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3™ Generation Mobile Technology Impacts on the
Profitability: A Systems Dynamic Approach
Adel Bishara
Vodafone Egypt,
MBA Graduate, Maastricht School of Management, The Netherlands
adel.bishara@ vodafone.com
Khaled Wahba
Assistant Professor, Systems and Biomedical Engineering Department
Faculty of Engineering, Cairo University, Egypt
Academic A dvisor, Regional IT Institute, Cairo, Egypt
Tel: +2 02 737 6006, Fax: +2 02 739 1380
Khaled.wahba@ riti.org
Abstract
Mobile operators in Egypt are facing a number of challenges due to the decline of the
average revenue per user combined with local currency devaluation yielding to a difficult
business position. Additionally, the ongoing competition between the existing two
operators MobiNil since 1997 and Vodafone Egypt since 1998, the challenges are
mounting. The competition adds more pressures on existing operators to differentiate
their services and introduce innovative solutions to maintain their competitive edge.
Therefore, newly diffused technologies with diversified revenue channels are needed.
This paper documents the findings of a study conducted in 2003 investigating the
possibility of using the 3° Generation mobile services as a tool for generating additional
revenues and accordingly profits to mobile operators. To support the findings a system
dynamics approach has been conducted to capture the dynamics of the current industry to
help explain its profitability.
Introduction
The explosion of new competition, the liberalization of markets, the globalization of
many leading players, the steady downward pressure on the price of basic telecom and
the imminent virtual ‘commoditisation’ of voice traffic. All these factors contribute to a
highly volatile industrial environment where strategic agility would seem to have more
value than long-term planning. But, in spite of all the uncertainties, operators really have
no option but to make long-term commitments and massive long-term investment
decisions, driven by the inexorable emergence of new mobile technologies. Second
generation mobile WAP (Wireless Application Protocol) devices have rapidly gained
mainstream status in most developed markets and value-added services are appearing to
exploit 2G’s admittedly rather limited data capability. The latest wave of change is
imminent in the shape of ‘Next Generation’ (sometimes referred to as 2.5G) services.
Enabling technologies like GPRS and EDGE will arrive in many markets at the tum of
the year, transforming the speed and volume of data flowing across wireless networks,
opening the way for operators to offer true IP-based data services. However, all this will
pale into insignificance when, in about 2002 - 2003, 3G services will start to become an
established part of life through most of the developed world. 3G will offer the kind of
bandwidth that was, until recently, undreamed of in a mobile environment and will allow
operators to compete realistically in the mainstream Intemet marketplace.
Adding to the above that the telecommunications world is changing as the trends of
media convergence, industry consolidation, Internet and Internet Protocol (IP)
technologies and mobile communications collide into one. Significant change will be
bought about by this rapid evolution in technology, with Third Generation Mobile
Technology a radical departure from that came before in the first and even the second
generations of mobile technology in a way that:
The people will look at their mobile phone as much as they hold it to their ear. As
such, 3G will be less safe than previous generations- because television and other
multimedia services tend to attract attention to themselves- instead of hands-free
kits, we will need eyes-free kits.
Data (‘non-voice') uses of 3G will be as important as and very different from the
traditional voice business.
The mobile phone will be used as an integral part of the majority of people's lives-
it will not be an added accessory but a core part of how they conduct their daily
lives. The mobile phone will become akin to a remote control or magic wand that
lets people do what they want when they want.
Many media and Intemet companies have shown a strong interest in using 3G
technology as a new channel to distribute heir content, opening the opportunity
for new entrants and new partnerships and value chains.
Nevertheless, there is uncertainty and the fear of displacement. Third Generation (3G)
mobile is topical and contentious for several reasons:
3G licenses have been awarded around the world, in many cases at huge cost,
necessitating that existing mobile communications companies in the 2G world
think about and justify their continued existence.
Because the nature and form of mobile communications is so radically changed,
many people do not understand how to make money in the non-voice world, and
do not understand their role in it, especially in the Egyptian market as the VAS
applications didn’t succeed in changing this perception.
