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Emerald Emerging Markets Case Studies

Vodafone Egypt (B), managing corporate cultural change and organizational performance
Harold Dennis Harlow,
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Emerald Emerging Markets Case Studies, Vol. 6 Issue: 4, pp.1-17, https://doi.org/10.1108/EEMCS-07-2013-0141
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Vodafone Egypt (B), managing
corporate cultural change and
organizational performance
Harold Dennis Harlow
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Harold Dennis Harlow is Introduction


Associate Professor at
the Department of This case study describes integration of Vodafone Egypt into the cultural value system of
Management, Wingate Vodafone corporate and systems used to make that transition and covers the period of
University, Wingate, North 2003-2008. The data for the case come from a presentation by CEO Ian Gray to the
Carolina, USA. Egyptian Human Resources Association and an interview with Hatem Dowidar, the new
Egyptian CEO appointed in 2007. Industry reports and general business publications as
well as company public information from their annual reports were used to present the
financials, human resources approaches and corporate strategy.
The primary focus of the case is how the corporate culture of a global firm like Vodafone
was introduced and adopted by local employees and how principles of global talent
management (Stahl et al., 2012) were key to the success of the enterprise business
outcomes as well as the decisions that Hatem must now make, as he transitioned the
company from CEO Grays approach to his approach. Hatem was not apprehensive but
excited by the opportunity. His career progress at Vodafone had been fast with increasingly
greater managerial roles beginning in 1999. Hatem had clear ideas of reforming the
company to be more customer focused and to compete as the market turned very
competitive in Egypt with the arrival of Etilsalat as the third competitor. Change was his
forte, and making the company cultural changes from British CEO to Egyptian CEO had
many potential obstacles. The concentration on the internal organization of the company
and building capability would now have to turn to a customer oriented approach and
accompanying internal systems to make that leap (Dowider, 2008).

Vodafones strategic overview


At the time of Egyptian market entry in 1998, Vodafone was the largest operator of mobile
networks in the world with over 70 countries within its corporate umbrella (Merrill Lynch,
1999). Over 90 per cent of Vodafones assets of approximately US$200bn are located
outside their home country of the United Kingdom (Economist, 2009). The Vodafone global
business strategy is to provide mobile phone network connections both nationally and
internationally to customers consumers and businesses in developing and developed
countries globally at competitive rates with suitable technology and consumer-driven
Disclaimer. This case is written products. Their goal is to be one of the top network survivors, as the market consolidates
solely for educational
purposes and is not intended
globally, and they have acquired large rivals such as Mannesmann to drive economies of
to represent successful or scale and become the dominate mobile operator in Europe (Kedia, 2003). Their revenue is
unsuccessful managerial
decision-making. The authors
mostly from airtime revenues, and they have close relationships with network equipment
may have disguised names; providers and mobile phone makers such as Nokia, Motorola and LG which are the top
financial and other
recognizable information to
three handset manufacturers in the world by market share in the world (Economist, 2007a,
protect confidentiality. 2007b, 2007c). Capacity, numbers of and quality of subscribers and quality coverage are

DOI 10.1108/EEMCS-07-2013-0141 VOL. 6 NO. 4 2016, pp. 1-17, Emerald Group Publishing Limited, ISSN 2045-0621 EMERALD EMERGING MARKETS CASE STUDIES PAGE 1
key metrics for network operators. In addition, customer churn[1] is also a consideration, as
this parameter directly affects their customer acquisition and retention costs.
Availability of educated engineers and managers was a key concern. Egypt has a higher
education system that frequently turns out more graduates than jobs in engineering and IT.
While many of these graduates lack skills needed at multi-nationals, some Egyptian
universities were excellent sources of trained English-speaking technical employees. The
Vodafone human resources plan was to attract and hire only the best talent and to pay them
better wages than local companies, while offering opportunity for advancement and career
growth. Gaining employee commitment in a fast-changing technical environment would be
crucial to Vodafones success (Rankin, 2013). The company and the technology was new
experienced engineers and managers were in short supply because of the Mobinil market
entry which preceded the Vodafone investment and a human resource strategy of training
new staff and younger employees and growing them into the positions was crucial to
Vodafones business success. Business and technical management resources needed to
enter Egypt at that time were available at Vodafone headquarters and in units throughout
the world. Management and technical staff could be assigned to this project from Vodafone
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units and would be able to see it through to its conclusion while leading and training local
staff.

