Telecommunications companies face “inflation” by providing more services and diversifying investment portfolios

In recent years, the ICT sector has seen a remarkable state of movement in line with the state’s orientations to build a digital Egypt, and intensified efforts in the implementation of various projects aimed at improving Egypt’s position on improve the ICT industry map, and enable the state sectors. achieve digital transformation and contribute to economic growth.
Over the past 3 years, Egypt has spent more than $ 3 billion, about £ 48 billion, developing the entire network, starting with the terrestrial network as well as the international network, the messaging network and the part related to increasing efficiency. of the network, and also invest in data centers.
The telecommunications sector is seen as one of the investment sectors facing the repercussions of the current economic tensions and turmoil under the pressure of worsening inflation rates and the tendency to raise interest rates.
Investment banking analysts have monitored the most prominent scenarios that telecommunications companies are expected to address during the current period in the Egyptian market to avoid the negative repercussions imposed by the nature of the current economic stage, which is companies’ tendency to price services offered to consumers are provided as a way to pass the expected decrease in profit margins.
Analysts expected the telecommunications companies to compete in the coming period to provide more services to customers as a way to maintain the existing customer base and attract a new segment, with a focus on diversifying their investments and the pump of more liquidity in the financial services and electronic wallets sector.
Analysts have also excluded companies from using loans to finance their investment plan to develop and expand infrastructure, while relying on self-financing from the profits of the past two years, during which companies have managed to achieve high profit rates as the sector one of the sectors that has managed to benefit from the repercussions of the “Corona” crisis. .
Mohamed Anis, a macroeconomic analyst, said that the effects of the current economic tensions and turmoil due to the Russian-Ukrainian crisis and the increasing deterioration in inflation rates that prompted all central banks to shift interest rates were undoubtedly a direct negative impact on all investment sectors and companies operating in the Egyptian market. Including the telecommunications companies, which can resort to shifting the prices of services provided to consumers as a way to avoid the decline in profit margins under the pressure of the current and continuous rise in interest rates.
He expected an increase in competition between companies during the current period with the aim of maintaining the current customer base and attracting new customers by increasing the services provided and adding new service and consumer products in line with the current situation. of movement in electronic payment services. to the focus of mobile companies during the current period on diversifying their investments and pumping More liquidity in the financial services and e-wallet sector, and companies’ attempt to compete to capture the largest customer base, of which Vodafone still owns the largest share .
In the same context, he pointed out that the investment companies’ plans mainly depend on the volume of liquidity for each company and its direct impact on the expansion plan, pointing out the most prominent expected scenarios for mobile companies in the coming period, represented in new investments pumping with the aim of expanding in the digital payment services sector provided to individual customers and companies, in addition to investing in the network to improve service, in the context of improving support for digital transformation and the application of the concept of financial inclusion in Egyptian society.
It is unlikely that the parent companies will finance these expansions, and that the companies will turn to self-financing from the profits and income gained in recent years, during which the companies have managed to grow, which explains that telecommunications companies are among the most successful companies . which has managed to take advantage of the repercussions that the Corona pandemic has brought between its folds and the ability to exploit these repercussions to expand its services to the public.
Regarding moving dollar prices and their impact on dollar loans on telecommunications companies, he said that companies are naturally affected by the currency difference between the pound and the dollar on loans used by companies in the expansion plans currently pursued by telecommunications companies. .
Amr Al-Alfi, head of the research division at Investment Bank Prime Securities, in turn said that the decision of mobile operators to shift the price of the service to customers is subject to prior approval of the Telecommunications Regulatory Authority, in accordance with Telecommunications Regulatory Wet No. 10 of 2003.
Point out that telecommunications companies are unlikely to turn to the device at the moment to shift prices on services provided to customers in light of the turmoil facing the market due to the factor of high interest rates and the global inflation movement and its impact on the profitability margins of these companies.
Al-Alfi said that the fall in the value of the pound against the dollar after the decision to move the interest rate of the Central Bank by 20% at the beginning of the Russian-Ukrainian war crisis, which led to a gradual increase in costs cause. of the import of mobile operating equipment from global providers, which negatively affects the companies that have dollar loans that it has acquired during the last period to increase its expansion plans.