Many industry analysts and other pundits have questioned the retum on an
investment in 3G technology- questioning whether network operators will be able
to eam an adequate retum on the capital deployed in acquiring and rolling out a
3G network.
Problem Statement
Due to the expected decline of the voice revenues and the appearance of a new potential
competitor, the mobile operators in Egypt are forced to think of new ways to differentiate
in their products and services’ portfolio. The devaluation of the Egyptian pound against
the American dollar has also its negative impact on the Average Revenue Per user
(ARPU) of the mobile operators in Egypt. This fact also is forcing the mobile operators to
think of new ways to increase the ARPU and hence their profitability. The appearance of
the 3G services in the world, following to the mobile industry boom, has created new
opportunities for the mobile operators to be provided for both business and private users
sector. The mobile operators in Egypt will have to evaluate the effect of introducing the
3G applications to the Egyptian market.
Research Objective
The purpose of this analytical study is to understand the possibility of introducing the 3G
services in the Egyptian market and its impact on the subscribers’ demand and the
profitability of the mobile operators in Egypt. In this research, the impact of the 3G
services will be defined generally as the possible change in the demand of mobile
services as reflection to the introduction of the 3G services that will create new revenue
channels for the operators and that will eventually affect their profitability. The
researchers will tests the willingness of the potential 3G users, either corporate or
individuals, in order to evaluate the expected demand on the 3G services and hence the
average revenue per user.
Theoretical Framework
Throughout the research, the impact of launching the 3G services in the Egyptian market
will be measured through the change in subscribers’ demand. The introduction of 3G
services will be considered as the independent variable. The dependant variable, which is
the profitability of the mobile operators in Egypt, will be defined as the profit generated
to the mobile operators after launching the 3G services. The following diagram shows the
relation between the dependant, independent and the moderating variables.
Third Generation Services Forecasts
Below are some key findings that have been forecasted for the Mobile Third Generation
Technology:
- By 2010, the average 3G subscribers will spend around $30 per month on 3G data
services. (umtsforum., 2002)
By 2010, the additional revenue from 3G data services, assuming only 28%
penetration into the worldwide mobile base, will add $9 per month to total
worldwide cellular ARPU. (umtsforum., 2002)
Advertising and transaction revenues are a new source of income for the 3G
operator, representing almost 20% of revenue ($60 billion). In addition, these new
revenue sources provide an opportunity to strengthen relationships with users.
(umtsforum., 2002)
Both business and consumer market segments are forecast to have significant
revenue potential, with the consumer segment contributing about 65% of the
revenue on a worldwide basis. (umtsforum., 2002)
Throughout the forecast period, Customized Infotainment is the earliest and single
largest revenue opportunity among the forecast services, contributing $86 billion
in 2010. (umtsforum., 2002)
Subscribers’
demand
Profitability
User perception
Availability of
Extrinsic capital expenditure
motivation on Value of Egyptian
the 3G pound
Intrinsic Variety of
applications
Regulatory rules
Billing methods
Socio-economic factors
Educational level
Income level
Demographic factors
- Age
Gender
3G awareness
Dependant/Independent
variables
Moderating variables
Figure 1 - Research Theoretical Framework
Non-voice service revenues will overtake voice revenues in the 3G environment
by 2004 and comprise 66% of 3G service revenues in 2010. (umtsforum., 2002)
Simple Voice services will remain a vital component of an operator’s service
portfolio, contributing 34% of total 3G revenue in 2010. (umtsforum., 2002).
Asia Pacific represents the single largest total revenue opportunity ($120 billion
in 2010). (umtsforum., 2002).
With the exception of some Latin American countries, most countries in the Rest
of World region will still be in the first few years of service penetration by 2010.
Therefore, revenues from all services for this region are small, contributing only
10% ($33 billion) of worldwide 3G revenues in 2010, but with significant
potential beyond the forecast period. (umtsforum., 2002).
Rich Voice services such as consumer videophone and multimedia conferencing,
contribute around 7% ($21 billion) of total 3G revenue by 2010, but are expected
to increase significantly in the years beyond the forecast period. (umtsforum.,
2002).