Vodafone Egypts cultural transformation


Social demography in Egypt includes the dominance of Islam in the culture. Although 10
per cent of the population is Coptic Christian, the majority of citizens are Muslim, and this
means that the culture is homogeneous. This has several business impacts including
numerous religious holidays (workers may, by custom, take both Christian and Muslim
holidays), impact on the availability and desirability of women co-workers, prayer five times
per day and a great deal of social consciousness among the general population. Work
rules and treatment of staff are often quite different than in the West because of religious
and social constructs that family matters are primary with societal rules of conduct
overseeing laws and regulations. Women have a different perceived place in the society
and are expected to behave in very conservative fashion at work and in social settings.
While not as restrictive as Saudi Arabia, the various cultural customs and practices made
it more difficult than in other Vodafone operations to hire the best talent and maintain
diversity. It should be noted that Christian women are no less conservative and that social
conservatism is more Egyptian than religious. Work hours are also regulated as are work
terms through employment contracts between employee and employer.
Ian knew that some Vodafone corporate values were already part of the operation when he
took over as CEO in 2002 (Hope and Hendry, 1995). His unease was caused because of
his lack of international operational experience and this assignment in a non-familiar
culture. He knew he would have to act to gain understanding of local culture and
motivations while using the Vodafone value orientation approach that had been used
successfully in many countries. He reviewed the purposes, strategies and values he
wanted to incorporate and thought of various training and measurement programs that
might instill those values into Vodafone Egypts employees.
The following core purposes, business strategy and metrics for factors for success
(Viinamki, 2012) were developed by Ian and the Vodafone executive staff for new
initiatives that coincided with Ians appointment as CEO in 2002:
Vodafone Egypt core purpose: To connect people and communities to enhance the
development of Egypt.
Business level strategy: Build network, gain market share, maintain market share and
revenues while maintaining profitable growth based on value and differentiation.

