose to 32.19 percent, compared to 24.91 percent in the same period of the previous year. By January 2012, the penetration rate stood at 36.31%, according to MCIT statistics.

According to global social media and digital analytics company Socialbakers, Facebook penetration in Egypt is currently 13.18%, totaling 10,609,900 users, a figure which has grown by 1,680,160 users since November 2011. According to Socialbakers, Egypt ranks 20 globally in terms of the total number of Facebook users.  

Mobile penetration exceeded 90% by the end of 2011, according to the MCIT.

Internet providers reported healthy subscription growth through 2011 while mobile internet has proven a boon for telecom companies. Since early 2011, traffic on social media sites continues to grow rapidly while Egyptians are increasingly going online to keep updated on current events.

Internet user demographics have also transformed following the revolution. An older age group is now showing interest in the use of internet. With a broader segment of the Egyptian population going online, internet providers are focusing on providing more Arabic online content.

Even as internet and mobile subscriptions continue to increase, this is countered by declining prices in a competitive and saturated market after the addition of a third telecom provider, Etisalat, particularly in voice services.

In early 2012, state-owned and sole landline operator Telecom Egypt, which owns 45% of Vodafone, sent a release to the stock exchange saying it will apply for licensing to provide a fourth mobile operator. The fourth service provider would operate as a Mobile Virtual Network Operator (MVNO), using infrastructure leased from other providers while offering its own call services. A fourth operator would further drive down prices in an already saturated market.

Revenues recovered over the course of 2011, but failed to produce profit thanks to rising costs. Companies are investing heavily to develop and maintain their networks. They have also been forced to deal with increased security expenses due to the precarious security situation post-revolution.

The most serious challenge facing the telecom and IT industries in the medium term is the overall economic slowdown that has afflicted key sectors. One of the biggest setbacks has been the decline in tourism, an industry that once generated 11% of Egypt’s GDP. Travel and hospitality companies continue delaying expansion and cutting back on expenses, even as telecom revenues have taken a hit from the lack of roaming charges usually generated by tourists.

The ICT industry also suffers from more systemic challenges, such as substandard infrastructure outside of major urban areas. Government and private sector collaborative initiatives, such as the e-Misr National Broadband plan, aim to overcome these challenges.

ICT is set to play a major role in education, literacy, e-government and a host of other vital issues in post-revolution Egypt. Recently, the MCIT and Ministry of Higher Education announced an agreement to distribute 10,000 locally-manufactured tablet PCs to university students over the next six months. No criteria were announced for who would receive the tablets.

The ICT industry continues to prove resilient despite the economic conditions. Internet and mobile subscriptions rates are expected to show healthy growth in 2012. As long as business picks up among enterprise clients, growth will continue to be robust, and ICT will continue to be a major economic engine in the Egyptian economy.