Bichara has called Italy his home since 2005. Close Up Rethinking Higher Education Notorious for producing graduates ill-equipped for the job market, universities are coming under greater scrutiny. The government will need to reach deep in the tool box to fix education. Is the free ride under threat Growing Pains Bickering aside, complaints surfacing at the German University in Cairo reveal some of the difficulties of importing foreign standards of education RethinkingHigher Education Notorious for producing graduates ill-equipped for the job market, universities are coming under greater scrutiny. The government will need to reach deep in the tool box to fix education. Is the free ride under threat? By Gianfranco Fainello Bichara has called Italy his home since 2005. By Omar Mohsen Bichara and his brother Karim sold out to Orascom Telecom, but Link maintains their own headquarters in Maadi. By Omar Mohsen Bichara at his work at Link.

By Hadia Mostafa, with reporting by Hania Moheeb in Rome

At the age of 35, Khaled Bichara has already achieved more than many executives do in a lifetime. The head of the fixed-line and portal unit of Wind (the Italian telecom operator that telecoms magnate Naguib Sawiris bought nearly two years ago), Bichara is also the chairman of LinkdotNet, the internet service provider (ISP) that he founded in 1995 and subsequently sold to Sawiris.

Just to keep busy, Bichara also holds seats on the boards of the Greek fixed-line operator Tellas and Orascom Telecom (OT), the parent company that runs all of Sawiris’ emerging-markets ventures.

Business Today Egypt caught up with Bichara in two consecutive interviews: one in Rome, where he has been running the Wind unit since 2005; and at Link’s Maadi headquarters in Cairo, where he tries to touch base at least once every couple of months.

Bichara’s easygoing nature has not changed much since the early days, when he was navigating uncharted waters as the head of a struggling start-up. But don’t let the unpretentious, boyish charm fool you: Bichara, who in 2003 bt named Egypt’s most interesting business leader under the age of 40, is as business savvy as they come.

In Italy, he managed to take competition that discounted him for both his youth and his Egyptian-ness completely by surprise by turning around Infostrada, Wind’s fixed-line business unit, from a dying entity that was losing 300,000-500,000 customers per year into a healthy, revenue-generating operation in just 12 months.

The prospect clearly amuses Bichara, who laughs at the irony of his situation.

“It wasn’t easy in the beginning. People were very skeptical about our capability to turn things around. They actually expected us to fail. It is always good in competition to be underestimated. It helps you to focus on your work.”

I first became involved with Wind around Easter 2005, when Naguib was consulting me on the due diligence process that led up to the acquisition. I remember working and traveling to Italy on weekends, then flying back to Cairo for Easter Sunday. Most of the others who were involved from OT came from the mobile side of the business so they basically wanted someone to put their two-cents in on fixed-line and internet.

I prepared a report that I shared with the previous CEO about what I thought should be done. Wind’s fixed-line business was clearly in trouble, it was bleeding both in terms of customer base and market share. The mobile side of the business on the other hand was doing phenomenally well and was thus carrying the fixed.

Wind was initially a mobile operation that acquired Infostrada, a Milan-based fixed-line company. After the acquisition, they lost 100% of Infostrada’s management, so they ended up with quite an unusual situation. The management of the mobile unit was running the fixed-line business as well. Obviously, that did not work because the two businesses are very different in terms of margins and cost structures. From day one, Naguib decided to split the two businesses. He just s ‘OK, I want you to go and manage Infostrada.’

No, not at all. I expected that I would be involved but only on a consultative basis, because in the past I have had the luxury of being consulted on any IP business within the group. I thought I would probably be visiting Italy once every quarter to help out and that would be the extent of it. The business is so much bigger than Link that I didn’t think they would think of me.

On a personal level, I never considered working outside Egypt, but I thought this would be a good opportunity and an interesting challenge. So I accepted a two-year assignment to basically relaunch Infostrada. If you look at our company’s footprint, Rome is probably not such a bad place to be in: I could have ended up in Iraq or Bangladesh, so I’m not complaining [laughs].