PAGE 2 EMERALD EMERGING MARKETS CASE STUDIES VOL. 6 NO. 4 2016


Metrics: Recognize where you are on the growth curve to realistically assess your
position. Vodafones success in Egypt is measured against Mobinil, macro effects and
our unique business strategy (Gray, 2007).
Although many of these operating principles had been in effect under the prior
management, Vodafones push to make over the company by raising its investment and
assigning key managers meant that sticking to the stated primary goals would be important
to achieve a lasting transition to the Vodafone corporate operational and cultural approach.
This transition to Vodafones approach to performance management (Glendinning, 2002)
had been honed in numerous other enterprises and operational changes under the
leadership of Vodafones top management. Use of online and company-wide online
systems for directing the development of staff had been used as a tool of Vodafone
performance management in addition to 360 reviews and constant training and
performance review with employees. Online performance management systems were
gaining in popularity, and Vodafones far-ranging businesses required a centralized system
(Neely, 2002).
Making the transition to a stable Vodafone culture would be a difficult managerial goal,
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given the tremendous growth and accompanying lack of defined processes during
2002-2004. Connecting human resource practices and strategic outcomes was particularly
important because mistakes in interpretation by young aggressive managers were
inevitable, and guiding principles were often thought of as simply rough guidelines, not as
the way we do things here (Boselie et al., 2005). This had to change to further Vodafones
investment goals in Egypt. The following are the business level strategies and outcomes
needed by Vodafone Egypt:
The primary Vodafones strategy is profitable growth. Vodafone has developed a
business model with a pricing policy that Vodafone will not always offer the lowest price
nor will it continuously try to meet competitors offers on price (Gray, 2007). Value and
benefit to the customer are a key focus to implement this strategy. There is still
tremendous market growth with many new subscribers added each month, and this
profitable growth at an appropriate cost will be the key to Vodafones future success in
Egypt. Adjacent markets in international calling and services are also targeted but only
when Vodafone has a clear competitive advantage in cost or differentiated products.
For example, Vodafone is developing IT solutions that make their customer service the
best in Egypt and can be used throughout the Vodafone family of companies both
internally and externally as a customer interface (Gray, 2007).
The second Vodafone strategy is establishing brand preference. Vodafone uses
network quality and coverage, being first to market with key products, excellence in
customer service and brand relevance to Egypt as means to develop brand
preference. When high value customers travel outside Egypt, their connectivity options
and access to the global network drive brand identification and loyalty, and they
choose Vodafone because of its global presence. This has a carry-back effect to the
Egyptian market, as Vodafone is perceived (like Mercedes and BMW) to offer higher
product quality and service and is more of a high-end choice for mobile service.
The third Vodafone strategy is cost containment and use of group synergies. This
means using technical, managerial, marketing and financial resources of the group to
create synergies and thus add more value in Vodafone Egypt activities. It
encompasses having a culture of cost containment as well as a no compromise on
quality approach. This strategy is used throughout Vodafones companies to develop
a high degree of cost awareness and focus in all activities. Whenever possible, group
knowledge is used to solve complex technical and management problems with
systems and group developed expertise.
The final Vodafone strategy is to have superior management capability. To create the
culture of a new company requires a climate, competence and capacity to accomplish

VOL. 6 NO. 4 2016 EMERALD EMERGING MARKETS CASE STUDIES PAGE 3


the tasks at hand, a strong management team, hiring the best Egyptian employees and
using foreign employees to transfer their knowledge to younger staff. In addition,
Vodafone has strong management development programs with a strong emphasis on
management and technical training. Vodafones business is in a fast-changing and
complex environment, and developing managers who are able to make good decisions
in this highly turbulent global market enable this strategy. These strategies are
summarized in Table I.
Of these important strategies, the most important is developing management capability
(Ansoff, 1992), and this strategy drives the operations. In the case of Vodafone Egypt, the
wild-west atmosphere of a startup company in a developing world would have to change
to one of a customer focused, brand equity-creating mature operation. This would
necessitate the imposition of the global Vodafone culture on the Vodafone Egypt workforce.
This would turn out to be a major challenge as Ian planned his talent development goals for
the next few years. The change in attitudes and focus would drive the organization (Bartlett
and Ghoshal, 2013).
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Vodafone Egypts corporate culture (behavior)


As Ian Gray prepared to begin work in Egypt in 2002, he knew that the business challenge
was less urgent than the challenge of bringing the Vodafone corporate culture to Egypt. He
was not aware of Egypts culture, and he had limited international experience; he knew that
his company could not continue to succeed without a major corporate program to bring
Egyptian employees in line with the rest of Vodafones global organization and culture. The
early decision to make the company an Egyptian company with few expatriates and mostly
Egyptian managers was a modest success and demonstrated that a localization strategy
of entry would work in the early market stages. Mohammed El-Hammamsy, founding CEO
of Click GSM, the operating company that preceded Vodafones use of its brand, had made
a good start with the initial network build-out and hiring spree, but the company still was not
moving as fast as it needed to deliver superior returns expected from shareholders. The
prior ad hoc culture that predominated at Vodafone would have to change.
Ian prepared his plan to incorporate the commitment and vigor of local employees within
the value structure of Vodafone without culturally insensitivity. This plan would be explained
to current employees, and as new employees were hired, he would get their buy-in using
training, mentoring and explicit rules and policies for management. The buy-in required he
knew from previous experience was the toughest to implement in fast-growing
entrepreneurial businesses but was what was needed to bring the company to world-class
Vodafone corporate standards.

