Strategy report

Rennes International School of Business

ESC RENNES

Executive Master of Business Administration

EMBA

COHORT 1 (2003 - 2004)

STRATEGY

Conducted by:

Serge OREAL

Menatel Business Strategy

By

Magdy A. Sattar

July, 2004

Cairo, Egypt

EXECUTIVE SUMMARY ................................................................................................................... II

1- INTRODUCTION......................................................................................................................... 1

2- REPORT OBJECTIVE ................................................................................................................ 1

3- MENATEL PROFILE.................................................................................................................. 1

4- ENVIRONMENTAL SCANNING .............................................................................................. 8

5- STRATEGY FORMULATION ................................................................................................. 22

6- STRATEGY IMPLEMENTATION.......................................................................................... 25

7- EVALUATION AND CONTROLLING ................................................................................... 31

8- REFERENCES ............................................................................................................................ 35

9- ANNEXES ................................................................................................................................... 36

EMBA Cairo I

EXECUTIVE SUMMARY

This report is about Menatel strategy, and how Menatel manages its strategies. I will start by

describing Menatel profile and illustrating it in brief; Menatel business, Menatel objectives,

vision, and values. I will show some of Menatel quantities indicators; such as commercial,

operational, and financial indicators, plus Menatel critical success factors and technology.

I will start by analyzing Menatel current environment, first, scanning the external macro

environments (factors & actors), then the external micro environments (supply & demands),

summing up the findings using EFAS techniques. Second, scanning the internal environments

(firm analysis), summing up the findings using IFAS techniques. By the end of this step I will

use SWOT analysis to identify Menatel strategic alternatives. The second step is to evaluate

the alternatives using SFAS to be able to formulate Menatel recommended strategies. I will

formulate Menatel strategy by illustrating Menatel rephrased mission, vision, and objectives.

Then I will define Menatel corporate strategy, business strategy and Menatel functional

strategies, (marketing, financial, operational, R&D, IT, logistics, HRM, and purchasing).

The third step is to recommend the implementation plan; I will illustrate Menatel programs,

budgets, procedures and action plan, and finally staffing and recommended training.

The last stage is recommendations for evaluating and controlling the implementation of the

strategies, by proposing input controlling, process controlling, and output controlling.

Finally a list of references I used to help me in doing this report followed by some annexes to

illustrate some points to the reader and verify some of my findings.

EMBA Cairo II

1- INTRODUCTION

In this report by the here below items, I will start by briefly describing what is Menatel? And

what is Menatel doing in payphone business, by illustrating Menatel owners and equity

distribution, coverage, functional activities and departments, and some of the key figures and

indicators of Menatel operation, commercial, and financial achievements. I will start scanning

the external environment by macro analysis of the factors and actors of the external

environment, and micro analysis of the telecom industry and competitors. I will continue to

scan Menatel internal environment through firm analysis, later by SWOT matrix I will sum-up

the findings and conclusions of the analysis to start formulating the recommended strategies.

I will evaluate the strategic alternatives to recommend the profitable and most suitable

strategy to the current situation. I will describe the programs and their corresponding budgets

with the suitable procedure to them in order to implement the recommended strategies. At the

end a controlling system will be described to follow the implementation procedure and

measure the performance outputs.

2- REPORT OBJECTIVE

The purpose of this report for me is to review Menatel strategies and strategic management

process, analyzing it using what have been taught during the module, and then providing well-

founded suggestions or recommendations for improving or formulating new ones. It will also

be a tool for the instructor to measure to what extend I have digested the course objectives,

and fulfilled what was expected from me by being more familiar with the terminology,

concepts, and the underlying issues. I will try to carry out this assignment in order to

consolidate my learning and try to reach useful conclusions about how strategic management

can be better exploited in Menatel.

3- MENATEL PROFILE

3-1 Menatel in brief

Late in 1998 Mena Communication Company (Menatel) was born as a domestic joint stock

company, under investment law number 8/1997 registered in 1998 under number 314030.

Menatel is granted a ten years; renewable license, to install, operate, and manage a

EMBA Cairo 1

telecommunication network of at least 30,000 public payphone. Egyptian shares were 53 %

and foreign shares were 47 %. By the end of 2003 Menatel has been operating a payphone

network of 30,000 payphones in operation, work force of more than 400 employees, and the

Egyptian shares are 100 %. Menatel is in the prepaid smart cards payphone business,

Menatel products are calls (minutes), local calls, national calls, mobile calls, and international

calls. Menatel is selling its products through a payphone network that covers all Egypt and is

managed by a payphone management system. These calls category are Menatel profit

contribution. With a centralized management style Menatel is structured of five main divisions

headed by corresponding Directors and four Branches allocated all over Egypt, to form simple

flat functional organizational structure.

3-2 Menatel ownership and equity distribution

By the end of 2003 the main four Egyptian shareholders bought the foreign shares and the

seven million shares are distributed as follows:

 National Bank of Egypt Egyptian 35 %

 EGYTEL Egyptian 37 %

 ADCOM Egyptian 17 %

 Telecom Egypt TE Egyptian 3.5 %

 ADI Egyptian 3.5 %

 CIIC Egyptian 3.5 %

3-3 Menatel Coverage

 Menatel Head Quarters,

54, Road 261, New Maadi, Cairo

www.menatel.com.eg

Tel: +2-02-591-400-1

Fax: +2-02-591-400-2

Cairo Governorate

Giza Governorate

Beni Suef Governorate

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Kalyobia Governorate (first part)

 Menatel Alex. Branch,

4, El-Saidla Towers, Somouha, Alex

Tel: +2-03-424-910-2

Fax: +2-03-424-910-1

Alex. Governorate

Behera Governorate

Matrouh Governorate

 Menatel Canal & Sinai Branch,

81, El-Gomhoreya St, Port Said

Tel: +2-066-324-336-6

Fax: +2-066-324-337-7

Damiatta Governorate

Ismailia Governorate

Port Said Governorate

Suez Governorate

North Sinai Governorate

South Sinai Governorate

 Menatel Delta Branch,

1 Abu Baker St. Tanta, Gharbia,

Tel: +2-040-333-031-3

Fax: +2-040-333-354-4

Kalyobia Governorate (second part)

Gharbia Governorate

Dakhlia Governorate

Sharkia Governorate

Monofia Governorate

Kafer El-Sheikh Governorate

 Menatel Upper Egypt Branch,

1, El-Gomhoreya St, Assyout

Tel: +2-088-307-600

Fax: +2-088-307-700

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Assiut Governorate

Minia Governorate

Sohag Governorate

New Valley Governorate

Qena Governorate

Red Sea Governorate

Luxer City

3-4 Menatel functional activities & departments

3.4.1 Technical Department & Activities

The objectives of this division are:

 Payphone-management system.

 Payphone installations.

 Laboratory & technical help desk.

 Maintenance supervision.

 Payphones maintenances.

 Value added services development.

 Subcontractors’ coordination.

 Branches management.

3.4.2 Commercial Department & Activities


 External communication.

 Advertising.

 Payphone location determination & authorization.

 Sites owner management.

 Cards direct distribution management.

 Cards indirect distribution management.

 Telecom Egypt relationship (JWC).

 Customer hot line.

 Commercial reporting.

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3.4.3 Financial Department & Activities


 General reporting & payments.

 Accounting & balance sheet.

 Business plan & budgets.

 Billing invoices & suppliers.

 Cash & contract management.

 Internal network management.

 Recruitment & training.

 Payroll & salary policy.

 Social, litigation, and legal matters.

3.4.4 Logistics Department & Activities


 Security management.

 Premises management.

 Purchases.

 Custom clearance.

 General procurement.

 Warehouse

 Card distribution

 Transportation.

 Vehicles management.

3.4.5 Business Development Department & Activities


 Handel assignments and projects to improve organization

performance.

 Improvement of the interface with major suppliers.

 Tuning of HR tools.