People were underestimating us a lot on all aspects — particularly fixed-line. They did not expect a serious and efficient attitude. They said ‘OK, those are guys coming from Egypt, OT is all about mobile and they don’t know what they are talking about.’ That’s why the title of my 2006 year-end report was ‘Against All Odds.’ But by Christmas 2006, we were the first Italian company to announce 1 million directly connected customers, even before Fastweb.

Initially much more so than now. There was all kinds of talk ranging from Khaled is Naguib’s son-in-law or Naguib’s first cousin [Editor’s Note: He is neither] to ‘They are linked to Hamas,’ ‘They are a Palestinian Fund [project],’ etc. In Ramadan, we had the press saying that we are changing working hours because of fasting. We have four Egyptians in the company, with only one guy who is fasting and he did not change his working hours [laughs].

But now that we have the best results in town, both with mobile and fixed, the press is much nicer. Now they are talking about Naguib the businessman and Orascom as a growing company. There was a BusinessWeek article a few months ago on the new multinationals and Orascom was one of them. That was received very well in the Italian press. I have seen a big shift in attitude.

It is the same everywhere; when a foreign company comes to acquire a business in Egypt, people are always suspicious. Italians think of us as Sharm El-Sheikh, diving, fun stuff — but when it comes to managing them and owning one of their biggest assets, naturally they are going to balk. Now there is not so much resistance. We didn’t employ a lot of non-Italians and we promoted a lot of people from within. It was just a matter of giving the right people the space to make a difference and the results have been good.

There are five main players in the Italian fixed-line market. The number-one player in terms of both revenue and market share is Telecom Italia. Infostrada and Fastweb have been vying for the number-two spot which, according to Bichara, is now firmly in Infostrada’s hands regardless of claims to the contrary made by Fastweb.

In the telecommunications business, customers are often divided into two categories: direct access customers and indirect access customers. Direct customers access services (such as telephony, internet or TV) directly through a primary connection to your network, while indirect customers access your services through the “gateway” of another company. Although indirect customers are easier to obtain, their overall profitability is lower as profit margins are eroded by the need to pay an interconnect fee to the “gateway” company. Direct customers are costlier and more difficult to attract, but more profitable and attractive in the long run.

Bichara says that Infostrada, with 1.6 billion in revenue and 1 million direct customers in addition to another 1.3 million indirect customers and both DSL and dial-up services, is the clear second after Telecom Italia.

Infostrada is now fully focused on direct customers. In 2006, we were, for the first time, able to retain the same number of customers versus 2005, so we are OK. This year will be the first year that we grow in revenue but it will be much more challenging because the competition has their eye on us; we don’t have the luxury to work unwatched any longer. We promised a lot of financial, customer-based and de-leveraging targets and we have achieved or overachieved on every single one of them.

When I first went to Italy in August 2005, we were not even on the radar screen. Today, Deutsche Bank’s most recent report on the Italian telecom sector which went out a week ago indicated a decreasing price target for Fastweb shares citing Wind as serious competition.

To me, this is huge. They are one of the big players worldwide; whenever you read or hear about triple play [telecommunications industry term for the delivery of three main services — internet, television and telephony — over one connection] the name Fastweb is always mentioned. The incumbent, Telecom Italia, has one of the highest market shares of an incumbent in all of Europe. So we did not really choose the easiest market to compete in, but this is the company that was available.

The change of management/ownership; it was the change from an investment owner to an industrial owner that made the biggest difference. The owner is now someone who understands the business. We did not make a lot of personnel changes inside the company — the difference is just that they now have to be accountable. Most of the changes were made in upper management. Out of the top 10 managers there is only one who was there originally, the head of the mobile unit. CEO, regulatory, HR, finance, legal, fixed everybody changed.

There are three Egyptians and one Lebanese, everyone else is Italian. Tarek Abu-Alam, who used to work for TE Data, now works for me in fixed; Maged Wadi’, the former head of procurement for Iraqna, is now our head of procurement and purchasing; and myself, are the three Egyptians. Waleed Tomei, who comes from OT Algeria, is now the Chief Technology Officer and he is Lebanese.

I was realistic from day one, I said I am not going to learn any Italian; we will have to stick to English. If I know the context of the discussion I can understand fairly well because I speak French, but all internal communication is in English.

