Title: In-depth Look into Telecom Egypt Operations, Future Plans

Source: Economy Middle East

Date: 6 August 2023

The following article is based on an interview conducted by Economy Middle East with
Telecom Egypt’s Managing Director and CEO Mohamed Nasr, who shed light on the
factors influencing the current state and future outlook of Egypt’s leading ICT provider.
Under his leadership, the company is “Gearing up for tomorrow today” and is cementing
its position as a key player in Egypt’s transition into a global data hub and the primary
telecom gateway to Africa, the world’s next center of growth.

The current state of Egypt’s telecom industry and future outlook

Egypt’s telecommunications market, one of the largest in Africa and the Arab world, is
characterized by intense competition in the mobile and broadband sectors. Additionally,
Egypt boasts an emerging and innovative digital sector that has pioneered business
models for digital content distribution. Consequently, the country’s mobile and fixed
penetration rates are comfortably higher than the African and Arab nation averages. In
recent years, the Egyptian telecom industry has undergone significant changes,
experiencing high growth rates in both the mobile and internet markets.

Telecom Egypt, a leading player in the industry, has successfully connected over 93
percent of households with fiber-to-the-curb (FTTC) technology. Moreover, they have
expanded their fiber-to-the-home (FTTH) services in all new-build areas across Egypt.
These initiatives are part of the company’s ongoing efforts to improve the quality of
fixed broadband services. Telecom Egypt has made substantial investments in upgrading
Egypt’s ICT infrastructure, exemplified by their “Fixed Broadband Enhancement Project
in Egypt.”

Thanks to Telecom Egypt’s endeavors, fixed internet speeds have increased eightfold in
just three years. These improvements have bolstered the infrastructure’s capacity to
accommodate the unprecedented surge in data traffic and have contributed significantly
to the ongoing digital transformation in Egypt.
Looking ahead, under the Ministry of Communications and Information Technology’s
“Digital Egypt” strategy, Telecom Egypt aims to transform all areas into FTTH networks,
aligning with Egypt’s Vision 2030 for a digitally transformed society and a robust digital
economy. To realize this vision, the company is implementing two digital transformation
programs. Firstly, in urban areas, it is installing fiber optic cables and upgrading and
optimizing telecom exchanges. Secondly, in rural villages, Telecom Egypt is participating
in the “Decent Life” presidential initiative, which focuses on enhancing infrastructure,
including telecommunications, in rural Egyptian areas. The company is responsible for
deploying fiber optic cables in over 4,500 villages, thereby improving internet access for
3.5 million households and serving a large portion of Egypt’s population.

Moreover, as part of the Ministry’s “Digital Egypt” initiative, Telecom Egypt is addressing
the government sector’s digitalization requirements. It is actively working to connect
33,000 government buildings nationwide through a fiber optic network, aiming to
enhance communication and maintain a more resilient service. As of now, it has
successfully connected 18,000 government buildings, with the remaining buildings
scheduled for connection in subsequent phases.

Telecom Egypt is also lending support to other national digital transformation projects.
This includes equipping schools with fiber optic cables and providing access to all of the
Ministry of Education’s e-learning websites. Furthermore, the company has played a
pivotal role in supporting the healthcare sector by delivering stable broadband
connections to hospitals and healthcare units throughout the country. Through
continuous investment in network upgrades and development, Telecom Egypt has been
instrumental in facilitating these transformational efforts.

Regarding 5G, it is worth noting that its development in the Egyptian market is still in its
early stages. Nonetheless, telecom operators are currently investing in preparation for
the new era. As the country’s wholesale infrastructure provider, Telecom Egypt is
actively gearing up for secure and widespread 5G-based services. The company is also
paving the way for the application of IoT, AI, and other next-generation technologies by
upgrading networks and deploying fiber-backed mobile sites across the domestic mobile
market.

The upcoming smart city projects throughout the country will serve as the primary
catalyst for the launch of the 5G network. This will unlock transformative IoT
applications across various industries, offering a plethora of innovative use cases.
Leading Telecom Egypt’s growth aspirations

Nasr, who takes pride in his role as head of Telecom Egypt, has been dedicated to
steering the company’s strategies to deliver exceptional services that prioritize customer
needs and provide a seamless customer experience. “I am excited to be at the helm
during this transformative era in the industry and to deliver on the company’s vision of
shaping the future of ICT,” he says. Through the adoption of superior services, Telecom
Egypt is making remarkable progress in enhancing fixed-mobile convergence services for
its users, taking the services to new heights. Additionally, the company places significant
emphasis on the enterprise sector, aiming to expand and connect its service portfolio to
become the leading digital ICT provider for enterprise, SOHOs, and SMEs.