 Defining and building major business indicators.

 Managing auditor.

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1
3-5 Menatel Quantities indicators

 Operational Indicators

Indicators Dec.2000 Dec.2001 Dec.2002 Dec.2003

Civil work (Thousand) 18.2 28.7 31.8 32

Booth Installed (Thousand) 16.2 24.9 29.3 30

Payphones IO (Thousand) 16 24 28 30

Numbers of Calls (Million) 291.5 437.3 520.5 476.4

Numbers of Minutes (Million) 580.5 870.7 1036.5 948

Quality of Service 96 % 95 % 97 % 98 %

 Commercial Indicators


Number of locations (Thousand) 22.1 37.8 43.3 62.4

Sales Point (Thousand) 20 35 45 42

Line Retain (Thousand) 17.3 25.6 30.6 30.5

Cards Sales (Million, LE) 220.3 340.4 400.1 360.1

Total revenue (Million, LE) 196.8 295.2 351.4 321.9

Average Revenue/day/PP (LE) 33.6 33.6 34.3 29.3

 Financial & Administrative indicators

Human Resources


Expatriates 5 5 3 3

Managers 27 28 28 26

Employees 203 307 363 370

Total 235 340 394 399

1
Menatel Internal monthly Reports.

EMBA Cairo 6

2
Key Financial Ratios

Indicators Dec.1999 Dec.2000 Dec.2001 Dec.2002 Dec.2003

LIQUIDITY RATIOS

Current Ratio 137 % 94 % 94.9 % 84.6 % 92 %

Quick Ratio 114 % 83 % 84.9 % 70.8 % 83.68 %

Cash Ratio 75.3 % 55.4 % 60.5 % 57.3 % 69.37 %

ACTIVITY RATIOS

Return on Equity -6.2 % 14.4% 39.2 % 40.9 % 18.33 %

Return on Investments -3 % 4.7 % 13.8 % 10.63 % 5.96 %

Total assets turnover 0.39 0.79 0.82 0.79 0.74

Inventory turnover 7.8 10.5 10.5 8.8 10.9

Days sales in inventory 46.33 34.5 34.74 41.45 33.36

Receivable turnover 8.9 6.2 6.8 9.3 12.5

Days sales in receivable 55.97 86.54 85.61 57.61 42.2

Payables turnover 3.2 1.2 1.07 0.89 0.91

Days sales in payable 114.2 229.7 338.1 405.63 400.65

LEVERAGE RATIOS

Debt to Assets 51.4 % 66.9 % 64.5 % 74 % 67.46 %

Debt to Equity 105.9 % 202.7 % 182.4 % 284.9 % 207.29 %

PROFITABILITY RATIOS

Operation Profit Margin 26.6 % 32.5 % 37.6 % 31.8% 29.45 %

Sales Profit Margin 3.2 % 9.1 % 17.7 % 13.3 % 9.89 %

Net Profit Margin -7.7% 6% 16.9 % 13.3 % 7.97 %

3-6 Menatel Critical Success Factors (CSFs)

The key of success at Menatel is that Menatel manages all its resources; tangible and

intangible, in a way that optimizes maximum use of all the resources to gain the maximum

efficient use of them.

Tangible Resources, financial and physical assets

Intangible Resources, human resources, reputation, and technology

2
Aneexes 9-1,2, and 3

EMBA Cairo 7

4- ENVIRONMENTAL SCANNING

4-1 External environment analysis
3
4.1.1 Global or Macro environment analysis (factors & actors)

 Factors indication

CURRENT FUTURE
MACRO ECONOMICS
FACTORS Low Medium High Low Medium High
Attractiveness Attractiveness Attractiveness Attractiveness Attractiveness Attractiveness
Demographic factors X X
Economic factors X X
Natural factors X X
Technological factors X X
Political & Legal factors X X
Social Cultural factors X X
Overall assessment X X

Analysing the figures and their expectation trends for the future illustrated in annex (9-4), we

can sum-up the main factors indications, as shown in the above table, in which I believe that

the trend is for better future conditions especially for the political and legal factors. The

restructuring of the government organisation and the new Prime Minister who was the

previous ITC Minister is a strong indicator of these believes.

 Actors’ indication

CURRENT FUTURE
MACRO ECONOMICS
ACTORS Low Medium High Low Medium High
Consumers X X
Suppliers X X
Competitors X X
Governments X X

Again the Government role in Egyptian telecom market is extremely important; despite

dominating the market, the new ITC policy towards liberalization is a highly attractive indicator

of the future.

4.1.2 Direct or Micro environment (telecommunication industry and competitions)

analysis

 Market Environment (demands)

3
Annex (9-4)

EMBA Cairo 8

Egyptian telecommunication market is a promising market, despite of Telecom Egypt (TE)

dominance over the market, the escalating developments of the market towards liberalization,

the issuing of telecommunication law in February 2003, and the role of National

Telecommunications Regularity Authority (NTRA) will make TE a Dinosaur no more.

The fixed lines telecom market is getting more competitive, as TE is pushing towards

increasing the penetration rate, by offering lines at 50 % discount, the ambitious universal

plan for TE is to operate 40,000 payphone all over Egypt, the recent entrance of the prepaid

calling scratch card (two new licenses) in addition to TE Marhaba card, and Egypt Telecard.

The second payphone license, our direct competitor (with two brands, Nile Telecom, and

Ringo), is in a very tough situation, with lots of debts to TE that might drive them to go

bankrupt, or to turn their debt into equity for TE. In both cases we are anticipating to seize the

opportunity of the gap of their absence, and the new competition directly with TE (unfair

competition) or to compete with a new comer (not likely to happen due to the current political

and economical situation).

We strongly believe that the NTRA will not allow us to be the sole player in the market. Thus if

our direct competitor went out of market or bankrupted, they would issue a call for new

payphone license or they will allow TE to go into this market to fill the gap, and avoid Menatel

monopoly.

The indirect competition by the two GSM companies (Vodafone and Mobinil), through their

prepaid and post-paid lines, we are monitoring the two big elephants movements towards

increasing the capacity of their network and subscribers.
4
 Market Players or competitive structure (supply)

Telecom Egypt (TE)

Telecom Egypt (TE) operates more than 7 million lines in Egypt, some 80% lines installed are

residential, 17% business and the remaining 3% government.

The Egyptian fixed lines market is under-penetrated; at the end of 2002 wire line penetration

totalled 12%, representing 7.75 million access lines in service. Expected wire line penetration

in the end of 2007 is 19.6%, representing 14-million access line in service.

4
Annex (9-5)

EMBA Cairo 9

Wire line

penetration 1998A 1999A 2000A 2001A 2002A 2003A 2004F 2005F 2006F 2007F

Year to June

Population (m) 62.7 64.0 65.0 66.0 67.00 67.8 68.7 69.5 70.2 71.5

Access line 3,972 4,686 5,530 6,530 7.75 8,830 10,130 11,430 12,730 14,00

installed (000)

Growth (%) - 18 18 18 19 16 15 13 11 11

Additions (000) - 714 844 1,000 1,220 1,200 1,300 1,300 1,300 1,300

Penetration (%) 6.3 7.3 8.5 9.9 12 13 14.7 16.5 18.1 19.6

A= actual, F = forecasted

Prepaid Calling Scratch Card (PCC)

Two active players in the market, one is a private owned company called Egypt Telecard, and

the other one is Marhaba service owned and managed by TE. In addition to the 2 million

cards capacity of the two TE (IN) Intelligent Network platforms in operation today, TE has

ambitious plans to upgrade their system capacity (2million card “IN” platform contracted)

expected to be in operation by June 2004.

Egypt Telecard also made use of the long time span of the Scratch Card License bidding to

upgrade their system capacity which resulted in enhancing their quality of service, and

expanding their distribution channels.

The marketing intelligence information we managed to gather was as follows:

Egypt Telecard and Marhaba achieved sales of 22 million cards during the period from Jan.