The process of change management


The operating strategies of the firm are implemented at Vodafone, as tasks are identified
and plans are developed for projects; behaviors are modified by training and skill
acquisition, and processes are used to develop consistently high standards of action by
and toward stakeholders, and finally resources are budgeted and programs begun
(Schippmann, 2013). Ian began the process of developing the Vodafone Egypt culture by
explaining first the strategies to be used and then the relationship of those strategies to key
corporate values. From there, tactics could be used to develop employees and build the
business. This conversion of strategy to operations is represented by Figure 1.

From strategy to operational plans


The Egyptian personnel
Many of the Egyptian engineers were well educated, very talented, highly motivated in a
task environment (engineers have these attitudes and behaviors as a profession globally)
and were able to effectively and efficiently apply resources to installing the network,
customer call centers and technical infrastructure of the firm (Harlow, 2011b). Ians

PAGE 4 EMERALD EMERGING MARKETS CASE STUDIES VOL. 6 NO. 4 2016


Figure 1 Strategies

Strategies

Tasks

Resourcing
Processes

 Marke t led
Behaviour Customer focused
 C ompetitor aware
 Employe e drive n

concerns of moving forward were how to develop corporate cultures and behaviors as well
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as processes (planning and work systems) to enable growth in both technical and business
areas while maintaining the initial commitment and excitement of the engineering and
management team.
Resources and task orientation were strengths of Vodafone Egypt, and Ian planned to
promote those who quickly used the strategic ideas in the business. This resulted in a large
cadre of young dynamic engineering and marketing managers who were among the first to
be trained and enabled with the corporate strategic views.
One of the first issues to be addressed was how to avoid the trap of employees looking to
the top for their decision-making. Egypt was a very hierarchical business society, and it was
assumed that the CEO at Egyptian companies made most of the important decisions.
Surveys indicate that Egyptians prefer to be directed more than others in their work
(Trompenaars and Hampden-Turner, 1998), and the society incorporates a great deal of
power distance and respect for older persons. The previous CEO had been culturally adept
in this mode, and Ian knew from his management training that Egypt ranked very high when
it came to power distance (the cultural deference of those at the bottom of the society to
expect that power is distributed unequally and tolerate those at the top making most of the
major decisions). This would have to change for Vodafone Egypt to work well with the rest
of Vodafone and for the company to perform at the level needed.

Vodafone corporate culture and Egyptian culture models of behavior


Vodafone corporate provided the model for behaviors for young Egyptian staff, but the
comparisons of the two cultures revealed a great deal of difference. Vodafone corporate
was headquartered in the UK and most senior managers were UK cultural products. Low
power distance, high individualism, high masculinity and low uncertainty avoidance typified
British managers and were in stark contrast to Egyptian cultural values of high power
distance, collectivism, moderate masculinity and high uncertainty avoidance (Hofstede,
2012).
Another key problem was how to turn Egyptians into great customer-centric employees.
Attitudes toward service in Egypt were hindered by the societal lack of service emphasis
and also by the attitude that Egyptians have indicated in surveys that they may act as they
please even though nothing is achieved (Trompenaars and Hampden-Turner, 1998). MNCs
that had entered Egypt in the past had to quickly develop ways to get employees to think
of the customer as the key to the business. Very little connection was made at large
Egyptian companies between the employees job and the customer (Trompenaars and
Hampden-Turner, 1998). This had to change for Ian to both grow the company and develop
the attitudes, belief systems and behavior needed to bring Vodafone Egypt into the
Vodafone global corporate culture.

VOL. 6 NO. 4 2016 EMERALD EMERGING MARKETS CASE STUDIES PAGE 5


As Ian continued to grow the company at breakneck speed in 2002 and 2003, it was plain
to see that the organization continued to look to him for all major decisions and even minor
decisions that would normally be handled by those further down in the organization. The
big man syndrome (person at the top makes all decisions) was in full bloom. Service was
often not the top goal of employees, and the company faced a crisis if this went
uncorrected. The company was changing from a task-oriented start-up company where
relationships where not as important as getting things done quickly into a large organization
where work processes and relationships between individuals and other organizations were
becoming a key performance attribute to assure organizational effectiveness and
efficiency. Something had to change quickly if this project was going to meet Vodafone
business goals.

