Best Practices and Innovation in Governance and Public Administration: The Case of Telecom Egypt Tarek Hatem Professor of Strategic Management and Public Administration The American University in Cairo, Egypt 2 Best Practices and Innovation in Governance and Public Administration: The Case of Telecom Egypt “TE has undergone one of the most drastic changes that we have seen any public sector company undergo probably in the history of Egypt,” says TE Chairman Beshir (El Bakry 2004). Radical changes in Information and Communications Technologies (ICT) are transforming countries' economies and presenting new opportunities as well as perils. The challenge in an emerging information and digital-based economy is to capitalize on the opportunities and compete effectively to achieve share holders' value and above average returns. Reforms initiated by the Egyptian Government in the 1990s have, therefore, emphasized economic and social reforms to achieve better economic growth rates, and lower rates of unemployment. Realizing the significant role that the information and communications technologies play in sustaining socio-economic growth, the government has focused on advancing the sector's development by providing a state-of-the-art national telecommunications network, promoting information-based developments, and upgrading human resources. The 150 years old state owned company, Telecom Egypt (TE), monopolizes the operation and services of international and national fixed line connectivity in Egypt. Earlier, during the 1980s and 1990s, however, the telecommunications infrastructure was the worst in the region. While millions were on the waiting lists for telephone lines, others couldn't obtain phones because their residence areas were out of reach of the telecommunications network. Therefore, over the last 20 years, the company has undergone radical changes to reduce customers' dissatisfaction, and better meet the challenges of ever changing demands through enhanced utilization of technologies and innovation in governance. 3 Characteristics of Telecommunication before 1998 Telecom Egypt's history and development dates back to 1854 when the National Organization for Telecommunications, the oldest company in Egypt inaugurated the first telegraph line connecting Cairo and Alexandria cities. In 1881, the first telephone line was installed between the two cities. Later in 1918, The Egyptian Government acquired the Eastern Telephone Company for 755,000 L.E. (US$ 132,456.14) and developed the Telephone & Telegraph Authority; a predecessor of Telecom Egypt. The highly regulated-government organization was dominated by Arab Republic of Egypt National telecommunication Organization (ARENTO), and was also highly over-staffed with unskilled and unmotivated civil servants, suffered poor managerial skills, and low productivity levels. The company played the roles of both the service provider and regulator, was characterized by a centralized hierarchical structure and system of approvals, a bureaucratic government culture, and absence of a marketing department and customer services' orientations. These company's characteristics, resulted in long waiting lines, poor quality of services provided, limited services, and a very week telecommunication infrastructure, all of which caused customers' dissatisfaction. Telecom Egypt after 1998 In accordance with Egypt's 1990s reforms, and liberalization of the telecommunication sector, Telecom Egypt (TE), Egypt’s incumbent telecommunications operator, was established in 1998, according to Law 19 of 1998, as a joint stock company, to replace the former Arab Republic of Egypt National Telecommunication Organization (ARENTO). Further, the National Telecommunication Regulatory Authority (NTRA) has been entrusted with the implementation of government policy with the objective of developing and spreading communication services throughout Egypt, and encouraging investment in the Telecom Sector. The year 1999 4 marked a new period in Telecom Egypt's activities with the Presidential announcement era of knowledge and information society, and the establishment of the Ministry of Communication and Information Technology. In May 2000, a successful business manager from the private sector was appointed as the new chairman of Telecom Egypt. In 2003, Law 10 was passed and enacted by the President of Egypt on February 4th to regulate the telecommunication sector. Initiatives of Innovations Those people behind applying best practices and innovation in governance and public administration have been triggered by seeking improved ways of serving the public sector's customers, and responding to new and changing needs of the private sector. Implementing best principles of public service is explained by the important