VZCZCXYZ0001
RR RUEHWEB

DE RUEHEG #5287 2351338
ZNR UUUUU ZZH
R 231338Z AUG 06
FM AMEMBASSY CAIRO
TO RUEHC/SECSTATE WASHDC 0826
INFO RUEHAD/AMEMBASSY ABU DHABI 0366
RUCPDOC/USDOC WASHDC 0185
RUEAFCC/FCC WASHDC

UNCLAS CAIRO 005287 
 
SIPDIS 
 
SENSITIVE 
 
SIPDIS 
 
STATE FOR NEA/ELA AND EB/CIP 
USAID FOR ANE/MEA MCCLOUD 
USTR FOR SAUMS/AUGEROT/MCHALE/NEUREITER 
COMMERCE FOR 4520/ITA/ANESA/TALAAT 
FCC FOR INTERNATIONAL BUREAU/COOPER 
 
E.O. 12958: N/A 
TAGS: ECON ECPS EINT EINV ETRD EG KCOR KGIT
SUBJECT: EGYPT:  THIRD MOBILE LICENSE AGREEMENT SIGNED 
 
REF:  CAIRO 4142 
 
Sensitive but unclassified.  Not for internet distribution. 
 
¶1.  (U) Summary:  The National Telecommunication Regulatory 
Authority (NTRA) recently signed a licensing agreement with 
Egyptian-Emirati consortium Etisalat for operation of Egypt's third 
mobile phone system.  Etisalat paid LE 16.7 billion ($2.9 billion) 
for the license, a sum that will have a significant positive effect 
on Egypt's public finances in the current fiscal year.  Etisalat 
plans to begin service in early 2007, and will invest up to $1 
billion in the initial stage of operations.  Service will only be 
offered, however, in Egypt's major urban centers.  The competition 
from the third mobile operator is expected to lead Egypt's current 
operators, Mobinil and Vodafone, to upgrade their technology and 
services.  End summary. 
 
¶2.  (U) On August 21 the National Telecommunication Regulatory 
Authority (NTRA), headed by Amr Badawi, signed a licensing agreement 
with Etisalat, an Egyptian-UAE consortium, for operation of Egypt's 
third mobile phone system.  Prime Minister Nazif and Minister of 
Communication and Information Technology Tarek Kamel were also 
present at the signing ceremony and President Mubarak met with the 
consortium representatives the following day to discuss Etisalat's 
operational plan.  As noted in reftel, Etisalat won the tender for 
the third cell phone license by offering LE 16.7 (USD 2.9 billion), 
more than eight times the minimum price asked by NTRA.  The LE 16.7 
billion was paid in full on August 17 to NTRA, which will eventually 
transfer the funds to the Ministry of Finance (MOF). 
 
¶3.  (SBU) Payment of the licensing fee was executed August 17 and 
has already had a significant effect on Egypt's public finances. 
Minister of Finance YBG indicated that revenue from the licensing 
fee would reduce the GOE's budget deficit from 6.5% to 4.6% in the 
current fiscal year 2006-07.  He also predicted the new mobile 
operation would increase foreign investment, possibly to $3.2 
billion, up from previous estimates of $1.5 billion for the current 
fiscal year.  Shortly after payment of the licensing fee, the MOF 
announced it would decrease its next Treasury bill offering by LE 10 
billion.  Mohamed Assaad, Advisor to YBG, told econoff that the GOE 
had planned to tender LE 29.5 billion in T-bills from 22 August till 
26 September, but will now only offer LE 19.5 billion, with 
quarterly maturity rather than annual. 
 
¶4.  (U) According to Etisalat president Mohamed Omran, the company, 
which still has not announced a commercial name, plans to begin 
trial operations in November or December, and full service by 
February 2007.  Initial investment will reach approximately $1 
billion, backed by investments and loans from some over 22 financial 
firms, including some U.S. financial houses.  Omran denied rumors 
that Etisalat was planning an IPO of 10%-15% of the new company. 
Etisalat will offer service only in Cairo, Alexandria, Sharm 
el-Sheikh and Hurgada, and will sign national roaming agreements 
with Egypt's other two operators, MobiNil and Vodafone Egypt to 
cover the rest of the country.  The new system will use elements of 
"3G" or third generation technology, a more advanced technology than 
that used by Mobinil and Vodafone. 
 
¶5.  (U) On the same day that Etisalat's full service begins, NTRA 
plans to introduce Mobile Number Portability, a system that will 
allow users to switch from one operator to another while retaining 
their mobile number, according to NTRA President Amr Badawi. 
Industry experts predict that the increase in competition from 
Etisalat will force Mobinil and Vodofone to upgrade their 
operations, a process that will require additional licensing from 
NTRA.  Omran also indicated recently that Etisalat will bid on an 
international gateway license the GOE will tender later this year to 
carry telecommunications traffic to and from Egypt, further 
increasing the competition for Egypt's telecommunications market. 
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