Egyptian Case Studies

Topics: Mobile phone, GSM, GlaxoSmithKline Pages: 43 (14968 words) Published: October 7, 2011
4. Egyptian Case Studies
Azza El-Shinnawy and Heba Handoussa
This chapter presents three cases of recent foreign investment in Egypt. In the case of the Egyptian Company for Mobile Services (MobiNil), an international consortium takes over a state-run mobile phone service, and modernises its operations in a rapidly growing and transforming market. The local partner subsequently becomes a regional player in Africa and the Middle East. Glaxo Smith Kline, a leading pharmaceutical firm, expands in Egypt through multiple acquisitions, while the parent firm itself is subject to M&A at a global level. The leading-brand ketchup manufacturer Heinz has established a production facility for the Middle East jointly with a Kuwaiti multinational specialising in being the local partner for foreign fast-food chains throughout the Arab countries.

Introduction Mobile telephony is capturing an increasing share of global telecommunications services, accounting for 23 per cent of global telecommunications revenues (up from 3 per cent in 1990). Mobile telephony is one of the high growth market segments of the Egyptian telecommunications sector, having outpaced the growth of fixed-line telephony, which currently stands at 7.5 million lines, growing at a compound annual growth rate (CAGR) of approximately 14.6 per cent during the period 1995/2000, compared with the staggering CAGR of 169 per cent for mobile telephony during the period 1997/2002 (American Chamber of Commerce in Egypt 2001, p. 14). Since the opening up of the sector to private investment in 1998, the Egyptian mobile telecommunications sector has been host to two of the world’s largest mobile operators, namely France Telecom and Vodafone. The two companies, in partnership with their 88

Egyptian Case Studies


Egyptian counterparts, have been operating as a duopoly, in what is perceived to be a market of remarkable growth potential relative to Africa and the rest of the Middle East region. Egypt has the third-largest number of mobile subscribers in the region, outnumbered only by South Africa and Morocco. Penetration rates, which currently stand at 5.4 per cent of the population, are forecast to reach 15.5 per cent by 2008 (American Chamber of Commerce in Egypt 2001). This case study explores FDI in the mobile telecommunications sector in Egypt, by throwing light on the first private operator, namely the Egyptian Company for Mobile Services (ECMS), known in the Egyptian market by the brand name ‘MobiNil’. The Industry The global wireless communications market has undergone remarkable growth since its initial years of operation during the late 1980s. The most widely used system for mobile communications networks is the Global System for Mobiles (GSM), which is used by roughly 62 per cent of global mobile telephony. In the Middle East region, more than 90 per cent of mobile telecommunications is dependent on GSM 900 networks (American Chamber of Commerce in Egypt 2001,p. 6). The Middle East region accounts for a relatively small share, 2.7 per cent, of the world GSM market. By 2006, the world GSM industry is forecast to service 1.4 billion subscribers, of which the Middle East region is expected to retain a relatively unchanged share of 2.8 per cent ( In the global telecommunications market, three sectors are expected to lead future growth: wireless, data and, to a lesser extent, fixed-line telephony. Compared to other emerging markets, the Egyptian mobile telephony sector was liberalised early, which allowed the private sector to invest in mobile communication networks, while line telephony to date remains a government monopoly. During the period 1998/2001, the Egyptian mobile telephony market has experienced high growth in terms of the number of subscribers, outpacing world growth rates as well as those in other Middle East and North Africa (MENA) countries. The liberalised status of...
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