In terms of culture, it has not been very difficult to adjust because it’s not that different from Egypt, which was a bit of a surprise to us. If you don’t push, things don’t get done, particularly because the former owner was the electricity company. Like any government-owned company the culture was relaxed; send the right emails rather than do the right work so we had to push very hard for results. I guess if you compare the work culture in Egypt, Italy and Germany, you’ll probably find Italy closer to Egypt than to Germany.

As for the market, it is different. It’s a very big market, tenders and volume are big and the purchasing power is high. At the end of the day no matter how good you are you’re limited by how big or small the market is. When you look at our business clients like banks for example, the smallest bank in Italy is as big in terms of branches as the largest banks in Egypt, so tenders are much more serious.

I expected to learn a lot more from the company than I did, but Wind was really more of a mobile company. Initially we thought we would be going in to copy what they do and implement it in Link and other fixed-line subsidiaries, but it has been more two-way than expected. Most of the work has been a collaboration between us and the local team.

As a board member of the Wind subsidiary, Tellas, the second largest fixed-line operator in Greece, Bichara was also responsible for the recent relaunch of that company. Like Infostrada he redirected the focus to direct access customers and is now overseeing the operation on a regular basis. Sawiris’ recent acquisition of the Greek mobile operator TIM Hellas has furthered the company’s footprint in Greece and will enable them to take steps to consolidate the two businesses.

Naguib is always one or two steps ahead of us in terms of announcements. He has stated that he wants to take steps toward integrating the two businesses, which is great, but the local electricity company still owns 49% of Tellas, so we can’t really integrate that much until we either buy them out or reach some sort of an agreement, which we are currently working on. Having the government as a partner means that decision making speed and appetite for risk are very different. We have, however, managed to change Tellas from being a 100% indirect company to the leading direct access company in just one year. We now have a huge waiting list of people wanting to leave the incumbent and come to us.

It’s basically the same thing that we have done in Italy. We based our pricing on customer need rather than what is easiest for us. We now have three types of customers and we have created three different pricing packages: unlimited phone calls inside Greece and pay per use DSL, unlimited DSL and pay per use phone calls or unlimited DSL and phone calls. Initially there was some resistance to this formula within the company, but we managed to launch and we have had phenomenal success. In fact, we can’t get lines fast enough.

Less than a month ago, the regulator gave the incumbent — who was slowing us down in terms of making lines available — rules on how fast they have to deliver. They will now be fined 10 per line per day if they don’t meet the deadlines. It’s the first time that the Greek regulator has been that aggressive with the incumbent.

In the current phase we have to keep the two companies separate. But we are looking at synergies in cross-selling and common promotions. TIM has a lot of retail outlets so we are looking into whether or not Tellas can make use of them. Once we reach a clear strategy on the ownership of Tellas, then I think even more synergies can be extracted. But to be fair, even in Italy where we have both businesses, we see convergence as something that will eventually happen. There is no huge business coming out of convergence right now.

I don’t think customers really care about the technological possibilities that are available regarding convergence. Unless I tell you I will give you better coverage or a better price per minute you will not care if your mobile shifts from the GSM network to the WiFi network. What we are doing in Wind is more tariff convergence, cross-selling and special rates.

Not with the very small companies. At Wind we do 5 billion in revenue per year, so I don’t think consolidating small companies will work for us. But Naguib has said several times that he is willing to acquire Fastweb or Tiscali if the price is right and every time he says that, the price goes up. But eventually it will come down to more realistic pricing. I believe that there will be consolidation in the market — we will acquire someone and others will come together. I am talking about fixed-line companies. For mobile there are only four companies so there is no real space for consolidation. In a country like Italy with 100% penetration, four companies is not bad. Wind is the third player with 14 million customers, which is pretty good.

This is neither Link nor Wind, it’s an Orascom initiative. Part of what we inherited in Wind was a source code for a search engine called Ariana fully developed by Wind in cooperation with some of the universities in Italy. It is still powering some of the searches in Libero (the number-one portal in Italy owned by Wind) but not a lot because Libero has now partnered with Google. We thought that we could take that code base to Egypt and rebuild on it with Arabic. The investment is not huge because the bulk of it is already an asset that we own. It’s now called Onkosh.com and it’s already live in beta. It has some very interesting features, including transliteration. You can write in English, it will translate for you in Arabic and search in Arabic so even if you have an English keyboard you can use it. The index is not yet complete, but we are working on it. We have launched the mobile version of it as well. So I am over-viewing the project for Naguib.