The Vodafone Egypt culture change plan


Ian began developing a program that he felt would change the work patterns permanently
and coupled with other actions could begin to get Vodafone Egypt on the right corporate
cultural track. Ian needed to change the organizations pyramid of strategic thought
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toward the business. He also needed to, serve customers by looking at the pyramid from
the bottom up. Finally, he was going to, develop a customer led organization which uses
the CEO position to lead and motivate, not to make all the decisions. As he explained his
new program to his top level Egyptian and expatriate staff, he could sense the difficulties
that he was going to encounter.
Ians planned Vodafone corporate culture changes dealt with behavior toward one another
by providing the following:
open, clear and honest communication, and open door policy and open complaint
policy;
more training sessions (three days at first) for all staff in the Vodafone corporate culture,
communications and developing mutual respect through relationships training;
understanding that values must be shared across the global business; and
learning a common language about what matters to each other.
The mostly younger employees (most managers were aged 24 or 25 years) in their first
management position were a significant challenge. Very few expatriates (12 on staff) had
been hired, and this strategy was acceptable in the task environment of the first few years
but was becoming more difficult to manage as employees increasingly reverted to
culturally based behavior and attitudes toward work. Relationships were important in Egypt
and work rules were less stringent in most Egyptian companies, as managers looked at
their role as more of a keeper of the jobs than a motivator to high performance. Ian knew
that Egyptians at Vodafone needed a system and that the system was one that might
provide the solution to creating common values (Trompenaars and Hampden-Turner,
1998). Ian also realized that young managers needed seasoning to be able to manage
effectively, and this was only gained by experience or training and coaching. He decided
to assign his expatriate managers 10-12 Egyptian managers each to coach in
understanding the global rules of the game at Vodafone corporate and to develop
Vodafone values and a common language.
A corporate values-based culture manager was trained and assigned the job of developing
a Vodafone corporate culture based on the values and goals of Vodafone. This proved to
an adept way of both promoting two-way communication and developing managers who
understood that processes and procedures were important if the company was to grow and
standardize excellent management capability and customer-centric behaviors. The
manager began his work by developing a training plan and talent matrix of those managers
who accepted and promoted the Vodafone Way.

PAGE 6 EMERALD EMERGING MARKETS CASE STUDIES VOL. 6 NO. 4 2016


Processes
Ian had recognized early that relationships must be improved between system and staff
and processes must be improved as growth slowed. The task environment that consisted
of engineers and technicians installing network systems would change quickly to an
established company with most of the employees in retail, customer services and
administrative and managerial roles[2]. The explosive growth that had enabled much of the
task organization to concentrate on getting things done internally would change to an
outward focused organization which needed to concentrate on customers. This required
strong processes to provide a consistent and coherent customer message as well as
providing strong and fair human resource processes for promotion, training and career
development.

Global human resource policies


Ian implemented the global human resource policies that he felt would ensure that the best
employees were not overlooked. Egyptian companies were frequently managed by a
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relationship-only approach (who you knew and their relationship mattered most), and Ian
was determined that merit-based policies would prevail at Vodafone Egypt.
All employees were expected to develop and participate in training to provide needed skills
for future jobs. Ian influenced promotions through his talent management system so that
when openings occurred, the best trained and most highly skilled were chosen for
promotion. Promotion was a joint exercise with the input of many different managers before
the final forced ranking decision was made. Nepotism was not rewarded, and those
sponsors who attempted this were quickly counseled otherwise.
Processes to make the business function better and more efficiently were important especially
those directed at customers. Customer call centers were the primary interface to most of
Vodafone Egypts customers, and a dedicated effort was made to develop intelligence in the
information technology software to enable customer service representatives to immediately see
the customers account information and prior record of service. This was further enhanced by
the high technical and English language caliber of customer service person that were hired at
Vodafone because of the perception that Vodafone offered employees unique opportunities in
advancement and promotion.
Processes were also installed to develop better control over programs and budgets and to
track responsibilities for successes and failures more directly. In a growing company, the
mantra is simply get the job done. Vodafone wanted to change that to a more efficient and
effective get the job done with the least resources needed while competing in a different
way. These changes were resisted at every level, as the company became less of a growth
company, and more procedures were imposed on resource and budget allocations.
Nonetheless, Ian pushed through to develop this change in culture and adhere to
profitability as the key the future growth of the company.