2002 till Dec. 2002, which is equal to approx. 250 millions LE. Taking that the minimum face

value of “Marhaba” is LE. 15 and it has gone out of stock several times.

Two more renewable licenses were introduced to the market, one of them “Moftah el Zero”

launched his product first of June 2004 and managed to sell approx. 5 millions LE for all the

face values of the card (5, 10, 25, 50,100). The owner of the second license is still facing

difficulties launching his product.

EMBA Cairo 10

Public Payphones (PP)

Menatel is maintaining the leader position by far; we are in a dominant company position, far

ahead of our direct competitors Nile & TE. According to ministry of communication and

information technology (MCIT) report of February 2004 the situation is as follow:
5
Market coverage in Feb. 2004

Company Number of Payphones

Menatel 29878

Nile & Ringo 14000

TE 4532

The above table shows that we are still improving our position, while Nile is blocked. As for

TE, their plan is to upgrade and replace their old payphones, with new ones using Smart

Cards, and to go public; as we know from our sources they started to request digging permits

in Cairo. We anticipate an aggressive competition from TE. Also the two competitors in

payphone area are using the OFF-LINE technology to manage their system while Menatel is

using the ON-LINE & OFF- LINE technology.

GSM Operators (GSMO)

The two big elephants enter the telecommunication market before the two private prepaid

public payphone companies; they have been growing slowly but in a continuous way and are

still growing. They are the future threat to the payphone business.
6
Mobile phone subscribers in Dec.2003

Subscribers Mobinil Vodafone

Prepaid 2.325 million 2.160 million

Post-Paid 667,000 479,000

 Market share (volume bases)

Based on the retail auditing reports for all the prepaid cards the bellow table shows that the

prepaid payphone cards share is shrinking,

5
Ministry of Communication & Information Technology (MCIT) report Feb. 2004.
6
Mobinil marketing intelligence information Dec.2003

EMBA Cairo 11

Prepaid cards Market shares on
Brand Name Brand Share
Volume bases

March-April 2001 Prepaid Calling Scratch Card (PCC) 20.4 %

Public Payphones (PP) 72.9 %

GSM Operators (prepaid cards) 6.8 %

March-April 2002 Prepaid Calling Scratch Card (PCC) 28 .8 %



March-April 2004 Prepaid Calling Scratch Card (PCC) 33.8 %



Based on what was previously illustrated and using Porter forces techniques we can sum-up

the findings in the hereunder table, which shows that we are in a high attractive situation but

we need to hedge our future situation.

CURRENT FUTURE
PORTER FORCES Low Medium High Low Medium High
Barriers to entry X X
Barriers to exit X X
Rivalry among competitor X X
Power of buyers X X
Power of suppliers X X
Availability of substitutes X X
Government actions X X

4.1.3 External Environment Analysis findings

Using the external factor analysis summary (EFAS) to sum-up the analysis finding in the

hereunder table.

Opportunities
Weight Score Weighted Score Comment
Telecom Market Need to be part of
O1 0.150 4 0.60
Growth this growth
Prepare for now
End of TE monopoly
O2 0.050 3 0.15 opportunities (2nd.
2005
Operator)
More customers
O3 Increased tariff of TE 0.065 3 0.20
prefer prepaid

EMBA Cairo 12

Low interest rate &
O4 New monetary policy 0.030 3 0.09
investment cost
Lobby to fight illegal
New Telecom law &
O5 0.130 3 0.39 competition &
empowering TRA
balance TE power
Nile Telecom might Prepare to take their
O6 0.060 4 0.24
be out of market market share
Neighbour
O7 0.024 3 0.072 Exporting Experience
Developed country
Threats
Scratch market
T1 0.090 3 0.27 Due to new licenses
growth
Likely to continue
T2 Economy slowdown 0.075 3 0.225
during 2003
Floating of Egyptian Increased cards &
T3 0.075 3 0.225
pound spare parts' cost.
Lobby to solve
T4 TE power still high 0.100 3 0.30 disputes to our
favour.
New payphone
Nile Telecom might
T5 0.050 3 0.15 license (Unknown
go bankruptcy
competitor)
Increased number of Illegal competition of
T6 0.075 3 0.225
substitutes street mobile
Middle East political Iraqi war and
T7 0.026 2 0.052
instability Palestine conflict.
Total 1.00 3.189

I believe that Menatel performance is average we need to move faster to seize current

opportunities.

4-2 Internal Environment Analysis

4.2.1 Firm analysis

 Menatel Vision.

To be the leaders in Egypt in the field of public pay-phone service as well as the leader as

smart card issuer.

 Menatel Goals,

Exceptional customer satisfaction.

Inspired, Innovative and Empowered Employees.

Superior Financial Results.

 Menatel Values,

Customer First:

In order to achieve total customer satisfaction, we anticipate, perceive, fulfil and exceed our

customer’s needs and expectations.

Integrity In All We Do:

Our actions and decisions seek the highest professional standards.

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Excellence Through Quality:

We individually and collectively use Menatel quality in our daily activities to achieve

excellence as a company.

Respect For Others:

We care for our company, our work, and our customers as well as we care for each other.

This caring is the unique source of our company’s energy, strength and excellence.

Respect For Our Environment:

We do not pollute. We maintain perfect cleanliness for our equipment and use energy saving

technology.

Growth through change:

We will grow as a company, as individuals and as professionals by aspiring towards change,

and responding to it creatively.

4.2.2 Internal Resource & Competences

 Resources

The key success of Menatel is that Menatel manages all its resources tangible and intangible

in a way that optimizes maximum use of all the resources to gain maximum efficient use of

them.

 Tangible Resources

Financial Assets

Menatel managed to maximize the use of its negative working capital situation by conducting

a very aggressive approach that lead to breaking even 8 months ahead of plans. This in turn

yielded in a remarkable high ROE of 40 %, as the source of investment was the recycle of

excess cash flow.

Physical Assets

As Menatel successfully managed to optimize the use of its physical assets (LAN, Payphones

Network, Branches) to achieve effective communication between all employees which

facilitated running the project in a productive and efficient way. Also, Menatel managed to

optimize the use of its database (Menaprod) achieving full management of the business,

which means conducting and analyzing its results.

 Intangible Resources

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Human Resources

Menatel recruitment policy is to recruit self-motivated and business oriented stuff to ensure

quality and productivity in the workflow. Also, Menatel conducts a semi - annual employee’s

objective - appraisal by which Menatel aims at:

1. Measuring employee’s skills and performance in coherence with Menatel objective.

2. Determining whether new or different tasks need to be added or adjusted.

3. Nominating the needed courses, training or workshops in coherence with the new

tasks added or modified.

Technology

1. Menatel System Technology

Menatel uses on-line payphone management system (Centralize Management Network)

unlike the off-line system; it provides a remote monitoring of equipment, which allows on site

maintenance in real time by Menatel employees.

2. Smart Card Technology

Menatel uses smart cards, which are the highest existing technology for cards not only for

Payphones but also, for Banks and Mobiles.

Reputation

Through its lifetime in the Egyptian market Menatel obtained a good reputation through very

distinctive services to its customer:

1. Using the most advanced technology in the market.

2. Dedicating six customer service-centres to achieve total customer satisfaction.

3. Guarantying high quality service to its payphones in field by Menatel highly-

trained team of technicians.

4. Safeguard environment by a high quality of cleaning and maintenance to

Menatel booths in field on daily basis by a sub-contractor.

5. Adhering to its financial commitments towards Governmental Institutions,

subcontractors and suppliers.

 Competences

Sales & Distribution Policy

Menatel Policy for sales & distribution based on three main trends:-

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1. Cards distributed through Main Distributors (7 Main Dis.)

2. Cards distributed through Sub Distributors (12 Sub Dis.)

3. Cards distributed through Menatel Sales Force (130 Sales Rep.)

This allows Menatel to cover 26 Governorates and 45,000 sales point to insure availability of

Menatel Card everywhere.

