CAIRO: Egyptian mobile operator Mobinil will make no profit on its third-generation (3G) network and would not have bought a 3G license if the deal had not included an extension of its 2G license, an executive said on Tuesday.
Mobinil bought a 15-year 3G license in October 2007 and launched its new network in Egypt in September this year, after agreeing to pay LE 3.34 billion ($602 million).
“If it were the 3G license only, definitely it would never have proven to be profitable,” Guillaume Van Gaver told Reuters on the sidelines of a telecoms conference.
“The controversial position is that 3G doesn’t pay in Egypt on its own, due to the terms. It only pays if you include the 2G (second-generation) license extension,” he added.
Van Gaver, vice-president for Mobinil’s commercial division, said difficulty accessing content and prohibitively expensive handsets had also slowed the development of 3G in Egypt.
“Until the cost of the handsets is not so high it will be very difficult in Egypt for us to bring in 3G revenue streams,” Van Gaver said.
Third-generation technology allows video calls and access to multimedia content, but coverage in Egypt is patchy.
When it signed the contract Mobinil negotiated a four-year payment plan, much longer than was granted to its two competitors, Etisalat Egypt and Vodafone Egypt, which signed 3G licensing agreements up to 18 months before Mobinil.
Van Gaver said wealthy 3G customers were very important but Mobinil, which has more mobile subscribers than any other operator in Egypt, would balance investment in its 3G network with the needs of its much larger customer base using earlier and cheaper technologies.
“We also need to take care of the millions and millions of our customers who have 2G phones,” he said, adding that about 200,000 Mobinil customers use the 3G network. At the end of June Mobinil had 17.5 million subscribers in Egypt.
Investment bank EFG-Hermes has said it expects Mobinil to add 1.4 million subscribers in the July-September quarter and to make net profit of LE 388 million during the quarter, down from LE 472 million in the same quarter of 2007.
