Egypt took its first steps to get 4G networks in 2016. After reports suggesting opening up the market for new entrants, including an official bid by Kuwait’s Zain — and talks with Saudi Telecom, China Telecom, and Saudi’s Lebara — the first 4G agreement was signed with Telecom Egypt (TE).

On 31 August, state-run fixed-line monopoly TE signed the country’s first 4G agreement with the National Telecommunications Regulatory Authority (NTRA). The license cost it a total of EGP 7.08 bn, half of which was payable in USD. As part of the agreement, TE is to begin providing 4G services by March 2017 (six months after the agreement’s signing), but was also required to reach an agreement with now-rival mobile network operators (MNOs) to use their existing 2G and 3G network infrastructure until it completes its own 4G network within two months of signing.

A high-stakes game of chicken: The MNOs — Vodafone Egypt, Orange Egypt, and Etisalat Misr — however, had at first rejected the terms offered by NTRA for the license. They pointed specifically to the limited spectrum on offer, the high cost, and the requirement to pay a portion in USD. All three of them declined to bid for the license by the deadline set by NTRA in late September, but eventually all had signed 4G by mid-October. Before the end of the year as well, it was announced that TE missed its deadline to sign an agreement with an MNO to use its networks temporarily, but NTRA gave it a two-month extension. Those two episodes give one of the clear themes going into 2017: Deadlines set by NTRA are not set in stone — they are not necessarily binding in a practical sense.

It was clear throughout the negotiations process that the MNOs had a problem with what they perceived to be the preferential treatment TE was receiving, leaving them looking for any leverage. Indirectly, and most likely inadvertently, NTRA provided them with that. Requiring TE to conclude an agreement with at least one of the MNOs to use their networks put time firmly on the MNOs side. By refusing to sign contracts with TE, Vodafone Egypt, Orange Egypt, and Etisalat Misr can now prepare to launch their own 4G services in 2017 without having to worry about competition from a fourth player in the market — for now. Making TE miss contractual deadlines would have also made us question the validity of the agreement, but NTRA’s relaxed attitude towards deadlines and the precedents it already set make this less of a concern.

This leaves us looking forward to 2017 with a number of questions. Will the operators be able to launch 4G services on time? Once they do, the concerns will shift immediately to monitoring the service quality and whether their concerns over spectrum availability were warranted. This concern might be tempered as the CIT Ministry promised to auction off extra spectrum.

Another, seemingly pedantic, question we have is contractual: Will the MNOs accept paying NTRA the USD-denominated portion of the contract as agreed to before EGP float at current market rates? Since the 4G agreements were signed, the value of the EGP dropped by nearly half, creating deep losses for the MNOs, who are contracted to pay a portion of the licence fee’s installments in USD equivalent.

However, our main concern is how TE will adapt to its changing role within the market. It has a lot of work to do to catch up in a market where the penetration rate is over 100% and, while it might have some government support, its rivals hold significant leverage over it operationally. If TE fails to meet its launch deadlines, or suffers from an unsuccessful roll out, who is left to pick up the tab for this state-owned company?