Customer Service

Menatel ensures a customer service hot line, only dedicated to receiving customer’s calls in

order to help the users and receive their comments on commercial or technical aspects

through 6 Customers Centers covering all of Egypt.

Maintenance

Maintenance is ensured by highly trained groups of Egyptians Engineers supported by French

Experts, highly trained and skilled technicians, and equipped by the highest on-line

technology to monitor and maintain Menatel payphones network all over Egypt.

Booth & Pedestal

Menatel Booth and pedestals are in stainless steel, specially designed to prevent shocks and

rust. Menatel’s Booth & Pedestals are locally manufactured.

Menatel is not required to further dig in order to connect to the light post in streets, for

telephone use. The power needed by the payphones line itself is at low energy thanks to the

chip memory used by Menatel. This provides 100 % safety to our customers since they face

no risk of electric shock.

4.2.3 Supply and Value chain analysis

 Supply chain

Menatel suppliers are categorized by three types, the first one is the only fixed line supplier

(Telecom Egypt), the second is all the domestic suppliers, and the third is all the foreign

suppliers (mainly Menatel cards, payphones, and spare parts) Menatel manages this process

through two systems, the first system process can be described as follows; it started by the

payphone distribution department to request directly the lines from TE through a committee

by a paper request, then to forward the retain lines to the PMS division for creating new lines

IDs and then to be send to maintenance division to be received on the out-door distribution

boxes, all these steps are by sharing Menatel data base (Menaprod). For the second and the

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third supplier providing Menatel with all the equipments needed to have a payphone In-

Operation, Menatel second system process is based on sending a purchase order (PO) to the

supplier after the approval of the purchase requisition (PR) of the concerned division. The

logistic (WH) is to receive the orders and dispatch them each to its concerned division, mainly

to the distribution cards division (Menatel cards), and production division (payphones, booths

& pedestals, and spar parts). This is done by a normal logistic paper work cycle, and all the

data transaction is saved on Menatel data base (Menaprod).The diagram of annex (9-6)

shows Menatel supply chain.

 Value chain

The diagram of annex (9-7) shows Menatel value chain. The system start with the commercial

agents survey to allocate best locations according to Menatel code, the commercial agents

update Menaprod (ORACLE designed data base) with these locations technical data (adders,

type) in the commercial field, request fixed lines for these locations by manual system (paper

request) using Fax technology, and update line request table (date, invoice number). As the

lines retained by TE (the sole provider of fixed lines) the commercial agents update Menaprod

(line retain date). The PMS (payphone management system) creates these lines and

characterizes them by IDs in the PMS Field of Menaprod, and at the same time, public

relation team requests digging permits from districts authorities using manual system

(papers). At this stage also the maintenance team starts receiving lines. When digging

permits are obtained the PR team updates Menaprod with digging date, this will generate civil

work needed report, and the production team generates this report by using production team

field on Menaprod. In the same time logistics receive orders to deliver equipments to Menatel

subcontractors (manual system). The production team follows all installation steps till all

equipments are installed, updating all the concerned dates waiting for maintenance team to

receive line date to finally installing the payphones. As the payphone is In Operation (PMS

team provides daily reports of the new payphones IO), the maintenance team updates

Menaprod with IO date, and thus closing the Menaprod cycle.

Menatel recognizes that the operation cost is an important element to have a competitive

advantage. Menatel strategy is to get the job done, to achieve Menatel target as fast as we

can and in the same time controlling the operation cost, and accelerating the production

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outputs. Menatel succeeded in achieving more than what was expected, and by starting the

operation four month behind the direct competitor we managed to put the first 20,000

payphones in operation all over Egypt two years ahead our schedule, this puts Menatel in a

strong financial and commercial position.

4.2.4 IT analysis

 Menatel LAN and communication organization

Menatel operates four different branches to ensure closer look at the consumers natures and

behaviors, all linked with the HQ by domestic WAN using frame relay technology in a star

connection, this ensures direct and on-line communication among all levels of the

organization. In addition to this desk communication, all menatel staff is provided with mobile

lines using GSM technology to ensure effective communication for out-door sites. Menatel

also has a reporting system (weekly & monthly) to share internal information between

different levels, and meetings system to share information between different departments.

This is to ensure effective communication at all directions of the organization. This kind of

organization saves Menatel time and money, and provides Menatel with the flexibility to any

technological change requirements.

 Data base (Menaprod)

Menatel designs, operates and installs a data base (Menaprod) shared to all Menatel

operation activities commercial, production, public relation, PMS, maintenance, branches, and

financial. The Menaprod (designed and built by ORACLE) enhances production process and

accelerates having payphones in-operation. One of Menatel managers is dedicated to

maintaining the effectiveness and efficiency of Menaprod, also operating daily updating to

Menaprod and weekly backup to the data for hedging risks.

 PMS (payphones management system)

Payphone management system, regarding the fact that Menatel strategy is to ensure superior

service, it decided, from the start, to operate and manage its network by using Ascom V7

technology, that enabled Menatel to monitor payphones, on-line, effectively, and efficiently.

This increases the total in-operation time for payphones, and provides Menatel with a wide

variety of options and promotions to the customers, that means a marketing advantage, i.e.

more customers, and more revenue.

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 Service Quality

Maintenance operation is one of Menatel core competences, the maintenance team main

activities are; receiving lines, solving payphones incidents, following booth maintenance and

cleaning, and managing Menatel spare parts.

4.2.5 Leadership & Management

Menatel leadership and top management describe the MD and the five directors who control

the steering wheel of Menatel, recently and due to the lack of the MD role in maintaining

Menatel soul and culture, as well as the straggle of power and authority among the five

directors, which resulted in five isolated islands managed by different styles with no synergy

among them. Knowing that, Menatel family spirit was a key element of Menatel success story

and that to have payphones in-operation depends on full commitment and effective

communication among all departments, thus, explain the importance of the leadership role in

maintaining Menatel performance level. I strongly believe that Menatel leadership and top

management weakness affect the continuity of Menatel operational process synergy and is a

major reason of Menatel performance drop.

By the above discussions of all the points related to Menatel performance in all its internal

activities and departments we can sum-up all Menatel performance in the following table:

PERFORMANCE IMPORTANCE
Strength Weakness High Med Low

FINANCE
 Cost or availability of capital  
 Cash flow  
 Financial stability  
 HR & administration 4 H
 IT management 4 H

COMMERCIAL
 Company reputation  
 Market share  
 Customer satisfaction  
 Customer retention  
 Product quality  
 Pricing effectiveness  
 Distribution effectiveness 4 
 Promotion effectiveness  
 Sales force effectiveness  
 Innovation effectiveness  
 Geographical coverage  

TECHNICAL
 Service quality  
 Booth shape maintenance 4 
 Payphone technology  

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 Card technology  

ORGANIZATION
 Visionary, capable leadership 4 
 Dedicated employees 4 
 Entrepreneur orientation  
 Flexible or responsive  

LOGISTIGS
 Security & premises  
 Purchases system 4 
 Warehouse system  
 Transportation & vehicles 4 

BUSINESS DEVELOPMENT (R&D)
 New projects 4 
 Auditing process 4 
 New business indicators 4 

4-3 Internal Environment Analysis findings

Using the internal factor analysis summary (EFAS) to sum-up the analysis finding in the

hereunder table rating Menatel strengths and weakness in away that prioritize them to have

better view and analysis.