The results
The customer-centric business model at Vodafone Egypt was a strategy to give
customers reasons other than price to choose Vodafone. This strategy was
implemented by providing better call capability with fewer dropped calls than
competitors and superior customer service while offering competitive prices for
subscription and prepaid plans. By the end of 2006, the results of Ians business
makeover from 2002 to 2006 were:
Vodafone was more profitable than Mobinil even though Mobinil has more declared
customers (55/45 per cent). Mobinil revenues do not convert as readily into profits.
Vodafone has higher margins. (Vodafone is making the most profit in the market
(60/40 per cent).

VOL. 6 NO. 4 2016 EMERALD EMERGING MARKETS CASE STUDIES PAGE 7


Strategies based on the knowledge that pricing promotion causes phone
acquisition to collapse sales later were used to avoid eating the seed corn
marketing activities.
Downward prices enticed customers to dramatically greater usage.
Vodafone reacted quickly to market response with strategies to provide a difference other
than price such as better initial service, coverage and better customer service.
Vodafones makeover apparently was a great success. Figure 2 details the results of
Vodafone Egypts free cash flow position during FY 2005/2006. This was a 100 per cent
increase over prior year 2004/2005. However, does this result simply reflect a fast-growing
market in which all participants with minimal products are successful or does it reflect
superiority in human talent? (Figure 3)

Conclusion
In the Spring of 2007, as Ian Gray prepared to move to his new Vodafone assignment as
CEO of Eastern Europe, he tallied the many accomplishments of the Vodafone Egypt team
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he had guided over the past five years from 2002. His ideas of transferring the corporate
culture using a values-based business approach had clearly worked (Jaeger, 1986). The
response of his employees and staff had overwhelmingly worked toward increasing
processes, developing a customer-centric approach and managing to profitability in a
highly competitive market (Cummings and Worley, 2014). Vodafone Egypt was recognized
as the leader in Egyptian business practices and opportunities for talent. The Vodafone Egypt
customer service department was now handling the customer calls for Vodafone Australia and

Figure 2 Free cash flow % of 100% 2005-2006

Figure 3 Vodafone free cash flow position

PAGE 8 EMERALD EMERGING MARKETS CASE STUDIES VOL. 6 NO. 4 2016


desktop support for Vodafone Europe. The advantages in technical skills and languages that
Egyptians possessed were being leveraged to create opportunities for Vodafone Egypt that not
only were creating a customer-centric environment but also were an example for other
Vodafone operations throughout the world. Strong profitable growth had replaced meager
returns and subscriber growth in high value consumers was impressive. The acceptance of the
workforce of a performance based culture (Barney, 1986) was enabled by the training and
support that was provided to ensure that rewards would go to those whose performance was
superior. Vodafone Egypts initial investment decision had been proven as an exceptional one
and future growth looked very promising. Vodafone Egypt was poised to become the leading
high performing network provider in the Middle East. Ian smiled as he left his office before
heading off to Eastern Europe as CEO of that Vodafone operation and thought of his impact on
Vodafone Egypt and the countrys progress, as he handed the management reins of Vodafone
Egypt to his Egyptian successor, Hatem Dowidar.