Over time, user expectations for the superior connection speeds will be even
higher than they are today. (Telecompetition Inc, 2001)
These are the worldwide revenue forecasts for each service category, including all the
potential 3G services which are: Customized Infotainment, Mobile Internet Access,
Multimedia Messaging Service, Location-Based Services, Simple Voice, and Rich Voice.
Table 1 lists these forecasts:
Summary of worldwide revenues for 3G services - 2001-2010
2001 2002 |2003 |2004 |2005 |2006 |2007 |2008 [2009 [2010
Revenues ($B)
Customized Infotainment 0 0.7. {5.8 |11.2 17.8 |31.9 [48.1 [53.7 [64.3 [85.8
Mobile Intranet/Extranet access _|0 0.9 [3.1 [5.9 |8.5 [15.3 [23.6 [34.1 [47.4 [60.7
Multimedia messaging 0 0.2 {16 (36 [5.1 {88 [11.8 [13.2 [154 [17.8
Service (Consumer)
Mobile intemet A ccess 0 0.2 (08 [15 |2.2 [3.9 [6 8.7 (9.6 [14.2
Multimedia messaging 0 0 04 (09 [22 [5.7 [10.3 ]16.5 [22.2 [25
Service (Business)
Location-Based services 0 0 0.7 [18 [2.7 [3.9 [58 [68 [7.8 [9.9
Rich voice 0 0 0 01 (07 [14 [42 [81 [13.6 [20.8
Simple voice Ca 64 [12.4 [18.6 [36.3 [54.2 [60.2 [72.3 [87.8
Total 0.1 [3 18.8 [37.4 [57.8 [107 [164 [201 [253 [322
Table 1 - Worldwide Revenues for the 3G Services
Regional Forecasts F or All 3G Services
Revenue forecasts and projected mix of mobile services differ from one region of the
world to another region. These variations stem from differences in demographics, current
state of fixed network services, mobile services, Internet penetration, and user experience
from current services and future expectations. In addition, country level assumptions
were made on service commercialisation dates based on known action plans and/or
estimates of mobility infrastructure plans. Regional forecasts divide the world into four
regions: Europe, Asia Pacific, North America and Rest of World. Rest of World includes
primarily Latin America and Africa. The forecast revenues by region in 2010 show that
Source: Telecompetition Inc February 2001
for Asia Pacific all the 3G services revenues will be about 85 billion $, while for the
simple voice it will count about 35 billion $. For Europe the forecasted revenues that will
be generated from all the 3G services are about 72 billion $ while that for the simple
voice is expected to be about 28 billion $. For north America the forecasts for the 3G
revenues are 51 billion $ and that of the simple voice will be 19 billion $. Finally the
expected revenues from the rest of the world are about 25 billion $ and that for the simple
voice will be 12 billion $.
The revenue-forecast picture in different parts of the Rest of World region is very mixed.
There are some very rich oil producing countries in the Middle East with a high GDP. On
the other hand there are some very poor countries with no political stability ad a very
poor economic situation with little telecommunications infrastructure. “It was assumed
that a large portion of the countries in this region would not commercialize any 3G
services until after 2007” (Telecompetition Inc, 2001).
The Mobile Industry in Egypt
The telecommunications industry is continuously changing as the trends of media
convergence; industry consolidation, Internet and Intemet Protocol technologies and
mobile communications collide into one (American Chamber of Commerce in Egypt,
2001).
With the introduction of 3" Generation Mobile Technology Services more rapid
evolution is expected. The service should be launched in Egypt in 2006 pending a
massive effort and requirements provision from different players in the industry in the
years to come. The telecommunications sector reform program undertaken by the
govemment in recent years has encouraged uplifting Tele-density and user’s intensity.
Moreover, the telecommunication network has been modemized and enhanced very
rapidly. Telecom Egypt has been aiming to add one million telephone lines each year
from 1999 to 2002, which would cost an approximate 1 billion US dollars annually
(International Telecommunications Union, 2001). The number of fixed lines subscribers
reached 8.3 million taking the Tele-density to 12.1% i.e. one line for every 12 citizens
(Fahmi, 2003).
