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ANSWERING THE CALL
BY REHAB EL-BAKRY
The recent bid for Egypt’s third mobile license
attracted worldwide attention. Amr Badawi, chairman of the National
Telecommunication Regulatory Authority (NTRA), took unprecedented
steps to ensure that his agency conducted a transparent and impartial
bidding process. Taking time from his vacation, he spoke to Business
Monthly about the regulator’s role and its plans for the future.
Seven months ago, Amr Badawi found himself thrust
into the media spotlight. Previously working behind the scenes in
the Ministry of Communica-tions & Information Technology (MCIT)
as the minister’s top adviser, the soft-spoken telecoms expert
was entrusted with the challenging task of heading the National
Telecommunication Regulatory Authority (NTRA) at a critical juncture
– and at a time when the regulatory agency’s operations
and decisions were under scrutiny not only in Egypt, but all around
the world.
"We belong to the government but we
have to be fair in judging between the government and the
other two parties".
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Badawi, who had been heavily involved with the
initial committee that recommended the issuance of a third mobile
license, embraced the challenge. “This was a very interesting
time to head the NTRA,” he says. “Everyone was anticipating
the third mobile bid for some time so there was a lot of attention
surrounding the NTRA as the body that would be setting the [ground
rules] for the issuing of the license.”
His confidence in his ability to run the telecom regulator stems
from a long career in both academic and practical telecommunications
engineering. Following his graduation from the Faculty of Mechanical
Engineering at Cairo University in 1977, he completed his Master’s
degree before traveling to the US to eventually complete a Ph.D.
in telecommunications switching and circuit design from Stanford
University.
Badawi spent several years on the teaching circuit in Egypt before
joining the local branch of US telephone company GDE (later acquired
by General Dynamics), which at the time was involved in a USAID-funded
digital switch project with Telecom Egypt (TE). While there, he
dealt with every aspect of the project from the preparation of bids
and tenders to the issuance of contracts and the supervision of
their implementation. “This was a particularly great learning
experience [because] this gave me a lot of hands-on experience in
terms of how to contract and tender things,” he says. “I
think that the Americans are extremely advanced in having clear
and fair processes for tendering.”
Badawi remained with General Dynamics until 2005, when he joined
MCIT as a senior consultant to the minister. He was heavily involved
with the TE initial public offering (IPO) and the committee that
recommended issuing the third mobile license, so when NTRA chairman
Alaa Fahmy left to head the National Post Authority in January 2006,
Badawi was a natural candidate to fill the vacant post.
Badawi acknowledges that the NTRA has had a higher profile than
usual over the past few months, but he does not believe that the
regulator has lost sight of its main purpose; to ensure that the
sector is growing and developing at a healthy pace, and in the right
direction. He sees the role of the NTRA as setting the ground rules
for all the players in the market, establishing guidelines for licenses
issued by the government, ensuring that all service providers abide
by the rules of the market, levying fines on violators and ensuring
that the Telecommunications Act 3/2003, the main law governing the
telecom sector, is applied fairly. Perhaps the most difficult role,
as far as he is concerned, is making sure that the NTRA maintains
its impartiality. “In a lot of ways, we are a semi-judicial
body that has to strike the balance between many bodies –
the government, the service provider and the consumer,” he
says. “It has to be a fair party. We belong to the government
but we have to be fair in judging between the government and the
other two parties.”
Critics see a potential conflict of interest in that the NTRA is
part of MCIT, and Minister of Communication and Information Technology
Tarek Kamel heads its board. Badawi, however, sees the ministry’s
weight as add-value, as it empowers the regulator when dealing with
other bodies, particularly the government. “We are involved
with the ministry in terms of formulating policies,” he says.
“The NTRA is [then] responsible for the implementation of
all policies.”
