CAIRO â€" Etisalat, the smallest of Egypt's three telecom companies, has gone no-holds-barred in its latest challenge to Vodaphone, "borrowing" one of the latter's former mascots, a genie, to take several not-so-subtle jabs at the market leader's star-studded, sing-songy Ramadan ad.
In the Etisalat spot, a narrator asks the genie (whoâ€™s all decked out in Vodaphone's signature red) some pointed questions: â€œThey left you out of this cool song, huh? Do you plan on telling us how much they spent on that commercial? A respectable amount, huh? Shouldnâ€™t they have given this money to the people? That wouldâ€™ve made them happier.â€
The genie, looking increasingly uncomfortable, eventually gets the message. And poof. He's turned Etisalat green!
Heated debate ensued on social media, as it always does, over the ethics of the approach. Was it a cheap shot? Or did Etisalat deliver a brilliant uppercut? Which telecom operator actually benefited from the campaign? And so on and so on.
There is little disagreement, however, regarding the services the companies provide, the rates they charge, and the overall direction telecom has taken in the country, which are bad, bad and bad, according to most Egyptians. The level of frustration is so high that last Thursday, consumers launched their own social media campaign calling on citizens to briefly boycott telecom operators by turning off their mobile phones from 5-10 p.m.
Critics say that fierce competition in the telecom sector hasnâ€™t translated into better rates and services. Instead, the quality of mobile and Internet services has actually declined in the past few years. And while government entities and telecom operators have acknowledged the glaring problems, they've done little to address the situation, consumers complain.
Khaled Sherif, deputy to the minister of telecommunications, sums it up this way: â€œIt would be difficult to find anyone who disagrees that the quality of all the services provided today in the telecom sector are not satisfactory, be it in mobile, fixed Internet or fixed voice."
Turn for the worse
The telecom sector, once a bright spot in Egypt's economy, has noticeably dimmed over the last four years. The industry is faced with a myriad of problems that are fully acknowledged by government bodies and market players alike.
Starting in 2004, under the government of former Prime Minister Ahmed Nazif, who hailed from a telecom background, the sector grew at a robust rate and was hailed as a key driver in efforts to modernize the economy. Like many sectors, it hit a roadblock in 2011 and has not recovered since.
Today, growth is sluggish. The quality and speed of mobile and Internet services have noticeably deteriorated. And talks about the introduction of a fourth mobile license have been exceedingly erratic, leaving operators perplexed as to which strategy to follow moving forward.
In this context, network upgrades have come at a slow and inconsistent trickle, and services on offer lack innovation while pricing remains above global averages. For customers, this means patchy mobile connections, dropped calls, slow and pricey Internet services and overall frustration.
â€œThe telecom sector was growing at a higher rate than the Egyptian economy,â€ says Khaled Hegazy, Vodafoneâ€™s external affairs and legal director. â€œAfter the revolution, there was a shift. We have not been the focus of the government for the past four years. There has been a succession of ministers that didnâ€™t stay long, no long-term vision and none of the previous plans were carried out.â€
Sherif, who assumed his position alongside the new minister in the last Cabinet shuffle, says the administration's new focus is to enter the next era of telecom development with 4G â€" something that was supposed to have been introduced by 2014.
â€œWhen we say 4G, it is about providing the capability of having access speeds that are in the range of 100MB per second, whether it is fixed or fiber,â€ he explains. 4G and its associated technologies â€œgive a new horizon for telecommunication and ICT at large, and provide new capabilities for development on the technical and socioeconomic side.â€
For this to happen, the country first needs a new regulatory environment. Sherif argues that there is a need to move away from facility-based licensing, which gives telecommunications services provisions licenses to establish a network, and into service-based licensing, where companies can provide services without necessarily owning a network.
He admits, however, that a new regulatory framework can't be implemented until the current status of service provisions is amended. "We need to improve the quality, make sure that networks at large are capable of providing the new aspirations for higher performance, higher speeds and more penetration,â€ Sherif says.
Similarly, the ministry plans to kick fixed Internet speeds up to up to 4MB per second by 2016, because â€œtoday, we have Internet speeds in Egypt that are quite embarrassing,â€ Sherif concedes. So much so that the global index for Internet performance published by the U.S.-based firm Akamai does not even rank Egypt, because it sets a minimum speed of 4MB per second for the listed countries.
Egyptâ€™s fixed Internet penetration levels are low, varying from an official 14% to around 34% if you factor in unofficial connections. MCIT is targeting 50% household fixed Internet penetration by the end of 2016, which Sherif admits is still a modest goal.
Over the years, Egyptâ€™s mobile penetration grew at exponential rates and swiftly reached saturation levels. As of this past March, there were 96 million mobile subscribers â€" a penetration rate of 111%, according to the latest monthly report released by the Ministry of Communications and Information Technology.