Strengths
Weight Score Weighted Score Comment
Learn from related
Strong management
S1 0.075 4 0.30 experiences &
with FCR know-how.
benchmarking
Established Considered one of the best
S2 0.050 4 0.20
distribution network. in Egypt
Market leader & Dominant company
S3 0.075 3 0.225
strong brand name position.
Strong financial Cash method, no credit
S4 0.080 5 0.40
position. policy.
High quality of service Need to be maintained,
S5 0.045 4 0.18
& coverage competitive advantage.
Utilized functional & matrix
S6 Slim organization 0.035 3 0.105
organization.
Deep knowledge of
Ability to meet new
S7 Indirect competitors 0.060 4 0.24
challenges in the market.
business economics
Highly trained & Ability to be export
S8 0.080 5 0.40
skilled employees expertise
Weaknesses
Stagnant organization, New Dept's needed, start
W1 0.090 2 0.18
no clear career path. with HR.
Customer service
W2 0.060 2 0.12 Call center is needed
function not utilized
Marketing less
Market watch, market
W3 structured & unclear 0.100 3 0.30
analysis, & PR
strategy
Expenditures are
W4 affected by exchange 0.060 3 0.18 Seek hedging tools.
rate.
W5 Spare parts shortage 0.060 3 0.18 Strategic stock needed

EMBA Cairo 20

Distributors’ Avoid out of stock
W6 0.055 3 0.165
coordination. situations
Maintenance vehicles Revisit cars' policy &
W7 0.025 3 0.075
operating cost control procedures
Premises needs Limited org. growth
W8 0.050 3 0.15
expansion potentials
Total 1.00 3.40

The analysis shows that menatel is doing slightly over average, but I strongly believe that

menatel can do better if we work or try to eliminate our weakness and I strongly recommend

that the key to this is HR and people management developments along with internal synergy.

4-4 SWOT matrix of Menatel

Getting Menatel through SWOT analysis will help better view the Opportunity or Threat arising

from current market conditions.

STRENGTHS WEAKNESSES

 Strong management with
 Stagnant Organization,
FCR know-how.
Unclear Career path.
 Market Leader & Strong
 Marketing less structured &
Brand Name.
Unclear Strategy.
 Strong financial position.

OPPORTUNITIES SO Strategies WO Strategies
 New Strategic Plan aiming at
exploring the expected
opportunities in Telecom
 Revisit Org. Chart
 Telecom Market Growth market.
 Revisit marketing functions.
 New Telecom Law & Empowering  Benefit from our cash position
 Revisit Customer Service &
TRA to finance our development
Card Distribution.
plans
 Second Operator as strategic
Target after 2005
THREATS ST Strategies WT Strategies

 Side effects of economic
New strategy to be adapted under
recession & decreased
consideration:
buying power.
 Slow growth with close
 Economy slow down.  Staff frustration and
monitoring to the market.
 Floating of Egyptian Pound. decrease of productivity
 Advanced hedging &
 Increasing number of substitutes and efficiency
financing techniques.
 Consumers attracted by
 Advanced marketing & Sales
lower priced substitutes, we
Techniques.
might face price wars.

By the SWOT analysis Menatel strategic alternatives are:

 New strategies aiming at exploring the expected opportunities in telecom market

 Benefit from our cash position to finance our developments plans

 Second operator as strategic target after 2005

 Slow growth with close monitoring to the market

 Advanced hedging & financial techniques

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 Advanced marketing & sales techniques

 Revisit Org. Chart

 Revisit marketing functions

 Revisit Customer Service & Card Distribution

 Side effects of economic recession & decreased purchasing power

 Staff frustration and decrease of productivity and efficiency

 Consumers attracted by lower priced substitutes, we might face price wars

5- STRATEGY FORMULATION

The SWOT analysis has some weakness by itself, that it shows no prioritization of the

findings or weight. To solve this weakness a new matrix has been developed, which is the

SFAS matrix.

5-1 Strategic factor analysis summary (SFAS)

Working on both EFAS & IFAS findings and ratings we can sum-up both in the following table:

Weighted Duration
Strategic factors Weight Score Comment
Score Short Intermediate Long
Follow a corporate
O1 Telecom Market Growth 0.150 4 0.60 X X X
growth strategy.
New potential
New Telecom. Law &
O5 0.130 3 0.39 X opportunities in
Empowering TRA
Telecom Market.
Slow growth with
T2 Economy slowdown 0.075 3 0.23 X X
close monitoring.
Cost Efficiency
T3 Floating of Egyptian pound 0.100 3 0.30 X policy & Hedging
Techniques.
Increased Number of Advanced Marketing
T6 0.075 3 0.23 X
Substitutes & Sales Techniques.
Strong management with FCR Maintain parenting
S1 0.090 4 0.36 X
know-how. relationship
Market Leader& Strong Brand Maintain position
S3 0.100 3 0.30 X X
Name and capitalize on it.
Avoid high financial
S4 Strong financial position. 0.100 5 0.50 X X exposure in hard
currency.
Stagnant organization, no Complete org.
W1 0.080 2 0.16 X
clear career path. structure.
Marketing less structured & Refine marketing
W3 0.100 3 0.30 X X
Unclear Strategy. strategy &Tools.
Total 1.00 3.36

Revising Menatel mission and objectives to see if the findings of the analysis and the

strategic alternatives implementation will match, we can rephrase Menatel mission and

objectives as follows:

5-2 Menatel rephrased mission

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To invest in the telecom market by providing high quality voice communication to the out-door

consumers all over Egypt.

5-3 Menatel vision

To be the leader in smart card prepaid payphone business.

5-4 Menatel rephrased objectives

 Extend menatel network to become 33,000 payphones by the end of 2008.

 Maintain average revenue of 32 LE/PP/day over the year.

 Maintain 60 % of payphones distribution market share.

 Maintain quality of service of 97 %.

 Low revenue payphones should not exceed 10 % of total number of payphones in-

operation with revenues per month.

 Reallocate payphones with revenue of less than 30 % of the average revenue per

area without losing locations.

 Extend distribution channels by increasing sales points by 20 % annually.

 Maintain ROI of 12 %.

 Maintain ROE of 30 %.

 Maintain NPM of 16 %.

5-5 Menatel strategies

Menatel is considered a small to medium size company that is why menatel corporate and

business strategies are not separated and actually we can consider both strategies are the

same. Menatel global strategy is to ensure payphones wherever needed and reachable points

of sales distributed around Menatel payphones to ensure an effective availability to Menatel

customers.

5.4.1 Corporate and Business strategy

 Corporate growth strategy by expanding Menatel network with new off-line

payphones.

 Business competitive strategy by being unique towards competitors through:

Payphones distribution.

Cards availability everywhere.

Skilled management.

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Total quality payphones services.

5.4.2 Functional strategy

 Marketing strategy;

Possession; to use market development strategy by developing new market

(small and medium villages).

Product; to use product development strategy by introducing new payphone

type (off-line payphones).

Promotions; to use a pull strategy by increasing our advertisings to increase

customers’ demands.

Price; to use no change strategy by applying the same service tariff.

 Financial strategy;

To use an autarky strategy by not relying on borrowing and Long-term debts

as a source of capital.

To use a hedging strategy by minimising the exchange rate volatility risk.

 R&D Strategy;

To use technological leader strategy by being pioneer in interring new

services (obtaining new licenses).

 Operations strategy;

To use continuous improvement strategy by increasing Menatel employees

experience and knowledge and process standardization.

 Purchasing strategy;

To use a multiple sourcing strategy by having more than one source for

Menatel purchasing needs and depending on high quality local suppliers .

 Logistic strategy;

To use centralized strategy by delivering all Menatel equipments and cards to

contractors and distributors through Menatel warehouse located in the head-

quarter.

 (HRM) strategy;

To use quality strategy by recruiting highly skilled and trained employees.

 Information system strategy;

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To use superior quality strategy by using high quality reliable equipments.

To use internal and external customer satisfaction strategy by operating On-

Line payphone system to have high quality after sales services.

To use effective communication strategy by enhancing internal connections

building strong data base and efficient networks.

5-6 Policies & Values

 Policies.

Market share growth.

Resources optimization.

Cost control.

Preventive maintenance.

Process standardization.

 Values.

Enjoy communication with passion.