Notes
1. Churn is the number of customers lost by the network either through other network operators
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Keywords: offering better deals or by customers dropping their service. The lower the churn, the lower the
Telecommunications, costs of customer acquisition and retention.
Change management, 2. As of 2007, most of Vodafones employees were in fact in these functions, as the need for network
Multinational business specialists had peaked.
cultures,
3. Network providers frequently provide a subsidized handset to customers who sign long-term
Performance-based contracts with the network provider. This results in lower handset prices and lessens the barrier
organizational systems, to mobile phone usage for those who cannot pay for a handset. This practice is losing appeal as
Wireless communications handset prices drop below 125LE in global markets due to Chinese low priced handsets.

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Vol. 1 No. 1, pp. 1-14.
Hofstede, G. (2012), Hofstede dimensions, available at: www.geert-hofstede.com/national-culture.
html (accessed 21 May 2012).

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about/investors/Documents/2006Annual_Report.pdf/, (accessed 7 March 2007), available at: www.
mobinil.com/download/investor/reports/annual98/finance/fcontents.html29/
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Further reading
Brown, A. (2004), Dataquest Insight: Mobile Phone and Chipset Forecast 2004-2010, Gartner and
Associates, Stamford.
Central Intelligence Agency (2009), CIA factbook, available at: www.cia.gov (accessed 8 January
2009).
Daily News Egypt (2014), Vodafone appoints Hatem Dowidar chairman, Daily News Egypt, available
at: www.dailynewsegypt.com/2014/06/11/hatem-dowidar-lead-vodafone-egypt-chairman-board-
ahmed-essam-ceo/ (accessed 6 January 2016).
Egypt in Figures (2009), Egypt in figures 2009, available at: www.egypt.gov.eg (accessed 21
November 2013).
FitzPatrick, P. and Mostafa, H. (2007), Full steam ahead: after a blazingly successful five years under
CEO Ian Gray, Vodafone Egypt has transitioned the hot seat to a new, but familiar, face, available at:
www.BusinessToday.com (accessed December 2007).
Harlow, H. (2007b), Commquest technologies: an entrepreneurial technology case study, Journal of
Business Entrepreneurship, No. 4, pp. 89-112.
Harlow, H. (2007c), Rate chart for TE DATA, available at: www.TelecomEgypt.com (accessed
15 November 2007).
Harlow, H. (2011a), Vodafone Egypt (A): the investment decision, Emerald Emerging Markets Case
Studies Collection, Emerald Group Publishing Limited, West Yorkshire.
House, R.J., Dorfman, P.W., Javidan, M., Hanges, P.J. and de Luque, M.F.S. (2013), Strategic
Leadership Across Cultures: GLOBE Study of CEO Leadership Behavior and Effectiveness in 24
Countries, Sage Publications, New York, NY.
Iveta, G. (2012), Human resources key performance indicators, Journal of Competitiveness, Vol. 4
No. 1, pp. 117-128.
Merrill Lynch (1999), Mobile Data Handbook, New York, NY.
Neary, D. (2002), Creating a company-wide, online, perfromance management system: a case at
TRW, Inc, Human Resource Management, Vol. 41 No. 4, pp. 491-498.
The World Bank (2012), Egyptian country data, available at: www.databank.worldbank.org/data/
views/reports/tableview.aspx, (accessed 15 November 2008).

PAGE 10 EMERALD EMERGING MARKETS CASE STUDIES VOL. 6 NO. 4 2016


Exhibit 1. Global and Egyptian telecommunication markets

The global telecommunications market


The telecommunications industry had grown rapidly in the 1980s and 1990s and by 1998
had total revenues of over one trillion dollars accounting for 4-5 per cent of global gross
domestic product. Growth forecasts were 29 per cent in the near term. Within the
telecommunications industry, the fastest growing segment was the wireless segment which
had grown at compound annual growth rate of 59 per cent from 1990 to 1999. Worldwide
mobile customers were expected to increase from 10 million in 1990 to 500 million in 1999.
With a global population of 6 billion people, this was only 8 per cent penetration, and this
market segment was poised to grow at increasing rates for the next decade(West Panmure
LBResearch, 1999; Merrill Lynch, 1999). As of 2015, the global wireless market is over 3
billion mobile phones in use.

