ICT SECTOR WITNESSES DOUBLE DIGIT GROWTH AS IT EMBRACES DIGITAL TRANSFORMATION

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The digital revolution in Egypt is well underway, led by government initiatives to develop the ICT sector, boost competitiveness and attract foreign investment.

The world is witnessing a revolution in Information and Communication Technology (ICT), the scope of which stretches far beyond the realm of the sector itself. No country seeking real, sustainable development and progress can hope to achieve these aims without a strong ICT sector in place to drive the necessary change.

The Egyptian government recognized that ICT plays a pivotal role in addressing Egypt’s challenges in the areas of poverty, education and health over the years to come.

This new Egypt, based on the development of a knowledge-based society and a strong digital economy, will possess a competitive, balanced and diversified economic system that is dependent on innovation, social integrity and participation and is characterized by vast improvements in the quality of life of its citizens. This is the vision of Egypt’s Ministry of Communications and Information Technology (MCIT) and its ICT 2030 strategy.

This strategy underpins the government’s vision for the digital economy and the development of the communications sector through various initiatives in order to maximize ICT contributions to the economic growth of the country. On this front, the strategy has already overseen notable gains, with the contribution of the ICT sector to Egypt’s GDP in 2017 reaching a record-high of EGP 62 billion ($3.5 billion), a 10 percent increase compared to the previous year. The MCIT hopes that its ICT 2030 strategy seeing such double-digit growth will become the rule, as opposed to the exception, going forward.

To ensure that this remains a realistic vision, the Egyptian government is currently undertaking several projects focused on ICT development, including a fiber-to-schools project that will improve the education system, provide digital services for citizens and offer training programs to bridge the skills gap between new graduates and the demands of the digital market.

In terms of connectivity, despite the number of households in Egypt with a computer having grown from 46 percent to 64 percent of the population and mobile penetration reaching more than 100 percent of the nation, fewer than half of Egyptians today enjoy a broadband internet connection, meaning there is still plenty of room for growth.

Speaking at the ITU Plenipotentiary Conference held in Dubai, United Arab Emirates, on November 16, Egypt’s Minister of Communications and Information Technology, Amr Talaat, put this potential into perspective.

According to Talaat, “Egypt is the largest country in the world with an underwater communications network linking the continents of Africa, Asia and Europe, which makes it capable of playing a powerful role in the international field of communications.”

“We are working seriously on fiber-to-the-home (FTTH) projects across the country and we’re also leveraging new technologies in order to enhance speed and increase the number of houses and citizens connected,” he added.

A major driver of this digital transformation is Telecom Egypt, the country’s incumbent operator, as it plays a central role in the implementation of the FTTH initiative, in parallel to its own projects.

“Undoubtedly, telecommunications has become one of the main pillars of modern societies. In this regard, Telecom Egypt has played a pivotal role in driving the growth and development within the local ICT market, depending on its infrastructure, which is the largest in the region and is spread across all of Egypt,” said the company’s CEO, Ahmed El Beheiry.

He also explained that “Telecom Egypt has been, and will always be, a key partner and an eyewitness of the rise of the ICT sector and an active player in boosting the comprehensive development process in Egypt.”

Besides its work to connect Egyptain homes, another area of focus for Telecom Egypt is the education industry as it has recently joined forces with the government on its fiber-to-schools project to extend fiber infrastructure to more than 2,500 schools.

“The president has mandated educational reform and it is one of the top-priority government projects this year,” explained El Beheiry.

“The first phase of this educational reform is supplying the schools with fiber cables, so the first phase of the number one project in Egypt right now is being carried out by Telecom Egypt, a technology company. This gives you a sense of the necessity of technology and digitization today,” he added.

“The fiber-to-schools project is evidence of how the government has become more ‘aware’ of how the ICT sector can act as a driver of growth for the whole economy,” said El Beheiry.

Even though many other countries have preceded Egypt in terms of digital transformation over the past decade because of the period of instability between 2011 and 2016, a number of recent developments demonstrate that Egypt is back on track in terms of harnessing ICT to deliver lasting sustainable growth for the country.

“Major developments started taking place in Egypt after 2016,” expressed El Beheiry pointing out that prior to this, Egypt was among just a handful of countries in Africa without 4G.

“The first development was the issuance of the 4G license for the three existing mobile operators and then the granting of a fourth license to Telecom Egypt. In terms of the country’s progress, allowing Telecom Egypt to enter the market as a fourth player in the mobile sector was a significant advancement,” he asserted.

In a country with more mobile phone subscriptions than residents, Egypt’s only fixed-line operator joined the thriving mobile market in September 2017 with a new service, WE, in a bid to improve competition and bolster state revenues. With around 96 million residents, Egypt has more than 100 million mobile subscriptions today compared to fewer than 10 million subscriptions for landlines and fixed broadband services. It is, therefore, understandable that El Beheiry described the company’s penetration of the mobile market as a “matter of life or death.”