Feel, Think, and Act as number one.

Be ready

Create value $.

Perform Together.

6- STRATEGY IMPLEMENTATION

6-1 Programs

 Reallocation program.

 Levelling and restructuring organisation program.

 Off-line payphone program.

6-2 Budgets

 1,000,000 LE will be allocated to the reallocation program about 20 % out of the

maintenance budget to reallocate 1000 payphone annually.

 1,200,000 LE will be allocated to the levelling and restructuring organisation program

about 4 % of the G&A budget to revise all Menatel salaries and positions and

EMBA Cairo 25

reengineer Menatel current organisation structure to cope with Menatel strategy and

future expectations.

 6,000,000 LE will be allocated to the Off-line payphone program about 12 % out of

the retained earnings to put 1000 payphones In-Operation annually.

Cost effective analysis for three years of the programs, by the end of 2008.

With programs executed
Items Without programs
optimistic Most likely pessimistic

Revenue (increase) 0 65,700,000 LE 49,275,000 LE 32,850,000 LE

Relevant cost
0 22,200,000 LE 22,200,000 LE 22,200,000 LE
(increase)

Training & HR cost 0 3,000,000 LE 3,000,000 LE 3,000,000 LE

profit 0 40,500,000 24,075,000 LE -1,935,000 LE

6-3 Procedures & Action plans

 Reallocation program.

Program objective

Is to reallocate 1000 Menatel PD2 locations (locations with 2 payphones) with average

revenue for both payphones les than 30 LE/day/location to new locations PD1 (locations with

1 payphone) with expected revenue more than 25 LE/day/payphone within a budget of

1,000,000 LE per year.

Program activities

1. Revenue analysis to determine the PD2 locations to be transfer to new location

2. New locations survey and updating the data base

3. Checking the network and digging permits availability

4. Request lines transfer

5. Request digging permits

6. Receiving retain lines

7. Start civil work

8. Install booths and put payphone in-operation

EMBA Cairo 26

9. Monitor new location in terms of revenue.

Action steps Responsibility Start End Duration

1-  Collecting data  PMS team 1/1/2005 7/1/2005 Quarterly

 Analysing data  Commercial team 8/1/2005 15/1/2005 Quarterly

 List of low revenue PD2  Commercial team 15/1/2005 15/1/2005 Quarterly

 Distribute to Branches  Commercial team 16/1/2005 16/1/2005 Quarterly

2-  Survey new location  Commercial agents 1/1/2005 14/1/2005 Monthly

 Revise with managers  Payphone distribution Mg. 15/1/2005 16/1/2005 Monthly

 Update Menaprod  Commercial agents 16/1/2005 16/1/2005 Monthly

3-  Checking network availability  Maintenance team 17/1/2005 21/1/2005 Monthly

 Checking digging availability  Public relation team 17/1/2005 21/1/2005 Monthly

 Report to commercial  Maintenance supervisor 22/1/2005 22/1/2005 Monthly

4-  Request line transfer  Commercial agent 22/1/2005 26/1/2005 Monthly

 Follow line transfer with TE  Commercial agent 27/1/2005 27/1/2005 Monthly

 Update line retain on Menaprod  Commercial agent 27/1/2005 27/1/2005 Monthly

 Report to maintenance supervisor  Commercial agent 27/1/2005 27/1/2005 Monthly

5-  Request digging permits  PR team with subcontractors 22/1/2005 26/1/2005 Monthly

 Follow digging request  PR team 27/1/2005 27/12005 Monthly

 Report digging obtained  Production supervisor 27/1/2005 27/12005 Monthly

 Update digging permits on Menaprod  Production supervisor 27/1/2005 27/1/2005 Monthly

6-  Create new lines ID  PMS team 27/1/2005 27/1/2005 Monthly

 Receiving lines retain  Maintenance team 28/1/2005 29/1/2005 Monthly

 Update lines received  Maintenance team 29/1/2005 29/1/2005 Monthly

7-  Civil work order  Production supervisor 27/1/2008 28/1/2005 Monthly

 Update on Menaprod  Production supervisor 28/1/2005 28/1/2005 Monthly

8-  Old ID closed & initialize new ID  PMS team 28/1/2005 28/1/2005 Monthly

 Install booths order  Production supervisor 28/1/2005 29/1/2005 Monthly

 Install payphone order  Production supervisor 29/1/2005 30/1/2005 Monthly

 Update Menaprod  Production & maintenance supervisor 30/1/2005 30/1/2005 Monthly

9-  Collecting data  PMS team 1/2/2005 1/2/2005 Weekly

 Analysis of data  Commercial agent 1/2/2005 1/2/2005 Weekly

 Report to managers  Commercial agent 2/2/2005 3/2/2005 Weekly

 Report to top managers  Payphone distribution Mg. 3/2/3005 3/2/2005 Monthly

EMBA Cairo 27

 Levelling and restructuring organisation program.

Program objective

Is to revise Menatel salary policy and organisation structure and reengineer Menatel

organisation structure to cope with new strategy and to enhance staffing policy within a

budget of 1,200,000 LE.

Program activities

1. Identify 3 best HRM consultants for reengineering organisation structure.

2. Ask 3 HRM consultants to submit a proposal for the new structure and salary policy

plan.

3. Consultants present proposals to administration director.

4. Select best proposal and inform consultant.

5. Consultant present winning proposal to MD.

6. Implement new policy.

7. Measure and evaluate new policy.


1-  Review previous policy & structure  HR manager 1/1/2005 1/2/2005 One month

 Discuss with administration director  HR manager & Adm. Director 1/2/2005 5/2/2005 One week

 Decide on 3 HRM consultants  HR manager & Adm. Director 5/2/2005 12/5/2005 One week

2-  Write Menatel code and specifications  Adm. Director 12/2/2005 14/2/2005 Two days

 Write consultant request  HR manager 14/2/2005 14/2/2005 One day

 Contact consultants  HR manager 15/2/2005 15/2/2005 One day

 Send request to consultants  HR manager 16/2/2005 16/2/2005 One day

 Meet with consultants  HR manager 17-19/2/2005 19/2/2005 One day

3-  Consultants work on proposals  Consultant agency 20/2/2005 31/3/2005 Five weeks

 Consultants present proposals  Consultant agency 1/4/2005 7/4/2005 One week

4-  Select best proposal  HR manager & Adm. Director 7/4/2005 14/4/2005 One week

 Meet with winning proposal  HR manager & Adm. Director 15/4/2005 15/4/2005 One day

 Inform non winning consultants  HR manager 16/4/2005 16/4/2005 One day

5-  Fine-tune proposal  HR manager & Adm. Director 16/4/2005 18/4/2005 Two days

 Presentation to top management  Adm. Director & MD 20/4/2005 20/4/2005 One day

6-  Meeting with managers  Adm. Director & MD 21/4/2005 21/4/2005 One day

 Meeting with supervisors  Managers 22/4/2005 22/4/2005 One day

EMBA Cairo 28

 Meeting with staff  Supervisors 23/4/2005 23/4/2005 One day

 Formal announcement  HR manager & executive secretary 24/4/2005 24/4/2005 One day

7-  Internal customer satisfaction survey
 HR manager 30/7/2005 30/8/2005 Twice a year
 Evaluate performance
 HR manager & managers 1/1-30/6 30/1-30/7 Twice a year
 Compare monthly production
 managers Month ending Month ending monthly
improvements

 Off-line payphone program.

Program objective

The objective is to increase Menatel payphone coverage, by introducing the new off-line

payphones to small villages, and remote areas within a budget of 6,000,000 annual

investments.