The Egyptian market

General market overview. The population of Egypt was approximately 70 million at the time
of the Vodafone market entry. As of 2016, it is more than 85 million and is growing at 1.8 per
cent per year (one of the highest growth rates in the world) (Egypt in Figures, 2009, 2015).
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The urban population is 42.6 per cent (Egypt in Figures, 2009, 2013).

Egyptian telecommunication markets. Figure E1 outlines the Egyptian telecommunication


market as of November 2007. The mobile market in Egypt has grown from less than 14
million in 2004 to approximately 25 million subscribers in 2007. Most of the mobile
subscribers in Egypt are prepaid with no handset subsidies[3] provided by carriers. With
over 1.4 million new potential young subscribers every year being born, Egypt is a long way
from being a mature market. Mobile phone penetration has increased dramatically with
current penetration of 81 per cent of the population and over 70 million subscribers as of
2014 (Africa and the Middle East Telecom Weekly, 2016) (Figure E2).

Figure E1 Egyptian demographics

Figure E2 Mobile vs fixed line vs mobile growth and revenues

VOL. 6 NO. 4 2016 EMERALD EMERGING MARKETS CASE STUDIES PAGE 11


Figure E3 Vodafone, Mobilnil and Etilsalat
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Most of the revenue for Vodafone and other carriers are provided by high value consumers
who use the mobile for the majority of their monthly communication. These high value
consumer generate large average revenue per unit and enable the profits upon which
mobile networks depend.
The market structure (Gray, 2007) has three competing companies: Vodafone, a strategic
partnership between Telecom Egypt (45 per cent of shares) and Vodafone PLC (55 per
cent of shares); Mobinil, a privately owned company with Orascom (31 per cent) and
Orange (32 per cent) as the major shareholders in addition to a free float (37 per cent);
2007 entrant Etilsalat holds the majority of its shares (66 per cent) with holdings by Egypt
Post (10 per cent), CIB (4 per cent) and the National Bank of Egypt (20 per cent):
Vodafone and Mobinil have approximately 43 and 52 per cent of the market as of 2007 and Etisalat
has a small share of approximately of 5 per cent. Mobinil is an established and entrenched
competitor with competitive strengths both technically and with its business partners. It was the first
company in the MENA region to gain ISO 14000 certification and was nominated for Best Brand and
Best CSR Contribution in the Telecoms World Awards Middle East competition (Mobinil, 2007). One
of its stockholders is the Orascom Group a very strong brand in its own right in the region. Etisalat
paid LE 16.6 billion or approximately 3.4 per cent of the 2006 gross domestic product of Egypt for
the mobile license. In return, Etisalat received a head start of several months to offer 3.5 G services
and high speed DSL via mobile. Etisalat has used this head start to gain a foothold in the market.
Subscribers are also duplicating service with several providers by having several chips and buying
new low price deals offered by Etisalat that were offered to lure customers from Mobinil and
Vodafone. The use of two or more chips to duplicate service is common practice in the MENA region
and simply involves changing the SIM cards of the mobile phone. It is unclear at this point if new
subscribers are choosing Etisalat, Mobinil and Vodafone at the same ratio as in the past or there are
new line market shares (Figure E3).

About the author


Dr Harold Dennis Harlow was a Management Professor at the American University in Cairo
for four years prior to his current position at Wingate University. His background includes
over 15 years of engineering and executive management at technical firms such as
QUALCOMM, IBM and GE. His research interests include technology strategies, tacit
knowledge measurement and entrepreneurship. Harlod Harlow can be contacted at:
h.harlow@wingate.edu

PAGE 12 EMERALD EMERGING MARKETS CASE STUDIES VOL. 6 NO. 4 2016

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