The mobile industry penetrated the market in Egypt with the first global system for
mobiles (GSM) network in November 1996 by Telecom Egypt then it was sold to the
Egyptian Company for Mobile Services (MobiNil) in April 1998, which launched its
services one month later. MobiNil (a consortium of Egypt's Orascom Telecom, Al-
Ahram Press Group, Motorola’s agent Systel and Alcatel’s agent in Egypt in addition to
the United State’s Motorola and France Telecom Mobile Intemational) paid
approximately 470 million US dollars in May 1998 to obtain the license from Telecom
Egypt (Economist Intelligence Unit, 2001). The second operator is Vodafone Egypt,
founded in November 1998 as Misrfone Telecommunications S.A.E (a consortium of the
UK’s Vodafone, the world’s largest mobile communications company, the UK’s Mobile
Systems International, Frances’ CGSAT, Egypt's Banque du Caire, Investment House
EFG-Hermes and the Alkan Group). In 1999, the company bought the license for 468
million US dollars (El Bakry, 2003). Both companies (MobiNil and Vodafone Egypt)
were guaranteed of market exclusivity until the end of 2002. This agreement with the
government, has led both companies to benefit from a monthly growing subscribers ratio
of around 1.43% per company (El Bakry, 2002). However, with the ongoing
developments of the sector and with the need to maximize quality and increase
competition for better service provision, the minister of communications and information
technology announced the purchase by Telecom Egypt of the 3" mobile operator's
license. The new company labelled (Wataneya) is expected to go live in the 4 quarter in
2004 (El Bakry, 2003). There are a lot of potentials perceived for Wataneya in specific
and for the mobile market in Egypt at large with a country of 70 million people (60% of
whom are under the age of 30) and a mobile penetration rate of 6% as announced by the
chairman of Telecom Egypt (El Bakry, 2003). Table 2 demonstrates the growth of the
sector between 1999 and 2003.
Item October | January 2003 | Increase %
1999
FxChanges Capacity in million 64mline | 10.3mline 61%
ines
Fixed Line Subscribers in million 4.9 77 57%
Waiting Line in million 1.265 m 200,000 -84.20%
Suburb exchanges 775 1008 31%
Mobile Subscribers 654,000 4.5 mil 588%
Payphone 13,300 48,000 261%
No of operational Intemational 6,130 11,900 94%
Circuits
Intemet Users 300,000 1,700,000 466%
Intemational Intemet Bandwidth 20 Mbps 850 Mpbs 4150%
Table 2 - Egypt Telecommunications Figures [1999-2003]
Source: www.mcit.gov.eg (2003)
The structure of the mobile services in Egypt is expected to change as soon as the
government launches the 3° operator (Wataneya) through Telecom Egypt. Table 3 shows
the evolution of the mobile service (Pyramids Research, 2000). Moreover, due to the
expected decline of the voice revenues and the appearance of Wataneya, mobile operators
in Egypt are forced to think of new ways to differentiate their products and services
portfolio. Moreover, the devaluation of the Egyptian pound had also its negative impact
on the average revenue per user. Both factors were forcing mobile operators to find new
solutions to improve their profitability and the innovation of 3G services created new
opportunities for mobile operators. Throughout the study, the impact of launching 3G
services in the market is measured through the change in subscribers’ demand and
profitability is measured as the percentage delta change of the expected average revenues
before and after launching 3G services.
1996 | 1997 | 1998 | 1999 | 2000 | 2001 | 2002 | 2003 | 2004
Mobile Subscribers (000) 27 83 177 | 877 | 1,578 | 2,281 | 3,541 | 3,951 | 5,531
Penetration 0 0.13 | 0.28 | 136) 2.4 | 3.41 | 4.37 ) 5.34 ) 7.35
Revenues (Million US$) 13 50 101 _| 281 | 598 | 912 | 1,132 | 1,320 | 1.738
Table 3 - Mobile Services Evolution
Source: Pyramids Research, 2000
The Egyptian mobile market is infatuated with prepaid services, which was introduced by
Vodafone Egypt in December 1998, and followed a month later by MobiNil with prepaid
services in the market accounting for more than 85% of subscribers (Pyramids Research,
2000). By 2004 the mobile market in Egypt is expected to exceed 5.5 million subscribers
and prepaid subscribers are expected to account for 62% of the total added subscribers.
