Mobile Telecommunications in the Arab World: a paradigm for economic development The Egyptian Company for Mobile Services (Mobinil) December 16, 2007

Telecom in the Arab world: technological, cultural and regulatory transformation Arab world far from homogenous: wide disparities in terms of population size, GDP, density, mobile penetration, etc… The mobile telecommunications revolution has impacted us all … massive growth in mobile subscribers and changes in the way we communicate. Telecom sector is a model of liberalization and economic reform – showing what can be achieved through effective public/private partnership and market liberalization.

Spotlight on the Arab world 22 countries: some rich; some poor some densely populated; some sparsely Total population exceeds 320 million Over 160M GSM subscribers (2G+3G) (as of September 2007) Served by over 45 operators (many countries have up to 3 operators) Already we have emergence of home grown international operators: Orascom, Zain, Etisalat, STC, etc ... ready and able to expand beyond borders of Arab world 3% 6% 7% 10% 11% 22% 23% 30% 33% 52% 63% 65% 70% 72% 76% 91% 106% 107% 115% 22 21 20 19 18 17 16 15 14 13 12 11 10 9 8 7 6 5 4 3 2 1 Y2006 penetration Comoros Somalia Djibouti Sudan Yemen Palestine Syria Egypt Iraq Lebanon Mauritania Morocco Algeria Libya Jordan Oman Tunisia KSA Kuwait Qatar Bahrain UAE Country Ranking Sources: WCIS+, ITU

The Arab telecom market has witnessed massive changes within the last decade Deregulation & liberalization  state-controlled monopolies in most countries have been replaced by public/private partnerships Countries are encouraging open competition between regional and international operators leading to extraordinary prices being paid for license fees Egypt 3rd license awarded to Etisalat for $2.9 billion – July 2006 KSA 3rd license awarded to Zain for $6.109 billion – July 2007 New investment friendly climate that is spurring FDI and local investments in ICT – delivering jobs and other economic value Telco sector is helping to an environment which encourages innovation, investment, competition and entrepreneurship GSM has been fastest technology to be adopted in region – dwarfs internet and broadband penetration Ultimate benefit goes to consumer because of widening access to communication technologies, and more affordability

Mobile subscribers (as of Sept–07) 61% of Arab world GSM subscribers reside in only 4 countries, nearly 100M subs Egypt is both the most populous Arab country and has largest number of subscribers …although not the highest penetration rate 4 3 2 1 What do these 4 countries have in common? Fairly liberal regulatory regimes 2 or 3 GSM operators – encouraging competition & smashing entry barriers (cost of ownership) Large populations Source: WCIS+

GDP in comparison to mobile penetration rate Telecommunication infrastructure development has contributed to economic growth. Some studies indicate that 1% increase in the infrastructure corresponds to 1% increase in GDP. Teledensity levels are directly correlated with human development indicators such as healthcare, education, and adult literacy. Increasing teledensity bridges the gap between the haves and the have-nots. Wide disparities in penetration and GDP among Arab countries Source: ITU 2006

3G in the Arab World [1 of 2] 3G introduced in Arab world in only a few countries There are many barriers to adoption of 3G services: Low computer literacy rates and low data penetration rates High handset costs Lack of transparency on pricing Lack of compelling Arabic language services and applications 3G has made only minimal inroads in both Africa and the Middle East – less than 1% of world 3G subscribers Source: WCIS+

3G in the Arab World [2 of 2] According to the latest figures, as of Sept–07, there were around 5M 3G subscribers in the Arab region – mostly in KSA and the Gulf states Source: WCIS+

GSM: an Egyptian success story

Current market conditions: developing society with many challenges Egypt is the most populated country in MENA region Large disparities in the income distribution – with regional dimension (urban/rural, Upper Egypt/Lower Egypt) GDP growth% population* population distribution < 30 years of age 73 M 43% urban 57% rural 60% inhabitants around 97% of inhabitants live on 4% of total area adult literacy rate (% age 10+) 57% area (km2) 997,739 GDP (2006 est) 107 BnUSD GDP per capita (nominal) USD 1,454 Socio-economic Indicators (2006) year % 2006 6.9 2007 6.7 2008 5.3 2009 4.9 2010 4.7 Sources: BMI Forecast, & IMF, Economist Intelligence Unit, CAPMAS 2006 Census (preliminary results)