Program activities

1. New locations survey and updating the data base

2. Checking the network and digging permits availability

3. Request new lines

4. Request digging permits

5. Receiving retain lines

6. Start civil work

7. Install booths and put payphone in-operation

8. Monitor new location in terms of revenue.


1-  Survey new location  Commercial agents 1/1/2005 14/1/2005 Monthly

 Revise with managers  Payphone distribution Mg. 15/1/2005 16/1/2005 Monthly

 Update Menaprod  Commercial agents 16/1/2005 16/1/2005 Monthly

2-  Checking network availability  Maintenance team 17/1/2005 21/1/2005 Monthly

 Checking digging availability  Public relation team 17/1/2005 21/1/2005 Monthly

 Report to commercial  Maintenance supervisor 22/1/2005 22/1/2005 Monthly

3-  Request line transfer  Commercial agent 22/1/2005 26/1/2005 Monthly

 Follow line transfer with TE  Commercial agent 27/1/2005 27/1/2005 Monthly

 Update line retain on Menaprod  Commercial agent 27/1/2005 27/1/2005 Monthly

 Report to maintenance supervisor  Commercial agent 27/1/2005 27/1/2005 Monthly

EMBA Cairo 29

4-  Request digging permits  PR team with subcontractors 22/1/2005 26/1/2005 Monthly

 Follow digging request  PR team 27/1/2005 27/12005 Monthly

 Report digging obtained  Production supervisor 27/1/2005 27/12005 Monthly

 Update digging permits on Menaprod  Production supervisor 27/1/2005 27/1/2005 Monthly

5-  Create new lines ID  PMS team 27/1/2005 27/1/2005 Monthly

 Receiving lines retain  Maintenance team 28/1/2005 29/1/2005 Monthly

 Update lines received  Maintenance team 29/1/2005 29/1/2005 Monthly

6-  Civil work order  Production supervisor 27/1/2008 28/1/2005 Monthly

 Update on Menaprod  Production supervisor 28/1/2005 28/1/2005 Monthly

7-  Old ID closed & initialize new ID  PMS team 28/1/2005 28/1/2005 Monthly

 Install booths order  Production supervisor 28/1/2005 29/1/2005 Monthly

 Install payphone order  Production supervisor 29/1/2005 30/1/2005 Monthly

 Update Menaprod  Production & maintenance supervisor 30/1/2005 30/1/2005 Monthly

8-  Collecting data  PMS team 1/2/2005 1/2/2005 Weekly

 Analysis of data  Commercial agent 1/2/2005 1/2/2005 Weekly

 Report to managers  Commercial agent 2/2/2005 3/2/2005 Weekly

 Report to top managers  Payphone distribution Mg. 3/2/3005 3/2/2005 Monthly

 Staffing and training

The HR department will provide the necessary training to all the involved persons to in reach

there skills. The table below shows the recommended programs for the involved persons.

Program Name Duration Target Audience Objective Cost
Understand the important of communications
Basic Communication 2 Days All Levels 225 LE/day/person
in the organization.
Getting around obstacles that prevent team
Teamwork 1 Day All Levels 225 LE/day/person
success and build an effective team.
Improving analysis skills for identifying
Problem Solving 2 Days All Levels problems and recommending creative 225 LE/day/person
solutions that help the organization.
Customer Orientation 3 Days All Levels Understand customer satisfaction. 225 LE/day/person
Understand the important of effective
Negotiation Skills 2 Days Commercial persons 225 LE/day/person
negotiation to the organization
Understand the role of supervisor, understand
Supervisory Skills 4 Days Supervisors 225 LE/day/person
people, how to manage people.
Understand quality and quality process;
Service Quality 2 Days Technicians understand the important of customer 225 LE/day/person
satisfaction.

EMBA Cairo 30

7- EVALUATION AND CONTROLLING

7-1 Preliminary controlling (input controlling).

Nominated quality control committee of technical, financial, and logistics departments is to

approve all Menatel purchases according to Menatel codes of quality.

7-2 Steering controlling (process controlling).

Menatel monthly performance report is to monitor and control Menatel performance and

strategy implementation during Menatel Senior Managers bimonthly meetings. The tables

below show the recommended measurements indicators of commercial, technical and

financial performance for monthly controlling and follow up.

 Operational monthly report.

Operational Monthly performance year 2003
objectives
indicators 1 2 3 4 5 6 7 8 9 10 11 12

Technical
Civil work Target
done(per pp) Achieved
Accumulated CW Target
done (per PP) Achieved
Target
Booths installed
Achieved
Target
Accumulated BI
Achieved
Availability Target
Network (% QS) Achieved
Payphones Target
installed Achieved
Target
Accumulated PPI
Achieved
Target
Payphones IO
Achieved
Accumulated PP Target
IO Achieved
Commercial
Target
Lines retain
Achieved
Target
Accumulated LR
Achieved
Lines transfer Target
reallocation Achieved
Target
Accumulated LTR
Achieved
Private locations Target
(Per line) Achieved
Accumulated PrL Target
(Per line) Achieved
Public locations Target
(Per line) Achieved
Accumulated PbL Target
(Per line) Achieved
Menatel 10 LE Target
soled (volume) Achieved
Accumulated 10 Target
LE soled (volume) Achieved

EMBA Cairo 31

Average Target
revenue/PP/day Achieved
Number of PP low Target
revenue Achieved
Target
Lines paid
Achieved
Target
Accumulated LP
Achieved

 Financial

Financial Monthly performance year 2003
objectives accumulated
indicators 1 2 3 4 5 6 7 8 9 10 11 12

Target
Sales (revenues)
Achieved
soled (value) Achieved
Net cash received Target
(millions LE) Achieved
Target
Expenditure
Achieved
Target
EBIT
Achieved
Target
Gross profit %
Achieved
Target
Net profit/loss %
Achieved
Target
OPM %
Achieved
Target
NPM %
Achieved
Target
ROI
Achieved
Target
ROE
Achieved

 Total Quality Feedback & control

In addition, we recommend to design a process for quality operation, the block diagram

bellow shows the recommended process guided by TQM philosophy that involves every one

of Menatel value chain including the contractors assigned for production, booth maintenance,

and cleaning, on continuous effort to improve quality and achieve customer satisfaction.

The process is based on that each block represents a step in the operation each step is

controlled and supervised by a person in charge, who knows his objective and collect the

results. Before and after each block or step a check quality test is done by random sampling

to insure quality at the source.

EMBA Cairo 32

Civil, Booth,
Payphone & Payphone Cleaning &
Line PMS Line Maintenance Booth
Request Installing Received Cabling
Installing & Spare Parts Maintenance

Quality Check Quality Check Quality Check Quality Check Quality Check Quality Check Quality Check
Test Test Test Test Test Test Test

Reporting System Reporting System
Reporting System Reporting System
Deviation Control
Reporting System

7-3 Feedback controlling (output controlling)

Menatel quarterly trend performance report is to monitor and control mental performance and

strategy implementation during a Board of Directors and Menatel MD quarterly meetings. The

tables below show the recommended measurements indicators of commercial, technical and

financial performance for quarterly controlling and follow up.