Nasr firmly believes that achieving these goals requires expanding the company’s
capabilities and corporate agility, as well as building a future-proof organization that
facilitates growth and fosters a seamless customer journey.

Egypt is the most reliable and trusted hub connecting Africa, Europe, and Asia since the
early deployment of subsea telegraph cables over 150 years ago. Telecom Egypt’s
international strategy focuses on delivering a cutting-edge infrastructure footprint
through its expanding network of subsea cables and diversified terrestrial networks.
“Leveraging Egypt’s strategic location at the crossroads of the three continents, as well
as its extensive coastlines along the Red Sea and the Mediterranean Sea (1,941 km and
995 km, respectively), the company enjoys a competitive advantage in establishing
multiple widespread subsea landing points separated by considerable distances to
deliver the required geodiversity to its global customers,” Nasr says.

Currently, Telecom Egypt provides the subsea industry with 10 landing stations, 10
crossing routes, and supports the landing of 14 subsea cable systems. Over several
decades, the company has closely collaborated with global telecom carriers and
hyperscalers, sharing a common understanding and commitment to their development
and prosperity.

Impact of divestment on Telecom Egypt’s operations and plans

Following the government’s announcement regarding the state ownership policy and its
objective to optimize resources, the Ministry of Finance, Telecom Egypt’s primary
shareholder, has divested 10 percent of the company’s total outstanding shares. It’s
important to note that this divestment has no impact on the company’s operations and
strategies, as the Ministry of Finance remains the main shareholder with a 70 percent
ownership stake, and the board representation remains unchanged.
According to Nasr, Telecom Egypt’s management team possesses a clear vision and
strategy that has evolved and strengthened in recent years, and will continue to work
tirelessly to solidify the company’s position as a regional telecom leader, always looking
to maximize Telecom Egypt’s shareholder value.

Influence of currency devaluation on Telecom Egypt

The devaluation of the Egyptian pound, inflation, and global financial and banking
challenges are circumstances that significantly impact the overall economy, including the
telecom sector. These inflationary pressures have influenced customer behavior, causing
them to prioritize their consumption objectives. Despite these challenges, Nasr notes
that there has not been a substantial change in the demand for telecom services thus
far.

The full impact of these economic factors is expected to become apparent in the near
future, coinciding with the company’s network expansion. Since a significant portion of
Telecom Egypt’s capital expenditure (CapEx) and some operational expenditure (OpEx)
items are denominated in hard currency, the company has managed to mitigate the
effects of inflationary pressures resulting from the devaluation of the Egyptian pound by
securing about 25 percent of its top line in U.S. dollars. Nevertheless, Telecom Egypt
aims to grow and diversify its revenue streams, particularly those denominated in the
greenback, to hedge against any currency fluctuations.

As a telecom market leader, the company encourages international manufacturers in

the telecom industry’s supply chain to establish production lines in Egypt. The
government has implemented several initiatives to support such endeavors, which will
not only reduce Telecom Egypt’s reliance on foreign currency but also benefit the
country as a whole.

Overview of the landmark 2Africa subsea cable project

2Africa’s subsea cable system is specifically designed to enhance international

connectivity and bolster internet access, connecting Africa with the rest of the world. In
addition, it strengthens Egypt’s role as a vital international hub for global
communication networks. As one of the world’s longest cable systems, 2Africa
addresses the growing demand for capacity in the Middle East and supports the
expansion of 4G, 5G, and fixed broadband access.

According to Nasr, embarking on such large-scale projects always carries the possibility
of challenges. “However, most of these challenges can be managed due to our
pioneering efforts, well-established infrastructure, and global partnerships. We
promptly address any obstacles or threats to ensure the satisfaction of our customers,”
he says.
2Africa was launched in May 2020 right after the breakout of the COVID-19 pandemic
and the associated lockdown restrictions. The main challenge at the time was securing
the necessary human resources, equipment and associated permits for the installation
of the new subsea cable landing stations and crossing routes for this mega project.

However, the company was able to overcome these challenges by diligently working
with the relevant authorities and stakeholders to secure the requirements. In addition, a
team of top-notch experts worked around the clock to make sure everything ran
smoothly and efficiently. This paved the way for the successful completion of the end-
to-end testing and delivery of 2Africa’s Egypt brand-new seamless optical terrestrial
crossings ahead of schedule, making it the first segment of the project in operation by
December 2020.

Subsea cables play a critical role in global connectivity and serve as the backbone of the
world’s economy, carrying 99 percent of internet traffic. Their economic impact stems
from the immense capacity they provide, the speed at which data travels, and the
growing reliance on data-intensive applications integrated into various aspects of life.
Egypt is no exception to the opportunities presented by a massive cable like 2Africa,
particularly for its telecom sector and overall economy.