The director of research at Prime Investment Bank indicated that companies invest around £ 5 billion annually in developing their infrastructure and increasing the efficiency of the network, explaining that expansion activities are needed during the current period despite the fluctuations that the market is currently facing. to support projects and increase services provided to consumers.
He pointed out that the financial solvency of all telecommunications companies is very good in view of their ability to manage their operations effectively during 2021, with the expectation that companies will focus on self-financing of their expansions or rely on parent groups in particular. and he stressed that the parent companies of Vodafone, Etisalat and Orange undoubtedly have investment and financing plans to avoid the repercussions of the economic tensions and turmoil experienced by all markets. .
In the same context, he particularly referred to Telecom Egypt, which has great financial capabilities, and has managed to achieve very positive business results during the last period, as Telecom Egypt has reduced the risk by diversifying its investments and concentrating in one or two to reduce. Only business sectors, which benefit from high growth rates in The data services sector, which accounts for the bulk of mobile companies’ revenue in recent years.
Al-Alfi pointed to the recently completed acquisition of approximately 2.766 million shares in Vodafone Group, which represents 9.8% of the company’s capital (excluding treasury shares) to the benefit of the Emirates Telecommunications Company (e &), at a purchase cost of about $ 4.4 billion, which is becoming the largest transaction in the telecommunications sector. the low value of these companies Half 4 years ago, and almost 30% in 2021, which reflects the extent of the decline in stock valuations in light of current conditions, which significantly improves the activity of acquisitions, and thus provides liquidity to the expansions of mother tongue. companies in the markets in which they operate, especially the emerging markets.
Hisham Hamdi, a financial analyst at Investment Bank Naeem Holding, emphasized that mobile, data and electronic wallet services are the basic services and not entertainment for a large segment of consumers, which supports the plans of telecommunications companies to expand their services expand in order to maintain the current customer base and attract a large segment, especially in light of the decline.The current purchasing power rate in all sectors is under pressure from the current rise in the prices of goods and services.
Point out that the opportunities for growth in the field of digital payments are still great despite the obstacles that the Egyptian market is currently facing, especially as the penetration of the internet in Egypt is still around 48%.
He expected the mobile companies to focus on improving their investments in the infrastructure sectors in the coming period in line with the country’s geographical expansion in the establishment of new cities, depending on the company’s self-financing, without resorting to loans. , in view of the high interest rates. .
He pointed out that internet services generated the largest share of total corporate revenue by more than 50%, encouraging companies to increase their investments in infrastructure, establish mobile towers and purchase new frequencies with the aim of increasing the volume of to maximize their income. of Internet services during the current period, as a way of authorizing the expected decline in margins Profitability under the pressure of the current economic crisis.
The average fixed internet speed increased from 6.5 Mbit / s in January 2019 to 45.7 Mbit / s in November 2021, making Egypt fourth in Africa compared to the fortieth position in January 2019, and the start of work on new frequencies for mobile services in the frequency space 2600 have been approved.TDD technology with a size of 40 MHz from the total frequency band that has been granted the right to be used by companies (Vodafone Egypt – Etisalat Egypt – Telecom Egypt) with investments $ 1.170 billion is estimated.
The indicators of the communications and information technology sector, which is the highest growth among the state sectors, increased in the fiscal year 2020/2021 with a growth rate of about 16%; The sector’s contribution to GDP also increased from 3.2% in 2017/2018 to 5% in the 2020/2021 fiscal year, as well as the growth of digital exports from $ 3.6 billion in 2018/2019 to $ 4.5 billion in 2020/2021, as well as the growth in the number of digital exports from $ 3.6 billion in 2018/2019 to $ 4.5 billion in 2020/2021. Workers in the sector increased from 233 000 in 2017/2018 to 281 000 in 2019/2020.
Egypt’s position advanced in the network readiness index, rising from 92nd place worldwide to 84th, Egypt also ranked among the 10 largest developing countries for digital inclusion, and Egypt’s rankings also advanced in the ‘Government Readiness for Artificial Intelligence’ index to become 56th worldwide compared to 111th in the year 2019.
The financial analyst at Investment Bank Naeem Holding pointed out that the business sector between companies continues to enjoy strong competition, by providing advanced offerings to companies at the price level and also providing integrated services, and expects an increase in competition between companies during the current year 2022 at the level of small and medium enterprises in view of its representation of more than 70 percent of the Egyptian economy, which supports the ability of enterprises to cope with the current unrest.

Click to track tomorrow’s money on the pulse application

Leave a Comment