Telecom Egypt (TE), the landline monopoly in the North African country, is reported to be considering the creation of an MVNO operation, having failed to buy Vodafone Group’s majority share in Vodafone Egypt earlier in 2010. Reuters reports that TE is looking to increase its exposure to the mobile sector in order to offset losses in its core fixed operations, which were attributed to customers substituting mobile for fixed. The company also denied that talks with Vodafone over a change of structure at the Egyptian joint venture had restarted. According to a separate report this week, the Egyptian authorities are not set to issue a fourth mobile licence before 2013, closing off this option for the company in the medium term. Vodafone Egypt is currently the second largest operator in the country.

Should TE decide to follow the MVNO path, it will be interesting to see what its strategy is with regard to the Vodafone Egypt stake. It is not clear if the Egyptian authorities will allow the company to act as an MVNO while continuing as a significant (45 percent) shareholder in a licensed operator. While Vodafone said in June 2010 that it had held talks with TE and the two had “agreed that it is in the best interest of VFE that the current ownership structure should remain in place,” it may be keen to increase its holding due to the fact that Vodafone Egypt is a profitable business. Geographically, however, the unit is somewhat isolated in Vodafone’s portfolio, with the company’s attentions being focused elsewhere. In addition, Vodafone has also been seen as more of a seller than a buyer recently, having disposed of its China Mobile holding, and with its stakes in France and Poland also believed to be up-for-grabs. Based on earlier reports which suggested that Vodafone’s 55 percent share of Vodafone Egypt is worth around US$4.4 billion, TE’s stake in the venture would be worth some US$3.6 billion.