Study Design and Methodology
In order to test the effects of launching the 3° Generation Mobile services on profitability
for different mobile operators, it was important to formulate the theoretical framework of
the study which included (a) the dependent variable which is the profitability of mobile
operators; (b) the independent variable which is the response of the GSM market in terms
of subscribers demand; (c) the moderating variables which include the billing model, the
demographic factors, the socio-economic factors, the mobile awareness, the availability
of capital expenditure budget, the currency value, the regulatory rules and the variety of
applications available. The study is qualitative in nature with a set of interviews
conducted and a questionnaire that was distributed to a sample of 260 mobile subscribers
based on convenience sampling. Questionnaires were used to measure the research
variables related to the consumer response towards launching the 3G services. Interviews
were conducted with three multinationals in the telecommunications industry
representing operators and suppliers in the market as well as key personnel in the
industry.
Data Analysis
The study questionnaire was distributed in the cities of Cairo, Port Said and Alexandria
among potential persons at universities, companies and in some public places. The total
size of the sample used was 260 representing around 0.007% of the total active
population of mobile users in Egypt. The distribution of the sample was 31% for age
bracket 13 to 25; 39% (26 to 40) and 21% (41 to 60) 9% older than 60 years. Findings
showed that 3G services will be of higher potential among the younger generation. 62%
of the samples were males. In terms of level of education, 20% had completed their post-
graduate studies, 64% had university degrees and the rest were enrolled in schools. With
respect to the income level, about 16% were without income (high school or less) or
graduates unemployed. Almost 88% were mobile users while 12% were not using
mobiles in their daily lives. Findings also indicated that most mobile users were coming
from the middle class, which has an average annual income of around 2,600 US dollars.
Among the 88% using mobiles only 58% were aware of all the services offered from the
operators. Findings also indicated that around 70% were post paid subscribers, 30% of
which were business subscribers and 40% were individual subscribers. In terms of daily
usage, only 27% of the sample was using mobiles for less than 10 minutes a day, while
39% used it more than 30 minutes a day, while about 17% used it more than 1 hour a day.
Such figures indicate that users depend on their mobiles more than just being a pager tool
or as a short messaging service. Around 57% were aware of 3G services and around 28%
perceived it extremely useful while 47% felt it was somehow useful. In terms of payment
and billing methods, 62% preferred post paid accounts and 50% favoured a billing
method that was based on volume of data while 27% favoured billing based on
connection time.
The analysis of the findings indicate that mobile operators need to put a number of
elements into consideration including (a) focusing more on the youth segment, as they are
highly affected by 3G services and have shown great interest in it which can be done
through conducting various promotional campaigns; (b) focusing on university and
graduate students to make a great use of their positive perception towards the 3G with
average annual income of 3,700 US dollars. These issues will be important for mobile
operators when setting their strategies and business plans.
A System Dynamics Perspective
The findings of the analysis encouraged simulating the different research variables b be
able to make a better use of the data collected through predicting its degree of affection
on each other within a specific time frame. A system dynamics approach (Sterman, 2000)
has been conducted to help conceptualise the current situation and capture the most
important drivers for the operator's profitability. In that respect, developing a causal loop
framework (mental model) with the first loop (reinforcing loop) addressing the demand,
it is important to note that profitability positively affects the advertising budget where if
profitability increases, the advertising budget increases accordingly. Therefore, having a
relatively high advertising budget encourages operators to launch new campaigns for
different services and products. However, the cost of one campaign affects the number of
campaigns launched negatively and the number of campaigns as opposed to having only
one campaign affects positively the users’ awareness for 3G technology; respectively,
when awareness increases, the positive users’ peception towards 3G technology
increases. Moreover, age, the education level and the average annual income have their
positive effect on users’ perception, which in tum positively affects subscribers’ demand.