role that these initiatives play in eliciting and developing privatization of state-owned enterprises, in increasing investments and attracting foreign capital, in enhancing accessibility to new technologies and markets, and in boosting economic growth in general. The purpose of this report is to share experiences and best practices in innovation in governance of the 150 years old state owned and highly regulated government organization, Telecom Egypt (TE), discuss lessons learned and key Issues, promote cooperation, and find out potentials of transferability of such practices to other organizations in other countries. For the purpose of this paper, best practices and innovation in governance and public administration have been compiled into four categories: regulatory change, good management, utilization of technology, and human resources management practices. 5 Company Overview Performance In 2004, Telecom Egypt was the leading provider of telecommunications in the Middle East. Market Information 80000 70000 60000 50000 Penetration Rate 40000 Population (000)s 30000 No. of Households (000)s Household Size 20000 Total number of lines New lines installed (000)s 10000 Growth Rate (%) Waiting List Tele Density (%) 0 1998 1999 2000 2001 2002 2003 2004 2005 Population (000)s 62700 64500 65700 66900 68230 69460 70700 71950 No. of Households (000)s 12950 13200 13410 13800 14100 14380 14670 14950 Household Size 4.84 4.88 4.9 4.85 4.84 4.83 4.82 4.81 Total number of lines 3971 4686 5586 6688 7736 8830 9650 10550 New lines installed (000)s 646 801 838 928 1115 1120 820 900 Growth Rate (%) 16.3 17.1 15 13.9 14.4 12.7 8.5 8.5 Waiting List 1349 1313 1215 1008 583 206 127 Tele Density (%) 6.3 7.3 8.3 9.8 11.4 12.8 13.6 15.4 Year Figure 1: Telecom Egypt Market Information To meet its goals and objectives, the state-owned company invested in developing skills and competitive capacities of its mid- management levels, introduced several human resources best practices, and improved the quality and capacity of its national network (see fig. 1). In 2004 the company retained 9.2 million subscribers, representing an increase of 9.5% over June 2003, and Revenues (see figure 2 for Telecom Egypt's breakdown of revenue) exceeding L.E 3.8 billion, representing an increase of 15% over June 2003 (Telecom Egypt 6 Website). Telecom Egypt generates revenues from a number of different channels with the overall revenue trend being positive. The company's long distance revenues have been reduced with the introduction of mobiles' services throughout Egypt. The number of subscribers differs substantially between governorates with Cairo taking the lead with approximately 25% of all subscribers. From 1998 to 2004, average annual population growth was 2.0% while average annual household growth was 2.1%, and average total line growth was 16% (approximately 950,000 lines per year). Revenues Breakdown (2003) 13% 16% 12% 4% 3% 13% 14% 13% 7% 3% 2% Local Long Distance International Fixed to Mobile Mobile Interconnect Internet Connection Subscription Prepaid and card Mobile Int'l & Roaming Other Figure 2: Telecom Egypt's Revenue Breakdown In line with the Egyptian Government's policy of increasing telecommunications access Telecom Egypt has dramatically grown its tele- density and subscriber base. Tele-density varies widely amongst governorates with Port Said having the highest at around 25% compared with more rural areas where rates can be as low as 5% or less. As for the subcribers' base, Telecom Egypt has benefited from a substantial waiting list for new subscribers which have enabled connection rates to be maintained at L.E. 800 (US$ 140.35) for domestic and L.E. 1500 (US$ 263.15) for commercial. 7 Defining a Mission Statement TE mission statement emphasizes the important role that the company plays in the development of telecommunications services in Egypt. TE is committed to being the best source and total solution communication provider, while dedicating its resources to build a better future for its employees and community through responsive services, honest business practices, and the latest advancement in the communication industry at a reasonable price. Identifying Goals 1) Be reachable everywhere in Egypt throughout its 26 governorates and build existing customer value by providing broadband solutions for both the retail and wholesale markets. 2) Improve the internal environment of the organization by enhancing managerial planning skills, and techniques to be proactive, developing core competencies, enhancing operational efficiency, and placing information technology at the center of all business decisions. 3) Increase revenues by increasing domestic subscription and the proportion of subscription based services such as ADSL by turning the company