Officially, the number is down 5% from the previous yearâ€™s 101 million subscribers and an 8% drop from a penetration rate of 119%, but this is attributed to a security measure taken by the National Telecommunications Regulatory Authority (NTRA) to cancel more than 5.5 million lines that were inactive or not linked to specific user data.
On the revenue side, mobile operators have also been disappointed. Vodafone has a 44% share of the market, with Mobinil in second place at 33% and Etisalat at 23%. â€œWhen it comes to mobile, we havenâ€™t seen growth since 2011,â€ says Sarah Shabayek, a telecom analyst with investment firm CI Capital. She says growth on the revenue side has been in the single digits.
Historically, revenue growth came directly from a surge in the number of subscribers, but todayâ€™s market has almost reached maturity, Shabayek asserts. â€œIn all markets globally, after penetration maturity comes data revenue that would lead to another round of growth â€" but that hasnâ€™t happened,â€ she says.
As of March, there were 23 million mobile Internet users, a 35% annual increase and 3% more than the previous month. The growth rate is nowhere near the trajectory witnessed with mobile subscriptions in the 2000s.
â€œThereâ€™s no data uptake as you would have imagined there would be,â€ says Shabayek. She attributes the failure to bad network quality, which does little to entice users to adopt mobile Internet.
For mobile data, there exist other barriers to entry â€" chiefly socioeconomic issues such as illiteracy and low income levels, as well as macroeconomic issues that affect disposable income. But as Shabayek points out, â€œeven people that would want the service or would want to increase their service are not encouraged by the quality.â€
The poor quality is a direct effect of mobile operators not investing in their networks, Shabayek argues. â€œThey werenâ€™t sure whether to invest or not, and this is where they got it wrong, because people will continue to use data and mobile even if the macroeconomic scene is not positive,â€ she says.
But thereâ€™s another bottleneck to network upgrades that lies in the sectorâ€™s very infrastructure, which is fully controlled by the countryâ€™s landline monopoly Telecom Egypt (TE), 80% of which is owned by the government.
Since 2014, Telecom Egypt has been working to replace copper cables with fiber. The target is to completely overhaul the network over the next two years, says Sherif. "Unfortunately, they started very late.â€
â€œAll mobile operators and fixed Internet providers depend on the same infrastructure,â€ says Vodaphone's Khaled Hegazy. "And thereâ€™s only one company allowed to provide infrastructure, which is Telecom Egypt.â€
â€œWe spend a lot of money on upgrading our part of the network, increasing capacity, adding sites and optimizing frequency, but what we canâ€™t control what we canâ€™t help," he adds. "We all go through the same bottleneck."
While Hegazy is hopeful that network upgrades will improve quality, he adds that Telecom Egypt is replacing copper with fiber in the end access point only. â€œThe backbone is not being upgraded,â€ he says. The result, he goes on to say, is that user could end up getting the same speed at a higher price.
Sherif recognizes the â€œdegraded mobile services qualityâ€ and claims there are many reasons for it, â€œall of which are being addressed and resolved, whether from the provider side or from the regulator and enforcement side.â€
The ministry recently issued what Sherif called a â€œcharter for performance,â€ an attempt from the side of regulators to enforce quality control on all telecom services providers. The charter levies â€œpenalties on companies if they fail to comply with quality standards set by the regulator â€" in an indirect way, it will force them to improve the quality of the networks,â€ he says.
â€œSome argue that companies were not investing sufficiently in network upgrade and quality improvement. I think this is changing now,â€ Sherif asserts. â€œWe have seen operators like Vodafone investing a lot recently to improve the quality of their network, and others will follow.â€
Vodafone is 45% owned by Telecom Egypt, and four of its executives sit on the TE board, which saw a sudden shakeup in late May. Prime Minister Ibrahim Mehleb appointed new government representatives to the board on May 27, removing Mohamed al-Nawawy from his three-year tenure as CEO in the process. The new board selected Osama Yassin as CEO and Mohamed Salem as chairman. Salem served as telecommunications minister in July 2011 in the post-revolution Cabinet of then-Prime Minister Essam Sharaf.
Speculation abounded regarding the reason behind Nawawyâ€™s removal, and none of the sources Mada Masr spoke to would give an explanation of what happened.
Nawawy was keen on buying the long-awaited license that would finally enable Telecom Egypt to enter the mobile market, and had agreed to pay roughly $3.27 million for it in May 2014. This was at a time when the government was considering offering all market players a unified license, but it was never activated.
Since then, it has been increasingly unclear whether Egypt will move forward with plans for a unified license or choose a different path to allow Telecom Egypt access to mobile, a move that has been in the making for several years.