The issuance of the third mobile license is an ideal example. The
decision to launch a third network was made by MCIT. However, it
was the NTRA that set all the ground rules as to how the bid would
proceed. For this, Badawi relied on his long experience with USAID,
where he learned how to develop a transparent bidding process. “We
had a process that [ensured] that everybody involved in the bid
received the same amount of information and at the same time as
everybody else. We didn’t allow for any contact between the
bidders and the NTRA team members involved in the process. Every
bit of information was provided to the bidders via e-mail, which
meant that they had access to it virtually at the same time,”
he says.
Last February, the NTRA issued a request for proposals (RFP) and
a notebook that stated all the conditions of the bid for the third
mobile license. It also included a draft license, which helped cut
down the negotiation time following the bid by outlining exactly
what would be required of the winning bid. “It took us [only]
around six weeks to actually finalize all the negotiations with
the new licensee because they knew most of the main conditions of
the license,” says Badawi. Normally this process may take
several months of tedious negotiations.
Two teams were formed, the first to review the technical aspects
of the bids, the second to review their commercial and financial
aspects. These teams were prohibited from communicating with one
another. “Within each team, there were two sub-teams that
reviewed the bids independent of one another in order to ensure
that these outcomes were essentially reviewed twice. They also had
a very detailed evaluation sheet with points for every item. We
only swapped the information from the technical group and the commercial
groups on [May 4], the day that we announced the names of the companies
that made it to the financial bid,” he explains.
To protect the integrity of the bidding process, the NTRA maintained
a media blackout on all details related to the evaluation of the
bids until the end of the selection process. In the absence of any
news, rumors abounded. “I enjoyed the rumors very much,”
Badawi chuckles, “because every time I heard a rumor, I was
sure that the members of the NTRA teams were also keeping a firm
lid on the information that they had access to. Not a single rumor
was true. This was essential because their silence guaranteed that
the process was transparent and fair.”
The winner of the third license was announced following an auction
held at the Smart Village on July 4. A consortium led by UAE-based
Etisalat Group, with a 66-percent stake, and Egyptian partners National
Post, National Bank of Egypt (NBE) and Commercial International
Bank (CIB), won after agreeing to pay a whopping LE 16.7 billion
for the license. The license was signed on August 22.
Now that the license has been awarded, there will be further negotiations
with the two existing operators, Mobinil and Vodafone, which have
been working in the market since 1998. The issues under discussion
include national roaming, number portability and site sharing. Badawi
says that these three items have been agreed upon by the two existing
operators and their license agreements have been amended to reflect
that. “We signed agreements with Mobinil and Vodafone, and
they have committed to provide these [items] when the third operator
starts operation,” he says.
He emphasizes that the NTRA could not force the existing two operators
to permit site sharing, but was hoping they would agree to it. “We
wanted to clarify that we would [approve site sharing], because
I don’t believe that we could really have forced it,”
he says. “Number portability and national roaming, however,
are a different issue.”
For national roaming, the agreement states that the new entrant
would attempt to negotiate agreements with the other two operators
and if they failed to reach an agreement within four months the
NTRA would dictate terms and all parties would have to abide by
them. “This would, in theory, apply not only to the third
operator but to all operators. However, I don’t think [Mobinil
and Vodafone] would implement it with each other because they already
have full coverage,” he says. “We say that this agreement
should expire in three years. Of course, if they elect to [continue
with] national roaming among themselves, that’s a different
matter.”
The operators have also agreed to permit number portability, Badawi
says. An NTRA committee is now working with the two incumbent operators
and will soon be joined by technical personnel from the Etisalat
consortium. “We are also working on the clearing house, which
will [create] a database for all the numbers that have been moved
from one operator to another, which is essential for number portability.
They will implement all systems that will allow the service so that
by the time the third operator is functioning, the system will be
up and running.”
That was the easy part. Badawi expects 3G services and 3G-compliant
interfaces to be much more tricky. Last month, the issue cropped
up after Mobinil launched EDGE technology, which allows faster voice
and data transfer and clearer sound than conventional 2G or 2.5
G services. The company argued that EDGE is classified as 2.75G.
