VZCZCXYZ0000
PP RUEHWEB

DE RUEHEG #2042 2991509
ZNR UUUUU ZZH
P 261509Z OCT 09
FM AMEMBASSY CAIRO
TO RUEHC/SECSTATE WASHDC PRIORITY 3997
INFO RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY

UNCLAS CAIRO 002042 
 
SENSITIVE 
SIPDIS 
 
DEPT FOR NEA/ELA AND NEA/EEB 
DEPT OF COMMERCE FOR IT MAS AND NTIA 
 
E.O. 12958: N/A 
TAGS: ECON EFIN EG PGOV ECPS EINV
SUBJECT: NO TIMELINE SET FOR OFFER OF A SECOND FIXED LINE 
TELECOM LICENSE 
 
REF: CAIRO 1928 
 
 ¶1. (SBU) Key Points 
 
-  GOE has no set timeline or conditions upon which to offer 
a second fixed line telecom license. 
 
-  NTRA President Badawi believes any future offer of second 
fixed line license would be a revenue-sharing model. 
 
 
¶2. (SBU) On October 12, we met with Amr Badawi, President of 
the National Telecommunications Regulatory Authority (NTRA) 
and discussed the GOE,s postponement of offering a second 
fixed line license that would assist in fully de-regulating 
the telecommunications market.  Badawi reiterated the 
official line that the GOE was postponing the offer of a 
second fixed line license due to the world economic crisis. 
Badawi stated that the Ministry of Communications and 
Information Technology (MCIT) and NTRA wanted to see better 
market conditions before they offered a second license; 
however, despite being pressed multiple times, Badawi was 
unable to define what would determine or quantify better 
market conditions. 
 
¶3. (SBU) Badawi claimed that Telecom Egypt lost 1.4 million 
fixed line customers over the past three to six months, most 
of whom were subscribers who were simply long overdue in 
paying their bills.  Thus, Telecom Egypt had made the 
business decision to finally cut the lines off.  Badawi used 
this figure to claim that fixed-line communication was not a 
growing industry but rather a dying one. 
 
¶4. (SBU) Badawi,s personal opinion is that if and when the 
GOE offers a second fixed-line license, it would most likely 
do so through a revenue-sharing model, as this would be less 
of an up-front burden to a new entrant into the market. 
Badawi stated that he would like to see a new entrant have a 
reasonable chance of success before determining that GOE will 
offer a new fixed line license.  Badawi believes that 
although Telecom Egypt has the fixed line monopoly, mobile 
phone operators serve as its competition, as more residential 
subscribers were moving away from having fixed lines in their 
homes and simply using cellular phones.  Badawi also worried 
that the infrastructure and its associated costs would be too 
burdensome for a new entrant into the fixed-line market and 
that this would in turn affect the GOE,s ability to make 
decent revenue from the project. 
 
¶5. (SBU) Comment: The MCIT is not committed to implementing a 
full de-regulation of the fixed line market in Egypt and has 
yet to explain what specifics they are waiting for to make a 
decision on offering a new license.  If the GOE were to offer 
a new fixed line license based on a revenue-sharing model, 
there would be little cost to the GOE while at the same time 
opening up the market to full competition.  The recent 
decision by the MCIT to offer two new "triple-play" or 
"compound" licenses for small, gated communities (Reftel) may 
serve as a temporary solution to start breaking up Telecom 
Egypt's monopoly on fixed line; however, it is only a small 
step.  Although fixed line growth is not likely to be high 
given the ever-expanding technologies in Egypt, the GOE has 
the opportunity to offer another license for bundled services 
to include fixed line that may attract more bidders.  While 
the NTRA has tended to focus on the effect that fixed line 
communication has on private citizens, NTRA does not address 
the effect that this has on potential businesses and 
investment.  As most businesses need a fixed line operation, 
the monopoly that Telecom Egypt has on fixed line can impact 
costs. 
Scobey