It’s like we have been saying; we will be leveraging the inter-group assets wherever possible. Some assets in Italy like this search engine would have been a little bit behind because Google is already huge, but in our region it has very good potential. Google has an Arabic search engine but we don’t think it is that strong.

Well I went in September 2005 so I should leave in September 2007, but I will probably stay an extra few months to close out the year.

The goal has always been to turn the company into a fixed-line direct business. So I want to make sure that I have more direct than indirect customers before I go. We have already stopped the bleed and I think by the middle of this year we will have more direct customers and revenue than indirect. By then I think I will be a happy man and I can go home. I do want to come back to Link, that is the plan for now, but Orascom is very dynamic so I don’t know what will happen.

[Bichara laughs] It’s a bid in progress so I can’t comment much on that other than to say that we are still very clearly within our strategy. Brazil is a high-population country with low penetration. The company has more fixed-line than mobile customers, which is a first for OT, but Naguib has always been interested in fixed-line operations.

He’s been given a hard time with this internally; people would say ‘why are you spending so much time on Link and the Link guys?’ It didn’t seem to make much sense because Link was so small in the big scheme of things, but he always saw that eventually this thing would grow and he has been proven right.

Mobile penetration will slow down at some point in time. If you look at the percentage of mobile penetration versus broadband penetration, we still have a long way to go on mobile but a longer way to go on broadband. Just look at what we are seeing now in Italy and Greece with broadband and IPTV.

Naguib likes media, so the idea of IPTV is very exciting. The beauty of having this wide footprint is that we are all learning. It’s all about size now. If you go and talk to Warner for example as an Egyptian ISP seeking content, they don’t have the time to talk to you, but as a group we are very well positioned and leveraging on the customer base of millions in Europe and beyond.

Despite Bichara’s absence on the home front for over two years, LinkdotNet, the company that he founded with his brother Karim, who now runs the company, has continued to grow and flourish.

Today, under OT ownership, the company is not only the largest ISP in Egypt, but also serves 20 different markets in the Middle East and Africa with a direct presence in the UAE, Saudi Arabia and most recently Pakistan.

Bichara has retained his title as chairman of the company that he calls “my baby.”

I am still involved on a strategic level. I come to the big events, I have attended all the annual meetings, I get the monthly financial reports and I am still in touch with the team as far as ideas are concerned.

Link is now opening its development arm in Italy and Greece, so we are helping them initiate business from our subsidiaries in those countries. For example, they developed Infostrada’s portal. Before the end of this year they should start to work with other non-OT customers in Europe. In Egypt most of our customers are not related to OT in any way.

Most of Link’s management has been there since 1996/1997, so they are all people I know really well. It makes communication much easier even though I no longer spend much time in Egypt. There has been a lot of knowledge-sharing between Link and Wind. Actually, a lot of technical issues are solved at Link, not because the people at Link are more intelligent or anything; it’s just that they are used to being much more resourceful. We send people back and forth between the two companies all the time so on that level I am of course very involved.

One of the things I like most about Link is that we have a very strong team. I think what has happened in the past couple of years proves that this is not a one-man show. The company sustained some very hard times and management changes, and it has proven that it can sustain.

We built the company together and that has helped us retain a lot of our key people. Sometimes you can have great management but they are not a team. With Link, the operation started out small and it was built on trust. This spirit makes it much easier to work together. If you are happy and achieving, the financial aspect of the job comes second. You don’t jump ship for a 10% increase. Yes, people leave, but our turnover is way below other companies. I see the difference in Wind. OK, we have a great team now, but it takes time to get used to your colleagues and how they work and to develop trust, at Link it is just much more natural.

We also spend a lot of money on training; we send people to Stanford and Europe on executive management courses. We also provide technical training; our tech people are all Microsoft- and Cisco-certified. When Naguib attends our annual meetings he always comments on the spirit inside the company. Now that we are expanding so rapidly and going into new countries [Algeria, Pakistan], it’s going to be hundreds and hundreds of new people. It will be more of a challenge to maintain that same spirit.  bt