Additionally, subscribers’ demand is positively affected with the variety of billing
methods and the additional services launched in the market. While it can be affected
negatively with the tariff structure, the quality of substitute and the demand for a new
technology, which can be the 4G (for exampk), this exogenous variable damps the
subscriber demand for 3G services after about 4 years from launching. The subscribers’
demand affects positively the revenues generated from 3G services and revenues
accordingly affect directly the profitability.
The second reinforcing loop being service, profitability affects positively the expected
expenditure that enables operators to launch new services in the market; therefore,
expenditures affect directly the additional services where the cost of additional services
affects the trend of launching new services. In this model, there are two main loops, both
are positive reinforced loops. Figure 1 show both demand and service causal loops.
Translating the above causal loops into a stock and flow representation using the
STELLA software can give meaningful expectations for the users’ perception, subscriber
demand and revenues that can be generated from launching the 3G services in the market.
It can also simulate the expected response of the users’ perception, subscriber demand
and revenues with the change of any of the variables including age, annual income,
educational level, tariff, quality of substitute, 3G awareness, cost of additional service
and campaign effect.
Educational
Ag, Income Level
J
a 7 y
Not Le —
OT ee
Demand for Positive Users Avwensanes” —
mew
Techrology Perception ®
Tasiff / a *
Quityr \ ft { ‘ }
substitute SS \ - }
\ A Subecribers \ co
Pilmg Demand ae
Metheds — Faye sae y 1 x
Sa Cost of
/ Advertisi ipaigns
{ Revenues + Budgt © om
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/
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om Saviees { baa ) /
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Figure 2 - Demand-Service Causal Loops Diagram
The expected response during a period of about 6.5 years could be one of three scenarios
as shown in figures 3, 4 & 5. (a) If conditions are normal, then during the first 20 months,
the users’ perception, subscriber demand, and revenues will increase exponentially
because they are located in a reinforced loop as shown in figure 1. Starting from the 20
month onwards, these variables will start to saturate for about 25 months before starting
to decline due to the interference of a new technology that might be 4G technologies (for
example). This new technology will generate a different perception and accordingly will
affect the users’ perception for the old technology as well its demand and revenues
generated representing the life cycle of 3G technology. (b) If conditions are pre-eminent
the tariff will be 1 unit, availability of 6 different billing methods, cost of 1 additional
service is 1 unit only, campaign effect is 3 units, cost of campaign is 1 unit and quality of
substitute is the least. (c) It conditions are worst, the scenario could be negative for
mobile operators if the tariff is 5 units, billing methods available are limited to 1 method,
the quality of the substitute will be the best, the campaigns for 3G services will be of
minor effect on the customers. Respectively, the cost of the additional service will be 10
and the cost of campaign will be 3 units.
709010
Figure 4 - Expected Response from the Stella Model in the Preeminent C onditions
@ 1: Subscribers demand
eC fatnoononds eee
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41800000
sone
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717826,
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2) hp ea es a es —— a
0.00 20.00 40.00 60.00 80.00
Neat Graph 1: p1 (Revenues) Time 00:046 21 0,,, 2003
Figure 5 - Expected Response from the Stella Model in the Worst C onditions
Study Findings
With respect to the effects of socio-economic and demographic factors on customer
perception and the usefulness of 3G services, the findings show that the age factor has its
effect on customer perception towards the usefulness of 3G where the 13-25 years
category have shown great interest while the above 60 years category showed the least
interest with no expected usefulness for the services.
1
z
Es
4
With respect to gender, it was equally balanced with same perception for the 3G services
as being useful. In terms of the educational level and average annual income, post
graduate study holders were more interested than university degree holders and with
respect to average annual income, the (no income) category were highly supportive to the
service while the 2,600 US dollars annual income salary (middle class) category where
less interested.
Findings also show that willingness to subscribe to 3G services is highly affected by age
reaching almost 79% among the youth and as low as 4% for people over 60 years. There
is also a clear relation between the level of education and the demand for 3G services.