By offering reliable and affordable internet access, 2Africa, along with other major
subsea cables, will contribute to job creation, stimulate economic growth, and improve
education and healthcare. 2Africa’s reach will extend to 3 billion people, which accounts
for 36 percent of the global population. Consequently, the project aims to realize more
of its potential by pursuing new subsea cable initiatives and introducing cutting-edge
products that will propel the ICT industry to new heights.

Telecom Egypt’s sustainability agenda

“Telecom Egypt fully recognizes the importance of operating in a sustainable manner, as

part of its responsibility towards the community, investors, customers, and the world at
large,” Nasr says. The company acknowledges that climate change poses a significant
threat to humanity and all life on Earth. Therefore, urgent collective action is necessary
to address this crisis and secure a sustainable future for generations to come.

As a pioneer in sustainability and eco-friendly practices, Telecom Egypt has taken the
lead in sparking climate action ahead of COP27. It has achieved this by transforming its
cellular base stations in Sharm El Sheikh into solar-powered stations, demonstrating its
dedication to environmental-friendly solutions. Additionally, the company has deployed
electric, eco-friendly cars and buses in the city, showcasing its commitment to
combating climate change through various projects and initiatives.
Telecom Egypt aims to become a leader in corporate sustainability by harnessing the
power of digitalization to tackle the climate crisis and mitigate its impact. To achieve
this, the company is developing a comprehensive carbon reduction strategy and
focusing its efforts on high-impact activities. For example, it is replacing copper with
fiber and adopting FTTH technology in all greenfield areas.

A recent milestone on Telecom Egypt’s sustainability agenda is the partnership with

Egypt’s New and Renewable Energy Authority. The company has inked a deal to procure
all of its low voltage power from renewable sources. This commitment makes Telecom
Egypt one of the largest and most environmentally friendly telecommunications
companies in the region.

Furthermore, Telecom Egypt strives to adopt eco-friendly business practices to the best
of its ability. This includes promoting optimal resource utilization, recycling, and
adopting sustainable and green supply chains whenever possible. The company also
emphasizes the importance of corporate governance, risk management, and
compliance, as well as business ethics, data privacy, cyber security, and maintaining
excellent customer service.

Diversity and inclusivity a key focus for Telecom Egypt

Within its commitment to sustainability, Telecom Egypt actively promotes diversity and
inclusion, ensuring equal opportunities for all employees throughout the recruitment
process, career development, training, and promotions. The company places significant
emphasis on key areas such as women empowerment, youth engagement, health and
safety, employee wellbeing, and training and development.

Nasr highlights that Telecom Egypt plays a pivotal role in supporting the implementation
of impactful social responsibility initiatives. To ensure effective execution, the company
has established a dedicated Social Responsibility Committee which is entrusted with the
role of formulating and executing the company’s corporate responsibility strategy in
alignment with Telecom Egypt’s mission. Additionally, the committee takes the lead in
identifying and recommending projects, initiatives and donations that contribute to the
overall social welfare.

Turning Egypt into a global data hub gateway to Africa

Nasr highlights “Gearing up for tomorrow today” as Telecom Egypt’s slogan, reflecting
the company’s response to the unprecedented changes brought about by the growing
digital economy, which have caused disruptive shifts in the ICT ecosystem. Taking their
strategy to the next level, Telecom Egypt has positioned itself as a key facilitator of
digitization by establishing the renowned Regional Data Hub (RDH) as part of their data
center expansion plan.
Telecom Egypt already operates seven data centers, with RDH standing out as the first
facility in Egypt to receive certifications from the Uptime Institute in the categories of
Design, Constructed Facility, and Operational Sustainability. RDH benefits from its
strategic connectivity to the Mediterranean Sea and Red Sea landing stations, granting it
access to over 60 countries worldwide. The initial phase of RDH, consisting of 400 racks,
is already operating at full capacity, prompting the company to prepare for the next
expansion phase, which will be slightly bigger.

Telecom Egypt currently boasts a transit capacity of over 165Tbps between the Red Sea
and Mediterranean Sea, a figure set to double with the installation of new cables. This
vast capacity and connectivity offer tremendous opportunities for other data center
developers to leverage when delivering services to hyperscalers and content providers.
Furthermore, Telecom Egypt adopts an open access model, allowing potential data
center customers seeking global reach to connect to their subsea stations. To maintain
its leading position and stay aligned with cutting-edge technologies and connectivity
solutions, Telecom Egypt has established partnerships with prominent global ICT players.

Telecom Egypt is excited about the opportunities that lie ahead and will continue to
prioritize customer-centricity and maximize shareholder value as it exerts its utmost
efforts to become a global data hub.