Several media outlets have reported – quoting anonymous sources – that the National Telecommunication Regulatory Authority (NTRA) has set the 4G licence costs for each of the four operators in Egypt as follows: EGP3.5bn for each of Vodafone Egypt (VFE) and Orange Egypt, EGP4.5bn-4.6bn for Etisalat Misr and EGP5.5bn-7bn for TE. Media sources say these figures also include additional 3G frequencies for mobile network operators (MNOs). Ministry of Communications and Information Technology (MCIT) offered international gateway licences to VFE and Orange Egypt at a price of EGP1.8bn each. The sources added that 50% of the various licence costs would be paid in USD and the rest in EGP. All operators will have until the first week of August 2016 to send their responses to NTRA. Moreover, MNOs will be allowed to offer the fixed-line service virtually through TE’s network, while TE will be allowed to offer 2G and 3G services virtually through the MNOs’ networks. In related news, the MNOs will hire consulting firms to conduct the technical evaluation and assess the economic viability of the 4G licence.   Our view: We reiterate our view that TE’s potential entrance to the mobile market comes at a late stage, given the relative maturity of the market currently and given how competitive the market has become in all segments including mobile broadband. This makes the rumoured pricing of EGP5.5-7.0bn for the 4G licence excessive, in our view. While TE has a considerable advantage that it already owns the whole fibre optic backbone in Egypt, allowing some capex saving, we believe TE will still have to deploy some mobile equipment and continue to modernise its fibre network, even if it does a geographically-limited mobile network rollout. Moreover, given that MNOs will be offered International Gateway licences by the government, we see a considerable risk that TE could lose an important wholesale revenue stream that stems from handling two-way international calling traffic on behalf of MNOs.   Will TE sell VFE? This question remains unanswered up until now. TE mentioned repeatedly that it has no legal obligation to do so, and the government has been silent about this issue; however, we think TE will be forced by the government to sell its stake in VFE in order to prevent any breach of market competition rules, as well as any conflict of interest arising from owning two mobile operations. We remain of the view that the best scenario for TE would be to keep its stake in VFE and attempt to increase this stake to a controlling one, as opposed to selling VFE and rolling out a greenfield mobile operation. (Several media outlets, Omar Maher, Karim Riad)   Telecom Egypt: EGP8.73 as of 16 June 2016, Rating: Buy, FV: EGP12.21 per share, MCap: USD1,678 million, ETEL EY / ETEL.CA