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ERTU, Investors at Odds Over Media Privatization

CAIRO, EGYPT, April 4, 2000 A new private satellite station to be located in Egypt's new Media Free Zone is being formed by a partnership of fifty local private investors, according to Abdel Rahman Hafez, Chairman of the Egyptian Radio and Television Union (ERTU).

The introduction of private channels is the latest move by the Egyptian government in an attempt to lure private entrepreneurs back into investing in the new Media Free Zone. There's also talk that the government will sell specialized Nilesat channels. It was a few months ago that the announcement of the Media Zone raised high hopes for the private sector before stamping them out again with the restriction of terrestrial broadcasting.

The establishment of the Media Zone comes at a time when privatized media channels and media cities are sweeping across the Middle East. Egypt, the longtime leader of Arab media, has entered the race by announcing its plans to contend. The zone, which covers a 3.4-kilometer area between the Media Production City and the Nilesat earth station, is set up to host private satellite channels that would benefit from tax exemptions and customs under the investment law. Benefits for investors also include the resources and facilities of the Media Production City: studios, labs for editing and post-production, and of course the vast human resources of technicians, actors, anchors and TV personalities.

With the announcement, however, came the swift stipulation by public sector officials such as Amin Bassiouni, head of Nilesat and former head of ERTU, that Egypt is not prepared to sell off its terrestrial and satellite channels. Rather, the aim, in their eyes, is to provide an investment climate conducive to encouraging the private sector to establish new satellite channels that will broadcast in Egypt and throughout the Arab world.

But it is precisely that conducive business environment, or lack thereof, which has shunned many private businessmen who were initially willing to invest. The banning of private terrestrial channels and consequently the ability to reach the vast majority of Egyptian public viewers' cuts advertising revenue. That spells a loss of profit for most entrepreneurs. As a result, at least two important consortiums of businessmen who were preparing to launch satellite channels in the Media Zone have backed down because of weak profit returns. One of these groups reportedly evolves around an alliance of private businessmen and an alliance of media groups al-Ahram and al-Akhbar; the other consortium includes businessmen and the owners of al-Alam al-Yom, Egypt's daily financial affairs and business newspaper. Businessmen from both groups including financial tycoon Naguib Sawaris declare they cannot go ahead with privately financed channels unless the government allows them to broadcast terrestrially as well.

Lamis Hadidi, managing editor of al-Alam al-Yom and business correspondent for Qatar's al-Jazeera channel, agrees. "We want a terrestrial transmission," she says. "It's difficult for an Egyptian private channel to compete with the likes of MBC and LBC, which are financed by their respective governments. It's also high time to break the monopoly of government in the media." According to Hadidi, and other media professionals in the field, the only parties who will reap any benefits from the Media Zone are the private satellite channels already in existence, like ART, al-Jazeera, Orbit and others.

But ERTU says there are valid reasons for not allowing terrestrial privatization. "It is undesirable from a technical standpoint for ERTU to add any channels on the terrestrial systems because of interference of signals," Hafez said. "It's also incredibly expensive to add a new terrestrial network. Anybody who wants to invest in terrestrial would have to invest at least LE500 million, and would not generate any profits."

The announcement of the Media Free Zone and the promise of relative freedom for satellite broadcasting has had an effect on the plans of Video Cairo Sat, which was preparing to launch Egypt's first privately owned satellite channel at the beginning of the year (see story, TBS issue 3). According to Managing Director Mohamed Gohar, the decision has compelled VCS to reconsider its strategy. Originally VCS was preparing to utilize a final hope broadcast facility from Paris, coupled with its own Nilesat transponder facility. Most of its production would come from its own Cairo studios to evade the previous barriers to private broadcasting from Egypt. While the promise of a Media Free Zone on the one hand makes everything easier, on the other hand it makes investment and political risk higher. But this is the route VCS looks set to pursue, firm in their belief that there is more to satellite television revenue than just pay-TV subscription and limited advertising. It is clear that the promise of various wireless-based Internet activity interests them.

At present, few other private media companies are poised to follow in the footsteps of VCS. The question now is, will the deadlock mean more compromising on behalf of the government, or will other private companies follow suit. One factor that could tip the scale toward further liberalization in the Egyptian media is regional competition, particularly with Dubai, which is already home to many of the region's broadcast facilities and which is also establishing a media free zone. Jordan had also announced plans for a free zone, although it now appears that the proposal has been shelved because officials didn't feel the country could compete with Egypt's facilities and human resources. 

About Heba Kandil

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