Respectively, for the post graduate category 55% were willing to subscribe while for the
university degree and high school category students it varied between 72% and 80%.
With respect to the income level, the (no income) category it recorded a high demand for
3G subscription, 93% of this category is from the youth segment while the other
categories had a moderate demand except for the category making more than 9,000 US
dollar per year which had relatively low demand if compared with the no income
category. The reason is that most of the high-income category is over 60 years old. With
respect to gender distribution and willingness to subscribe to 3G services, there is a slight
difference between the responses of males and females towards launching 3G services as
for mobile and 3G awareness, mobile awareness strongly affects the demand for 3G
services and encourages the willingness towards 3G subscription and the same occurs for
3G awareness where people who are aware of 3G technology and willing to subscribe to
3G services are about 75% while those who are not aware with 3G services and willing to
subscribe are about 20%.
It is important to note that the variety of application may have a great effect on 3G
demand. The findings show that around 91% will be using all 6 services offered by the
operators and only 7% will be using 1 service indicating that the more the services
offered the more the willingness to subscribe will increase; respectively showing that the
variety of applications strongly affects the demand for 3G services. With respect to
billing methods and its effects on 3G subscription willingness, the findings show that if
the billing method will depend on the volume of data, this will affect positively the
demand for 3G services and that subscription willingness can go up to 95%, however if
the billing method will depend on the connection time the subscription willingness can
reach 67%.
Conclusions
The 3G technology will be launched in Egypt by 2005 and requires massive efforts from
the different players in the industry. The market has much potential for such technology.
(a) In terms of profitability, although there is a high demand for 3G technology and its
applications (78%) with a good perception for its usefulness and (81%) willingness to
subscribe for 3G services, the expected increase in the average revenues will vary
between 12% to 16% having in mind that such increase is pending the provision of all 6
3G services. This range is needed to breakeven. Respectively, it is fair to say that the
expected profitability is relatively low.
(b) In terms of youth demand, about 82% of the potential 3G users in Egypt are below 40
years old, while 42% of the total sample belongs to the youth category. Moreover, 70%
of the sample surveyed has a good perception on the usefulness of 3G services, which
gives a strong push to their subscription willingness, in which the younger generations
showed more interest and willingness to subscribe with an average of 65%.
(c) In terms of gender perception, there was no effect on the users’ perception towards 3G
applications based on gender.
(d) In terms of education level, the users’ perception relatively changes from one
educational level to another. In general, more than 50% at each level have a good
perception towards 3G applications with 68%, 89% and 76% are the perception
averages for post graduate, university degree and high school categories as for their
willingness to subscribe in any of the 3G services, willingness percentages of all
segments ranged from 55% for postgraduates to 80% for the university students.
(e) In terms of income level, there is a good perception towards 3G services and it can be
normally distributed, except for the no income category which is high as the youth
segment represents most of this category and the same also can be noticed for the
willingness for 3G subscription.
(f) In terms of 3G awareness, 57% are aware of 3G technology and services amongst
which 75% are willing to subscribe and 20% of those who are not aware with the 3G
services are willing to subscribe.
(g) In terms of sense of security, 71% of those who are willing to subscribe to 3G
services are not feeling secure with it while 89% of those not willing to subscribe are
also not feeling secure which showed the irrelevance of the sense of security.
(h) In terms of billing methods, 50% of potential 3G users have asked to be charged
according to the volume of data downloaded or uploaded or transferred while 27%
have asked to be charged by time of connection and 23% on volume of data
depending on the application used. Respectively, the variety of the billing methods
affects the willingness to subscribe to 3G services.
(i) In terms of variety of applications, 61% of potential 3G subscribers are requesting
more 3 3G services or applications pointing to the fact that the market is keen to try
new technologies rather than some specific applications.
References
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Economist Intelligence Unit (2001) Statistics on Information and Communication
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El Bakry, R (2002) Does Not Compute, Business Today, October.
El Bakry, R (2003) Targets: Acquired, Business Today, February.
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