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Telecom Egypt at the core of the Golden Pyramid

01 April 1999

Telecoms in Egypt remained fairly stagnant until 1997, when the government took steps to liberalize the cellular sector and corporatize the incumbent operator, Telecom Egypt. A modernization programme is also under way, which involves the installation of millions of new telephone lines. Telecom Egypt's chairman, Abdel Fattah Abou Serie, talks about the goals behind this programme.

The Egyptian government initiated partial deregulation of the telecoms sector in November 1997, announcing plans to open up the mobile sector to competition. It also indicated that the incumbent, Telecom Egypt, would be corporatized as a first step before privatization. At the same time the government has launched a modernization programme in the telecoms sector, with a number of projects involving foreign manufacturers, geared at improving teledensity and network quality. The government realizes that, owing to its unique geographic location, Egypt could be a regional hub for telecoms traffic for Africa and the Middle East.
In an interview with Global Telecoms Business, the chairman of Telecom Egypt, Abdel Fattah Abou Serie, talks about the modernization programme, restructuring and the operator's role as a potential regional hub.
Despite plans to transform Telecom Egypt into a profitable joint stock company, so far there have been no staff reductions, as Abou Serie explains: "A new law dated March 26 1998 separated operation from regulation. Telecom Egypt is being reorganized from a public authority into a profitable, customer-focused joint stock company. In the same year the Telecommunication Regulatory Authority was established. There has been no reduction in staff levels. We are training people for the new view of the company, which is more focused towards the marketing of services and features provided by Telecom Egypt."
The "Golden Pyramid" programme
Teledensity is clearly a priority issue for Telecom Egypt: in 1981 it stood at 1.8%. As Abou Serie makes clear, Telecom Egypt plans to install more lines as quickly as possible: "We plan to achieve a teledensity of 14% by the year 2002."
The Golden Pyramid programme is just one of a number of projects that are being undertaken to achieve this goal. Telecom Egypt is working with a number of suppliers. In November 1998 the operator awarded a contract worth an estimated $300 million to Lucent Technologies to install 700,000 new lines. In October Ericsson won a $30 million contract to supply AXE local switches, access networks and an operations support system.
Abou Serie talks about these "mega projects" and the suppliers involved in the modernization drive: Golden Pyramid is a project that involves Lucent, while NileVision involves Alcatel. These projects, as well as Egypt 2000 with Siemens and Rising Sun with NEC are all called "Mega Projects" to achieve the Telecom Egypt's goal of doubling the number of installed lines and connections to customers. All these projects include switching, transmission and access networks. Ericsson is responsible for upgrading the AXE switches."
As Abou Serie points out, the operator uses a number of suppliers for switches: "AXE switches from Ericsson are used for international gateways and tandems. Other switches from Alcatel, Lucent and Siemens are installed all over Egypt. All EWSD (digital electronic switching system) switches are manufactured locally at Egyptian German Telecom Industries (EGTI), a joint venture with Siemens." EGTI was set up between the Egyptian government and Siemens in 1989. Telecom Egypt holds a 10% share in the joint venture. Digital lines now account for 75% of the lines in the network.
Technology upgrades and the Internet
Abou Serie explains how the operator is incorporating the latest technologies: "Telecom Egypt introduced the first Packet Switching Data Network in 1988, using X.25 protocol accommodating 24 nodes with a capacity of 3500 ports connected to six international gateways. A frame relay service was introduced in 1998. We are considering the introduction of ATM. SDH is largely used in most of the fibre links covering Cairo, Alexandria, Delta, Sinai and the north coast. Internet penetration is increasing more and more through different private companies. Studies are being carried now to enable Telecom Egypt to become a gateway for Internet services in the near future."
While Telecom Egypt focuses on the Internet and data services, it has a limited role in cellular ever since the government decision in 1997 to open up the market to competition. In March 1998 a bid from a consortium including Vodafone and AirTouch was accepted. The company, known as Misrfone, was awarded a 15-year licence to set up a GSM network in Egypt. In the following month the government decided to offer shares in the existing GSM network to the losing bidder in the first tender, MobiNil, a joint venture between France Telecom and Motorola. It was awarded a five-year licence in May.
Improvements in services to rural areas
Telecom Egypt is still involved in cellular, in particular in rural areas, as it tries to improve access to telecoms services. The operator also aims to use modern communications improve educational standards: "In the 1980s Telecom Egypt started to provide service to rural areas and has proceeded to provide rural areas, new cities, north cost villages and tourist villages in Sinai besides the coverage of highways with emergency service. We are also providing wireless local loop services for farms and newly reclaimed areas. Remote learning and Internet services are provided in schools and universities by the Ministry of Education with technical help and provision of the required circuits by Telecom Egypt."
International projects
The company aims to play a greater role in the region as it seeks to leverage its unique geographic position. The company is active in a number of international projects that aim to bring better connectivity to businesses in Egypt. The company is involved in the FLAG (fibre-optic link around the globe) project. According to Abou Serie, the company's involvement in such projects is critical to the operator's plans: "International telecoms services have witnessed tremendous growth in the 1980s. This trend is expected to continue in the 1990s. In view of Egypt's unique geographical position and Telecom Egypt's policy of establishing links with other countries, we have participated in a number of international links which makes Egypt an international telecoms hub. The strategic location of Telecom Egypt in the Middle East area gives it a great deal of importance in the field of international communications."
He continues on the benefits that the operator is accruing from these projects: "The participation of Telecom Egypt in the first submarine cable between South East Asia and the Middle East and western Europe (SEA-ME-WE1) had a very positive impact on the expansion of telecoms routes with many countries and the increased volume of international traffic. This led Telecom Egypt to participate in the second and third cable SEA-ME-WE2 and SEA-ME-WE3 with extended coverage to Japan, Australia and many of the east Asian countries using WDM technology with higher capacity and a larger number of landing countries.
Abou Serie talks about Telecom Egypt's involvement in these projects and the progress that has been made: "Submarine cables SMW1, SMW2, SMW3 and FLAG cross the territory of Egypt from Suez to Cairo to Alexandria. Traffic coming from the Far East arrives at the Suez landing station at the Red Sea, crossing Egyptian land to the Alexandria landing station in the Mediterranean to eastern and western Europe. FLAG is crossing Egypt in the same way, but has an additional landing station in the Mediterranean, which is called the Port Said landing station. Egypt is supervising the installation and testing of those segments international submarine cables crossing Egypt on behalf of all the partners on those projects and takes responsibility for their operation and maintenance."
Abou Serie continues on the benefits for its neighbours: "Meanwhile all neighbouring countries benefit from Egypt's strategic position to access most international submarine cables. Egypt as a member of the Arab League has to achieve one of those targets for Arab countries, which is to establish a regional fibre optic network to link all Arab countries and benefit from transit charges paid by Arab countries to reach each other through the transit in foreign countries."