Sherif says that the ministry and the regulator are indeed now attempting to adopt a unified license for all market players, as opposed to selling a fourth mobile license directly to TE. â€œA unified license would allow all telecom service providers in the country the same capability of providing all the services listed in this license,â€ says Sherif. Due to launch in 2016, it is essentially meant to level the playing field.
Shabayek explains that the unified license gives all operators what is missing in their license. For example, Vodafone has mobile data and mobile voice, but not fixed voice. Mobile operators also have to go through Telecom Egyptâ€™s international gateway for international phone calls, she says.
With a unified license, each of these services will be priced, and operators will have to pay to add on the services they currently lack. Telecom Egypt would therefore pay $327 million to be able to provide mobile services, and may have to sell its stake in Vodafone.
But this could further cut into Telecom Egyptâ€™s revenue, which is already suffering from the decreasing usage of landline services. If mobile operators get their own international calling gateway, â€œthat would be another 30% of the companyâ€™s topline,â€ Shabayek points out.
Another issue of contention is that the unified license would give mobile operators access to the infrastructure. â€œIt would cost Telecom Egypt a lot in revenues, because today it has the largest infrastructure footprint, so mobile operators have to lease this infrastructure" â€" another 30% of its revenue, says Shabayek.
In theory, mobile operators wouldnâ€™t need to lease the infrastructure if they can duplicate it, but technically it would be difficult to do so as that would entail digging up Cairoâ€™s streets. Besides the nightmare this would represent logistically, it's a security concern for the ministry and the NTRA.
There has been a proposal for a national entity for infrastructure, which would bring the four main players together to save on the infrastructure costs. However, that plan is also controversial, because it would have officials from the different security ministries on the board.
â€œTelecom Egypt needs to decide which way they want to go,â€ Sherif concludes. â€œThere are many options and compromises to be taken into consideration in getting this license.â€
Crunching the numbers of South Korea's personal and household debt offers a glimpse into what drives the win-or-die plot of the Netflix hit produced in the Asian country.
SEOUL — The South Korean series Squid Game has become the most viewed series on Netflix, watched by over 111 million viewers and counting. It has also generated a wave of debate online and off about its provocative message about contemporary life.
The plot follows the story of a desperate man in debt, who receives a mysterious invitation to play a game in which the contestants gamble their lives on six childhood games, with the winner awarded a prize of 45.6 billion won ($38 million)... while the losers face death.
It's a plot that many have noted is not quite as surreal as it sounds, a reflection of the reality of Korean society today mired in personal debt.
Seoul housing prices top London and New York
In the polished streets of downtown Seoul, one sees endless cards and coupons advertising loans scattered on the ground. Since the outbreak of the pandemic, as the demand for loans in South Korea has exploded, lax lending policies have led to a rapid increase in personal debt.
According to the South Korean Central Bank's "Monetary Credit Policy Report," household debt reached 105% of GDP in the first quarter of this year, equivalent to approximately $1.5 trillion at the end of March, with a major share tied up in home mortgages.
Average home loans are equivalent to 270% of annual income.
One reason behind the debts is the soaring housing prices. In Seoul, home to nearly half of the country's population, housing prices are now among the highest in the world. The price to income ratio (PIR), which weighs the average price of a home to the average annual household income, is 12.04 in Seoul, compared to 8.4 in San Francisco, 8.2 in London and 5.4 in New York.
According to the Korea Real Estate Commission, 42.1% of all home purchases in January 2021 were by young Koreans in their 20s and 30s. For those in their 30s, the average amount borrowed is equivalent to 270% of their annual income.
Playing the stock market
At the same time, the South Korean stock market is booming. The increased demand to buy stocks has led to an increase in other loans such as credit. The ratio for Korean shareholders conducting credit financing, i.e. borrowing from securities companies to secure stock holdings, had reached 21.4 trillion won ($17.7 billion), further increasing the indebtedness of households.
A 30-year-old Seoul office worker who bought stocks through various forms of borrowing was interviewed by Reuters this year, and said he was "very foolish not to take advantage of the rebound."
In addition to his 100 million won ($84,000) overdraft account, he also took out a 100 million won loan against his house in Seoul, and a 50 million won stock pledge. All of these demands on the stock market have further exacerbated the problem of household debt.
42.1% of all home purchases in January 2021 were by young Koreans in their 20s and 30s
Game of survival
In response to the accumulating financial risks, the Bank of Korea has restricted the release of loans and has announced its first interest rate hike in three years at the end of August.
But experts believe that even if banks cut loans or raise interest rates, those who need money will look for other ways to borrow, often turning to more costly institutions and mechanisms.
This all risks leading to what one can call a "debt trap," one loan piling on top of another. That brings us back to the plot of Squid Game, "Either you live or I do." South Korean society has turned into a game of survival.
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