“When looking at Telecom Egypt, the company was stagnant between 2010 and 2016, even in the number of subscribers and the company’s revenue growth. We only had virtual revenue growth, meaning that, even when there was a revenue increase, it was consumed by the operational cost. However, in just one year since entering the mobile market, we managed to gain over 3.5 million subscribers, which has exceeded our expectations. Most remarkably, we have succeeded in the past two years, despite having 8 billion EGP in debt, to grow our revenues and our net profit as well. We are absorbing the interest expenses of our debt while growing the net profit of the company,” he stated.

El Beheiry applauded the National Telecom Regulatory Authority’s (NTRA) decision to introduce an around 35 percent increase in prices for mobile services in 2017, a price-up that was necessary for the operators to re-invest in the market after competition had driven prices aggressively low, making it almost impossible to justify returns.

The NTRA gave Telecom Egypt a temporary pricing advantage in terms of mobile operations. This allowed the new player to keep up with the other players in the market in its first few months of operation and bring increased competition for the benefit of Egyptian citizens.

“Personally, I still do not believe that this price increase in telecommunication services was actually enough because Egypt’s prices are still far from the minimum desired, but this was still a good step. It is important for prices to be fair to make sure that telecom companies are able to make profits, or else, we will not have the opportunity to progress. These changes that have recently taken place indicate that the government is really interested in boosting the ICT sector,” according to El Beheiry.

Given the recent progress, El Beheiry said Telecom Egypt is now starting to take steps forward in terms of investing in technology to ensure that Egypt does not fall behind in the race for 5G, as it did for 4G. Meanwhile, another transformative decision that has been made by the government, one that makes the Egyptian ICT market more competitive globally, is the introduction of technology parks.

As stated by El Beheiry, “The government made a conscious decision to put technology parks all over Egypt … We have technology parks in Asyut, the heart of Upper Egypt, Alexandria, El Sadat city, which is halfway between Cairo and Alexandria and in Beni Suef. Egypt also has a manufacturing facility that produces mobile phones. Overall, the government has reformed legislation, pricing and built technology parks. This is a manifestation of a vision and a will to implement this vision.”

This commitment to reform and the strategy to develop the ICT sector into a flourishing digital economy is now opening up Egypt as a more attractive destination for global technology firms. The agency tasked with nurturing Egypt’s competitive advantages as a one-stop-shop for foreign direct investors in the ICT sector is the Information Technology Industry Development Agency (ITIDA).

ITIDA is working alongside the technology ministry towards making Egypt one of the top global hubs for technology and business services. It is also working alongside foreign investors seeking to enhance their global offering. In addition to attracting and servicing multinational IT companies, ITIDA also offers a wide range of services that help build the capacities of the local IT companies.

“There are a lot of opportunities for international investors,” says Maha Rashad, the agency’s acting CEO.

“Indeed, there are also a lot of successful operations already in place. Companies come to establish service centers out of Egypt to provide different services or software development, such as IT services, IT support, R&D centers, centers of excellence, as well as business process outsourcing centers. The Information Technology and Intelligent Transportation (ITITs) field is one of the areas that is very interesting and growing in Egypt right now,” she continued.

International technology companies that have established centers in Egypt such as Vodafone, Valeo, or Mentor Graphics, to name but a few, have all expanded “beyond their expectations,” according to Rashad. The country has developed a very strong base of local providers.

“These providers have been growing, most of them being in the business outsource area, and they are employing around seven thousand people per company whilst exporting their services all around the world to different clients,” she commented.

The acting ITIDA CEO refers to another example, that of the peer-to-peer technology firm, Uber, which has recently established a center of excellence in Egypt and is outsourcing part of its operations to a local provider.

According to Rashad, “for companies in the U.S., the options are already available. Whether they come and establish their own operations, acquire a local company, or collaborate with a local provider and provide services out of Egypt. What we have developed here is a very mature service provider base.”

Aside from these competitive advantages, Egypt has also been developing its legal frameworks in terms of data protection and cyber security in order to meet international global standards.

“We have been pursuing a set of bigger reforms to make this industry attractive to investors, so, the cybersecurity and the cybercrime law is already issued,” explained Rashad. “The Intellectual Property Rights (IPR) office is currently formulating a comprehensive strategy about the legal reforms that are required to develop the sector and we are lobbying with different government entities and are proposing the required legislation.”

“The data protection law has been approved by the government and is soon going to be presented to the parliament. It complies with our GDP regulations when it comes to data protection, so I think this would be a very confident message to investors that we are aligning the legislation according to the best practices,” she stated.

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