Operational (Technical/Commercial)

Quarterly trend performance year 2003
Operational Semester 1 Semester 2 Semester 3 Semester 4 Semester 1 Semester 2
objectives
indicators (31/3) (30/6) (30/9) (31/12) (31/3) (30/6)
2003 2004 2003 2004 2003 2004 2003 2004 2004 2005 2004 2005

Technical
Civil work Target
done(per pp) Achieved
Accumulated CW Target
done (per PP) Achieved
Target
Booths installed
Achieved
Target
Accumulated BI
Achieved
Availability Target
Network (% QS) Achieved
Payphones Target
installed Achieved
Target
Accumulated PPI
Achieved
Target
Payphones IO
Achieved
Accumulated PP Target
IO Achieved
Commercial
Target
Lines retain
Achieved

EMBA Cairo 33

Target
Accumulated LR
Achieved
Lines transfer Target
reallocation Achieved
Target
Accumulated LTR
Achieved
Private locations Target
(Per line) Achieved
Accumulated PrL Target
(Per line) Achieved
Public locations Target
(Per line) Achieved
Accumulated PbL Target
(Per line) Achieved
Average Target
revenue/PP/day Achieved
Number of PP low Target
revenue Achieved
Target
Lines paid
Achieved
Target
Accumulated LP
Achieved

Financial

Quarterly trend performance year 2003
Financial Semester 1 Semester 2 Semester 3 Semester 4 Semester 1 Semester 2
Objectives Accumulated
indicators (31/3) (30/6) (30/9) (31/12) (31/3) (30/6)
2003 2004 2003 2004 2003 2004 2003 2004 2004 2005 2004 2005

Sales Target
(revenues) Achieved
Net cash Target
received
Achieved
(millions LE)
Target
Expenditure
Achieved
Target
EBIT
Achieved
Target
Gross profit %
Achieved
Net profit/loss Target
% Achieved
Target
OPM %
Achieved
Target
NPM %
Achieved
Target
ROI
Achieved
Target
ROE
Achieved

EMBA Cairo 34

8- REFERENCES

 Menatel internal data, Annual report 1999-2003

 Thomas L. Wheelen & J. David Hunger, Strategic Management & Business policy,

Eighth Edition.2004.

 Philip Kotler, Marketing Management, Eleven Editions. 2003

 Fundamentals of Corporate Finance, Ross Westerfield Jordan, sixth edition, 2003

 Pre-reading materials & slides, Serge Oreal, July 2004

 Menatel retail audit reports 2001-2004 (MEMRB).

 www.idsc.gov.eg

 www.tra.gov.eg

 http://www.cia.gov/cia/publications/factbook/

 http://www.amcham.org.eg/

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9- ANNEXES

9-1 Menatel Balance sheets

As of December, 31, 2003, 2002, 2001, 2000, 1999

2003 2002 2001 2000 1999

Assets

Current assets

cash 178.2 160.21 107.01 63.14 12

Accounts receivable 25.68 37.79 43.18 31.48 4.47

Inventory 20.30 27.19 17.52 12.55 3.7

Total 224.3 225.2 167.7 107.18 21.9

Fixed assets

Net plant and equipment 205.85 215.04 191.9 141.72 79.93

Total assets 430.15 440.02 359.6 248.9 101.8

Liabilities & owners equity

Current liabilities

Accounts payable 243.79 266.08 170.53 109.1 9.12

Notes payable 13.25 13.25 6.18 4.7 6.8

Total 257.04 279.33 176.7 113.8 15.92

Long-term debt 33.13 46.37 55.65 52.9 36.44

Owners equity

Common stock 70 70 70 70 49.44

Retained earnings 69.98 44.32 57.34 12.12 0

Total 139.98 114.32 127.34 82.2 49.44

Total liabilities and owners equity 430.15 440.02 359.6 248.9 101.8

EMBA Cairo 36

9-2 Menatel Statements of cash flow

As December, 31, 2003, 2002, 2001, 2000, 1999

2003 2002 2001 2000 1999

Cash, beginning of the year 160.21 107.01 63.14 12 0

Sources of cash

Operation

Net income 25.66 46.77 49.93 11.85 -3.07

Depreciation 33.04 29.14 21.73 13.58 7.53

Total 58.70 75.91 71.66 25.49 4.46

Working capital

Increase in accounts payable -22.29 95.55 61.43 79.42 9.12

Long-term financing

Increase in common stock 0 0 0 20.56 56.88

Total sources of cash 36.41 171.46 133.09 149.32 70.46

Uses of cash

Working capital

Increase in accounts receivable -12.11 -5.40 11.70 27.01 4.47

Increase in inventory -6.89 9.67 4.97 8.85 3.7

Decrease in notes payable 0 7.07 1.48 -2.10 6.8

Long-term financing

Decrease in long-term debt 13.24 9.28 -2.75 -16.46 -36.44

Fixed assets acquisitions 9.19 23.14 50.18 61.79 79.93

Dividends paid 14.87 74.50 23.64 7.09 0

Total uses of cash 18.30 118.26 89.22 86.18 58.46

Cash end of the year 178.32 160.21 107.01 63.14 12

EMBA Cairo 37

9-3 Menatel Statements of income

For the fiscal year ended December, 31, 2003, 2002, 2001, 2000, 1999

2003 2002 2001 2000 1999

Sales (revenues) 321.9 351.44 295.22 196.88 39.75

Direct cost 222.1 239.43 184.1 132.77 29.15

Gross operating profit 94.8 112.01 111.12 64.11 10.6

Marketing & sales cost 33 37.94 34.8 27.02 2.7

G & A cost 29.97 27.2 23.92 19.04 6.6

EBIT 31.83 46.87 52.4 18.05 1.3

Net financial activities results 6.17 0.1 2.47 6.2 0.4

Other gains (loss) 0 0 0 0 2.17

Net profit 25.66 46.77 49.93 11.85 -3.07

Additional to retained earnings

9-4 Environment indicators

Environment

indicators Year to 1998A 1999A 2000A 2001A 2002A 2003A 2004F 2005F 2006F 2007F

December

GDP Growth (%) 3.3 4.9 5.1 3 3.2 3.2 4.1 5.5 - -

Inflation (%) 3.8 3.8 2.8 2.5 2.7 3.2 12 9 - -

FDI (million $) - 639 223.4 134.9 150.4 55.5 - - - -

Exchange rate
- 3.68 3.4 3.28 3.87 5.37 7.33 7.6 - -
(euro)

Exchange rate
3.39 3.4 3.45 3.85 4.5 6.03 6.2 6.51 - -
(dollar $)

Interest rate for 3
9 9.14 9.29 9.43 9.42 8.46 7.92 - - -
month (%)

Interest rate for
13.2 12.84 13.11 13.57 14.1 13.45 13.42 - - -
one year (%)

Per capita real

income growth 2.9 3.7 3.8 1.4 1.1 1.2 1.2 - - -

(%)

Population (m) 62.7 64.0 65.0 66.0 67.00 67.8 68.7 69.5 70.2 71.5

EMBA Cairo 38

9-5 Egyptian telecom sector structure
Incumbent Operator (Telecom Egypt)

Available capacity for telephone lines 11,500,000 lines

Total number of subscribers in service 9,000,000 lines

Total number of ISDN subscribers 14,771

Total number of DSL subscribers 6,131

Internet providers

Class A (carrier level internet provider) 4

Class B (data service provider) 8

Class C (internet service provider) 170

Free internet numbers 261

Total BW (international bandwidth) 1,214 Mbps

DSL ports 11,619

Total minutes 603,033,850

Mobile Providers

Mobinil
2 Mobile Networks
Vodafone

Total number of subscribers 5,950,285

Total stations 261

108 countries
Roaming (agreements with all operating countries)
262 operators

Satellite service providers

VSAT service 2 operators

GMPCS service 2 operators

Payphone companies

Number of companies 3

Number of payphones 47,377

International circuits

% of number of maritime cables international circuits to total 75.3 %

% of number of terrestrial cables international circuits to the total 1.81 %

% of number of satellite international circuits to the total 22.29 %

% of number microwave international circuits to the total 0.6 %

Total 100 %

Penetration rate

GSM 8.66 %

Fixed 13 %

Payphones 0.0695 %

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9-6 Menatel supply chain

Suppliers
Payphone PMS C

Maintenance
T/E distribution
U
S
Domestic T
W/H,
Logistics
Production O
Foreign
M
E
R
Menatel Distributors S
Menatel Supply Chain
Management

9-7 Menatel value chain

Logistics, manual and automated systems

Administration & management, Reporting and meeting system

Support
HR, computerized payroll system, manual procurement system Menatel
Activities Value chain

Accounting, computerized accounting system

IT, computerized-WAN, LANs system

Commercial Operation Cards sales Service Production
Primary survey

Activities Payphone Payphones
Manual management Manual maintenance Automated
system system (PMS) system system system

EMBA Cairo 40

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