The Egyptian market is characterized by very wide income disparities improving economy – but financial constraints remain for many … limiting potential mobile growth. income disparities have significant impact on telecommunications consumption and habits. as a result, we need a dual market strategy to meet the very different needs of high end and low end (mass market). We also need to work on reducing the internal “digital divides” – by working on increasing computer literacy and promoting technology adoption. still room for penetration – but only if affordable Source: Mobinil Marketing Strategy Department

ICT in Egypt: a success story [1 of 2] Government of Egypt has positioned ICT development on top of its agenda increasing infrastructure investment easing restrictions on FDI increasing liberalization and increasing competition Egypt is North Africa's biggest telecom market making up nearly 3.9% of the country's GDP. ICT sector is achieving annual growth rates of +20% Egypt is an important growth market in telecom, IT solutions, and consumer technology Tremendous potential for Egyptian ICT industry: demonstrated by increasing exports. 12.7 10.4 21,200 14 1,716 1,293 2006 Exchange capacity (M) 13.2 Fixed line subscribers (M) 10.8 Subscriber waiting list (M) 0.036 Exchanges in rural areas (1,007 villages) 1,142 Public phone booths 56,449 International connecting circuits & links 25,745 Mobile subscribers 0.065 1,128 55,700 2005 4.3Gbps 5 Local call 125 18 Internet capacity 9.9Gbps Internet users (M) 6 Subscription cost (EGP) Monthly broadband subscription (EGP) 95 IT companies 2,070 IT clubs 1,442 IT Fixed services Mobile services Internet Egypt is being identified by regional and global companies as an important market for growth: telecommunications, IT solutions, and consumer technology Information Technology Industry Development Agency (ITIDA) recently commissioned a report that put the current estimate of Egypt's exports of Information Communication and Technology (ICT) exceeding US$ 0.25 Billion, predicting yearly IT exports worth $1500 Million through 2010. These figures suggest tremendous potential for the Egyptian industry. Egypt is North Africa's biggest telecom market making up nearly 3.9% of the country's GDP. The steady growth has been further fuelled by the surging Egyptian economy in addition to significant portions of FDI from both regional and global investors. Source: MCIT Yearbook 2006

Egypt is a high growth telecom market [1 of 2] Mobile market growth is booming due to increased competition, and lowering of entry barriers (handset cost, minimum monthly spend) We are witnessing incredible growth rates: 3 operators together are adding up to 1M new subs per month As of end of Sept–07, there are nearly 28M Egyptian mobile customers, +55% over end 2006 Deregulation of telecommunications market is creating the necessary conditions for continuous growth subscribers 28 M mobile penetration 38% * 10.9 M fixed 15 % users 8 M Internet 11 % 0.36 M broadband 0.5 % as of 3Q-07 Mobile is the real success story here – because driven by real consumer need, and relative ease of adoption Source: Egypt Telecommunications Report Q3 2007 BMI International & Company information, NTRA Brief on the Egyptian Telecom Sector Structure (Q3-07) - http://www.tra.gov.eg, population calculated at 74M

Egypt is a high growth telecom market [2 of 2] Egypt has the largest Internet market in Africa – nearly 8M 53% of Internet users are in Cairo and 32% are in the Nile Delta and on the North Coast There is a huge demand for broadband… In 2005, DSL market grew by 150% YoY, and a further 100% in 2006. Egypt has the largest Internet market in Africa – over 6M 53% of Internet users are in Cairo and 32% are in the Nile Delta and on the North Coast There is a huge demand for broadband…in 2005, DSL market grew by 150% YOY, and further 100% in 2006 There is great improvement here – but there is still a great potential for growth – especially if we start to think about bundling of services and convergence Source: Egypt Telecommunications Report 3Q-07 BMI International & Company information

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