However, the NTRA disagreed and requested that the company either
halt dealing in the service or apply for a 3G license, which it
technically cannot acquire until six months after Etisalat launches
its network, and even then only after paying the estimated LE 3.3
billion licensing fee.
“It will be an issue,” states Badawi bluntly, citing
EDGE’s classification by the International Telecommunications
Union (ITU), a UN body that sets definitions and standards for telecommunication
services worldwide, as a 3G technology. “EDGE has been selected
by the ITU as one of the five approved interfaces for 3G technology.
In accordance with that, the NTRA considers EDGE to be 3G technology
and hence it requires a 3G license.”
He continues, “Our stated position is that EDGE is 3G technology.
Of course, [Mobinil] holds the position that it is not. Whenever
there is an issue between an operator and the regulator, the operator
has to obey the regulator and there are channels to resolve this
dispute. These channels look into the matter and then announce their
decision regarding the issue, which is binding to both parties.”
"Our stated position is that EDGE is 3G technology.
Of course, [Mobinil] holds the position that it is not" |
Badawi asserts that the NTRA’s position on
the issue of EDGE technology has never been a secret, and that it
has never given approval for any operator to deploy it. “Actually,
what [Mobinil said] was that they would bring in the equipment for
trial and that they would not use it in any commercial manner before
they get [approval], be it in the form of a license or an authorization.
All the equipment was moved into the country under this context,”
he says. “We basically have been corresponding with them since
February asking them not to have any commercial launch, but of course,
they already started doing it last month.”
The third mobile license has garnered the lion’s share of
press coverage in recent months, but the NTRA is involved in much
more, Badawi says. Later this year, two licenses for international
gateway calling are to be issued, a service that was legally monopolized
by TE until the end of last year. And by all reckoning, it’s
going to be an exciting time. The international gateway licenses
were originally slated to generate LE 1.4 billion, but given the
hype surrounding the third operator license, which generated LE
12 billion more than anticipated, some analysts expect a lot more.
But money isn’t everything, insists Badawi. “MCIT and
the NTRA’s responsibility for the [telecom] sector is to make
sure that it is healthy and growing, and not to extract the maximum
amount of money from it,” he says. “We are looking at
the international gateway issue and we are going to issue directives
in September or October. At that time, everyone will be able to
know our direction on the issue.”
When the Telecommunications Act was passed in 2003, international
calling was the only service that TE was permitted to continue to
monopolize, since it generated almost 90 percent of the state-owned
fixed-line operator’s revenues. These profits, in turn, helped
subsidize TE’s domestic fixed-line service. “Until now,
international operations in voice have been subsidizing the local
[fixed-line] service. With that, there is no incentive for any other
operator to apply for a license for fixed-line domestic service
without international telephony,” he explains.
According to Badawi, the costs involved in setting up a second fixed-line
network have discouraged all private investors from applying for
a license. “Basically, it’s very difficult to build
a land network now, especially in a country like Egypt, so we felt
that it makes little sense [to issue other fixed-line licenses].
We felt that we needed to wait for better conditions to be able
to have another fixed-line operator. Now that we are doing tariff
restructuring to allow TE to cover its costs through domestic services
in order to make profits, we could consider another fixed-line operator.
We expect that this might happen around 2007 or 2008. At that point,
we could definitely entertain bids from operators that are interested
in providing a second fixed-line service.”
Telephony has dominated the NTRA’s agenda for much of this
year, but the regulator also monitors all information technology
services in the country, including Internet provision, voice over
Internet protocol (VoIP) and worldwide interoperability for microwave
access (WiMAX). It’s a sizeable task, Badawi admits, but he’s
enjoyed the ride so far. “It’s been a very interesting
time for all of us at the NTRA,” he says, adding that the
upcoming period should see more action. “The final quarter
of the year will be hectic as we prepare for the launch of the third
network.”
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