Egypt — Collaboration with Mubarak costs Vodafone soccer sponsorship and fans

Lit­tle did Vodafone’s Egypt unit know what it was bar­gain­ing for when it inked a three-year $9 mil­lion spon­sor­ship deal with Al Ahly SC, Egypt and Africa’s most crowned soc­cer club, whose mil­i­tant sup­port­ers were in the fore­front of the pop­u­lar upris­ing that top­pled pres­i­dent Hos­ni Mubarak and have since spear­head­ed oppo­si­tion to his mil­i­tary suc­ces­sors.

What was designed as a mar­ket­ing and pub­lic rela­tions ploy to exploit the telecom­mu­ni­ca­tions provider’s asso­ci­a­tion with an insti­tu­tion that evokes deep-seat­ed emo­tions has instead land­ed Voda­fone in hot water with Egypt­ian soc­cer fans as well as the Euro­pean par­lia­ment. Adding insult to injury, Voda­fone Egypt lost its chance to buy back some of its evap­o­rat­ed good­will among soc­cer fans when it was out­bid at the end of its spon­sor­ship con­tract in late 2011 by the Unit­ed Arab Emi­rates telecom­mu­ni­ca­tions com­pa­ny Eti­salat.

Vodafone’s expe­ri­ence has become a case study as tele­com oper­a­tors in the Mid­dle East and North Africa brace them­selves for an extend­ed peri­od of polit­i­cal volatil­i­ty in a region stretch­ing from the Atlantic coast of Africa to the Gulf that is being swept by pop­u­lar protests.

The protests have put man­age­ment of the risk of polit­i­cal inter­fer­ence at the top of their agen­da and could call into ques­tion con­ces­sions that Black­ber­ry made in 2009 when it bowed to pres­sure ini­tial­ly from the UAE and Sau­di Ara­bia to sur­ren­der the codes for its secure instant mes­sen­ger. Vodafone’s major risk con­cern was pri­or to the anti-Mubarak protests ensur­ing the safe­ty of its per­son­nel in the case of a calami­ty or polit­i­cal upheaval.

Vodafone’s prob­lems start­ed when it agreed ear­ly last year at the peak of the protests that oust­ed Mr. Mubarak to first sus­pend ser­vices along­side all oth­er providers, and then in con­trast to oth­ers to broad­cast pro-gov­ern­ment text mes­sages that includ­ed an announce­ment of the time and place of a demon­stra­tion by sup­port­ers of the embat­tled Egypt­ian leader. The demon­stra­tion took place on a day on which 20 peo­ple were killed in clash­es with anti-gov­ern­ment demon­stra­tors on Cairo’s Tahrir Square where mil­i­tant, high­ly politi­cized, street-bat­tle hard­ened sup­port­ers of Al Ahly and its rival Al Zamalek SC manned the pro­test­ers’ front line.

Voda­fone, in which state-owned Tele­com Egypt (ETEL), the country’s fixed line monop­oly, has a 45 per cent stake, is feel­ing the impact of its col­lab­o­ra­tion with the Mubarak regime in its bot­tom line. “There’s still a very strong feel­ing of resent­ment and peo­ple still don’t like the role Voda­fone played,” Amr Ghar­beia, an activist at the Egypt­ian Ini­tia­tive for Per­son­al Rights in Cairo, told Bloomberg News. Mr.. Ghar­beia added that Egyp­tians have yet to see “prac­ti­cal mea­sures and reforms that guar­an­tee this is fixed,” mean­ing legal safe­guards against polit­i­cal­ly moti­vat­ed gov­ern­ment con­trol.

“Cut­ting the phones and inter­net meant that pro­test­ers who were being shot at could not call oth­ers and warn them about the snipers and their loca­tions,” said a soc­cer fan who was at the time on Tahrir Square.

Protests forced Voda­fone last year to with­draw a three-minute com­mer­cial, part of an adver­tise­ment cam­paign with the slo­gan Our Pow­er, that sought to white­wash the company’s assis­tance to the Mubarak regime. The com­mer­cial fea­tured images from protest ral­lies on Tahrir Square, assert­ing that Voda­fone “did­n’t send peo­ple to the streets, we did­n’t start the rev­o­lu­tion … We only remind­ed Egyp­tians how pow­er­ful they are.” It include screen shots of Face­book and Twit­ter mes­sages post­ed by Egyp­tians sup­port­ing Voda­fone fol­lowed by an audio record­ing of Mr. Mubarak’s res­ig­na­tion.

Vodafone’s acqui­si­tion of new clients has slowed in the last year to a trick­le com­pared to the peri­od pri­or to the anti-gov­ern­ment protests. While Voda­fone has seen its rev­enues ini­tial­ly go flat and since decline, France Tele­com, one of its main com­peti­tors is expand­ing its busi­ness despite polit­i­cal volatil­i­ty and Egypt’s eco­nom­ic prob­lems. The French com­pa­ny agreed last month to acquire bil­lion­aire Naguib Sawiri’s stake in its Egypt­ian wire­less oper­a­tions for $2 bil­lion.

Vodafone’s woes don’t stop at Egypt’s bor­ders. The Euro­pean Par­lia­ment in a bid to ensure that Euro­pean telecom­mu­ni­ca­tions providers are shield­ed from polit­i­cal pres­sures is prepar­ing to issue a report that calls for greater scruti­ny of telecom­mu­ni­ca­tion com­pa­nies. Oper­a­tors “must learn the lessons from past mis­takes, such as Vodafone’s deci­sion to give in to demands from the Egypt­ian author­i­ties in the last weeks of the Mubarak regime to sus­pend ser­vices, to dis­sem­i­nate pro-gov­ern­ment pro­pa­gan­da,” Bloomberg quot­ed the draft report as say­ing.

Pop­u­lar resent­ment against Voda­fone and the loss of its soc­cer spon­sor­ship deal has prompt­ed the com­pa­ny to pre-empt the Euro­pean parliament’s advice. Voda­fone has launched a lob­by­ing cam­paign to per­suade Egypt’s first post-Mubarak par­lia­ment to adopt leg­is­la­tion that would curb state con­trol and pro­tect its invest­ments. Voda­fone is urg­ing Telia­Son­era AB and Nokia Siemens Net­works to sup­port its cam­paign. The com­pa­ny is push­ing par­lia­ment to restrict con­trol of telecom­mu­ni­ca­tions net­works to the pres­i­dent and to ensure that only he has the author­i­ty to inter­fere and only on the basis of a Cab­i­net deci­sion.

The pro­pos­al is designed to pre­vent a repeat of last year’s sit­u­a­tion in which Voda­fone was ordered in a tele­phone call from the secu­ri­ty ser­vices to coop­er­ate with the gov­ern­ment. Voda­fone was told it could expect a vis­it from secu­ri­ty if it failed to com­ply.

“We’re lob­by­ing very hard,” said Voda­fone Egypt CEO Dowidar in a Bloomberg inter­view. He said that “no one in Egypt, not the pre­vi­ous regime, not the rev­o­lu­tion­ar­ies, not us, was pre­pared for what was hap­pen­ing” when the anti-Mubarak protests erupt­ed. Demon­stra­tors camped out on Tahrir Square for 18 days in Jan­u­ary and Feb­ru­ary of last until Mr. Mubarak had no choice but to resign after 30 years in office.

About The Author:
James M. Dorsey is a senior fel­low at the S. Rajarat­nam School of Inter­na­tion­al Stud­ies at Nanyang Tech­no­log­i­cal Uni­ver­si­ty in Sin­ga­pore and the author of the blog, The Tur­bu­lent World of Mid­dle East Soc­cer.