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CALL HAWKERS CUT INTO PAYPHONE REVENUES
BY ALEX HESS
Once busy payphones now stand empty, their customers
lost to the leagues of mobile phone call hawkers that congregate
in the major squares and streets of Egyptian cities. Armed with
just a mobile phone handset, these itinerant service providers stand
on the busy sidewalks soliciting passersby, who they charge a fee
to use their handsets to make phone calls. “It’s a serious
problem,” complains Mohamed Abdel Badie, treasurer of payphone
operator Nile Telecom, who says his company is pursuing various
options to limit call hawking, though he declined to elaborate on
them.
Until a decade ago, payphones were scarce in Egypt, limited to small
banks of coin-operated phones, often with missing digits or broken
handsets, located outside Telecom Egypt (TE) offices. The government
opened the payphone market to competition in 1998, which paved the
way for private firms Menatel and Nile Telecom to enter the market.
For the next few years, payphones sprouted up on street corners
and in public areas at a dizzying pace. Well-maintained card-based
payphones replaced the country’s antiquated coin-operated
phones.
Today, according to Mohamed Safaa, marketing and commercial director
of Menatel, there are over 50,000 payphone boxes in Egypt. Menatel
operates 30,000 of them, Nile Telecom, which also owns Ringo, operates
15,000, and Telecom Egypt owns about 5,000. By comparison, he estimates
that call hawkers operate between 100,000 and 150,000 mobile lines,
collecting about LE 1.5 billion a year from their unlicensed operations.
Call hawkers usually charge 50 piastres per minute, while payphones
cost 8 piastres per minute for local calls, 24 piastres per minute
for national calls and, on average, 50 piastres per minute for calls
to mobile lines. At face value, payphones seem significantly cheaper
than hawkers, but Safaa says the growing preference for mobiles
means most customers use these services to reach people on their
mobile line. “If you want to call somebody you’ll call
him on his mobile, not on his landline, even if you know that he’ll
be in his office,” he says. “So the mobile is cannibalizing
the landline.”
As the cost of making a call to a mobile is roughly the same for
both payphones and mobile hawkers, it all boils down to convenience.
Safaa says this makes it difficult to convince a potential customer
to go to a shop, pay for a card, and then find a payphone owned
by the same company as the card they purchased. In addition, hawkers
can occupy any space, which means customers are more likely to find
them before they find a payphone.
While hawking mobile calls, as an unlicensed commercial activity,
is illegal, Menatel CEO Jacques Brun says the government has decided
that policing the matter is futile. “We have been talking
with government bodies, mainly with [Telecom Egypt] and even with
the Ministry of Finance because there is a tax issue as well, but
the answer from both... is that [hawking] has reached such a level
with so many people involved that it is now a social problem in
Egypt and we cannot stop it by legal means.”
But the answer is not in policing, he insists. The problem is a
structural one – as long as it is profitable to re-sell mobile
minutes, desperate entrepreneurs will continue to operate regardless
of how many lines are shut down. The solution then is to change
the pricing model to give payphones a cost advantage over the hawkers.
All payphone companies pay fees to state-owned Telecom Egypt for
use of its landline network. While Brun declined to enumerate these
fees, he insists they are reasonable and the problem is not with
the national telecom. Instead, he places the blame squarely on the
shoulders of the nation’s two mobile phone companies, Mobinil
and Vodafone Egypt. He says the rates they charge payphone companies
to connect to their mobile lines is too high. “What we pay
in [mobile] interconnection cost is the same as the commercial price
that subscribers pay,” he says. “This is a big problem
because it should not be the same... it should be far below the
commercial price of a call... and we have raised this problem to
the NTRA [National Telecommu-nication Regulatory Authority].”
Telecoms Law 10 of 2003 stipulates that interconnection agreements
between two telecom firms must
be approved by the NTRA, which is responsible for ensuring that
they do not violate fair competition practices. One of its requirements
is that interconnection charges “must be cost-based with a
reasonable profit margin.”
Brun recognizes that mobile phone companies have no incentive to
stop the re-selling of minutes because they make a tremendous amount
of money from it without any extra marketing or promotion. Instead,
he calls for the NTRA to require that mobile operators set two interconnection
rates, one for subscribers and a cheaper one for payphones. This
should level the playing field with hawkers, who have no overhead
costs and would otherwise always win when it comes to pricing.
Safaa, however, believes the agency should directly intervene to
snuff out call hawking. He says Menatel employees recently scoured
Cairo streets in search of mobile phone hawkers. When they found
them, they paid for a call and dialed their own mobiles. In this
way they collected 11,000 phone numbers used “illegally”
by hawkers. But when they gave the list to the NTRA, Safaa complains,
the agency took no action to shut down the lines.
Safaa points out that he doesn’t expect authorities to round
up thousands of cash-strapped hawkers. Instead, he accuses the mobile
phone operators of being complicit in the practice and, therefore,
accountable. “Don’t take the person to prison, take
the GSM company,” he says.
Maged Ghobrial, Vodafone Egypt’s strategic and public relations
senior manager, says reselling mobile minutes is against company
policy and Vodafone discourages the practice. He explains that over
the past couple of years the cost of making a call from a prepaid
mobile to another mobile has fallen to 39 piastres per minute, from
150 piastres per minute, which has resulted in greater mobile penetration
and less demand for payphones. But he argues that it is impossible
to regulate the issue because Vodafone does not monitor how customers
use their minutes.
In any case, Ghobrial notes, Vodafone has limited the avenues for
hawkers to make profits by restructuring its rate plans. In the
past, hawkers would pay for a business line, which had a much cheaper
rate than the standard prepaid line. Now the gap between these prices
has been reduced. Yet he says the bigger threat to payphone providers
is the reality that as mobile penetration increases and rates fall,
people simply have less need for pay phones, or call hawkers for
that matter.
Nile Telecom’s Abdel Badie admits it’s a dilemma. He
explains that as mobile penetration has increased it has cut into
payphone usage. If it costs 50 piastres to call a mobile from a
payphone, but only 25 piastres from a credit line mobile, customers
will naturally choose to use a mobile, if not their own then a hawker’s.
Likewise, Menatel has no delusions about the threat to payphones
from legal mobile services. Safaa predicts that mobile-to-mobile
rates could fall to as low as 15 piastres per minute once the third
mobile operator launches services in 2007. And that, he believes,
would almost certainly mark the death knell for payphone services
in Egypt.
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