No. 5, Fall/Winter2000

Special Issue:
The Arab World

continued: Interview with Khalid Abu Nuwar, General Manager, MultiChoice Egypt
page 2 of 2 / page 1

Sullivan: Showtime is planning to offer Internet and TV via PC services, Shownet and Showcast, to subscribers. And Internet is big business now in Egypt, where ISPs and Internet cafes are cropping up everywhere. Will you be a competitive player?

Abu Nuwar: We're infringing on their business. Put all the ISPs together in Egypt, or the number of dialup subscriptions, and our number of pay-TV subscriptions is higher. If we introduce Internet for our subscriber base, we'll be the biggest ISP in Egypt as such, if we're successful.

Sullivan: There's talk of CNE moving to digital terrestrial?

Abu Nuwar: Yes, from the point of view of channel distribution that's an advantage, whereby you have one terrestrial station and you can put on it 12 to 14 channels. The operation cost is very advantageous. The problem is the price of the box. It's more expensive than the satellite digital box, because of economy of scale; the producers are concentrating on satellite. Not much analog terrestrial or digital terrestrial is being produced, so the box price is comparatively expensive. So if you tell customers, forget about satellite digital, go and buy your terrestrial digital, in my opinion it won't fly.

In the UK—a more affluent society—digital terrestrial exists and is successful, but it was introduced before digital satellite. Now there's a system whereby both are the same: what you get on digital terrestrial is the same programming you get on digital satellite.

Sullivan: So for the customer it doesn't make a difference.

Abu Nuwar: Right. But it's different here in Egypt. And the most important thing is the price of the boxes. Somebody has to import them, and they'd have to be heavily subsidized. Whereas on satellite, if you have a motorized dish you can watch 36 satellites, and the equipment is becoming fairly cheap.

In 1997 satellite channels available in Egypt, analog and digital, totaled 388. In 2000 there are 606 channels, 393 of which are free-to-air, 213 are encrypted. The Middle East is right in the middle of Europe, Africa, Asia, and whatever is coming in from the United States to Europe. But the numbers of free-to-air analog on satellite haven't changed. The analog technology isn't something people are pushing. Whereas in 1997 there were 107 free-to-air digital; it exploded into 246 digital by 2000.

By looking at this, you can see what we're up against. First there's the mindset of people that you don't have to pay for television. And we're introducing pay-TV at the same time that everyone else is introducing, on the same platform, more free-to-air channels of good quality.

Sullivan: While in the beginning people were paying for something they couldn't get for free, like CNN, before other all-news channels became available. How has your marketing strategy shifted, then, with competition from the free-to-air channels?

Abu Nuwar: We don't go head-to-head against the free-to-air channels, which we knew we couldn't compete with from the point of view of financing or distribution, because they generate revenue from advertising, they're highly subsidized by very rich governments, and they have a political agenda. They're here to stay. So we tried to turn that to our advantage. We told customers, here's a highly subsidized box, you can pay now or in installments, and on top of that this box—unlike Orbit's, for example, which they haven't been able to upgrade yet—gives you access to all those free-to-air channels. It worked well. People are taking our CNE decoder, subscribing to ART or Showtime or both, and enjoying all those free channels from Nilesat as well. And now Nilesat 102 can potentially double the number of channels they receive.

Sullivan: What does it mean for you that Orbit is now allowed into the market to sell their decoders?

Abu Nuwar: They'll be legal competition against us in the market, and we welcome that very much. Competition makes us even better operators. We become wiser, more aggressive. Also, both Orbit and us spending more in competition means better business for everybody, because it means more exposure of the pay-TV principle in the market. It means there's twice the amount of money being spent to introduce the public to pay-TV. And whoever has a better package will win. So even with Orbit here we have a better chance to succeed.

The strategy here is to ask bouquet providers to give us more programming at the same price. Add value, but at the same price to the customer. With more programming we build new promotional campaigns. And we're thinking into new territory, to packaging different cross-promotions between ART and Showtime, or making relational marketing with other fee-based operations like mobile phones. Mobile phones are a booming business in Egypt, and we're plugging into that with joint promotions. If, for example, you're a Mobinil subscriber you might get a discount on CNE, or vice-versa. Or if you're not either, subscribe to both and get a discount on both. We're already in talks to promote this kind of package.

Sullivan: Working as you do with both ART and Showtime, you get the strengths of both-Arabic programming, especially movies, on the one hand, and Western entertainment on the other. How do they work together as a package?

Abu Nuwar: They complement each other. Maybe you want a majority English programming, but also want to get Egyptian movies. You can buy the basic ART bouquet along with the full Showtime bouquet. Or vice-versa: you can subscribe to the full ART bouquet, then add a mini bouquet of Showtime. There are people who only want only one or the other, but also people who want a bit of both, so the packages have been designed to take care of all those needs.

Sullivan: Since you started there have been a lot of changes in the Egyptian economy, with a move toward privatization. But when you started, the current free-market climate didn't exist. Beyond that, ERTU is a shareholder in CNE. Did either of those factors mean that you had to overcome a bureaucratic business climate?

Abu Nuwar: It's something you have to keep in mind and to work with. Whenever you're working with a government body there's an element of bureaucracy and inflexibility. That may have been the case when we started but that changed very quickly, because the terms of the business, the demands of the people involved in the private sector, made it clear that the business can't afford to be bureaucratic, can't afford to be slow in making decisions, and has to move forward. There's goodwill between the parties, and everybody understands this.

Marketing, sales, and distribution is really the engine of the business; everything else is just systems: computer systems, transmission systems, satellite uplinking. The operators have always been very understanding of our need to move quickly on the marketing and distribution side, and have given us huge help. It surprised people, maybe, that they allowed us to move into the market the way we did, but they understood that we can't wait for committees to make decisions and sign papers. And you do have to move very quickly in the market, because of competition coming in and because of the way the market is reshaping itself.

The 1990s have been a new dawn in the Arab society in many ways. During the Gulf War everybody wanted to see CNN. They paid huge amounts of money for dishes that would become obsolete a few months later, just to be able to watch CNN. This is where pay-TV started, and where people began to understand that you have to move with the market, or ahead of it, as fast as you can in order to drive this business. Otherwise you stay where you are, and you lose money. These government bodies made money on these deals because they allowed the private sector partners to enter the market. TBS