Egyptian Government Intrudes on Mobile Operators

Vodafone Group PLC and France Télécom SA, facing heat for complying with the Egyptian government's order to pull the plug on their networks last week, said Thursday that Egypt's government forced its way onto their mobile networks to send text messages directly to the country's people.

U.K.-based Vodafone said the government invoked emergency powers under Egypt's Telecom Act to send the text messages against the company's will. Vodafone, which runs Egypt's biggest mobile carrier by customers through a joint venture with state-controlled Telecom Egypt, said it protested the action and "made clear that all messages should be transparent and clearly attributable to the originator."

France Télécom, which runs mobile carrier Mobinil in a joint venture with Orascom Telecom Holding, said the Egyptian army forced it to send texts to its customers, though it said the only army-endorsed messages processed by Mobini concerned "national security and general safety."

Vodafone said the text-messaging capability of it and other mobile operators in Egypt has been shut down since mass protests began late last week. But Egyptian authorities appear to have opened the networks briefly at times to send pro-government texts.

The messages appeared to be nonthreatening in nature. One Mobinil subscriber received the following text on Tuesday: "Egyptian youth beware of rumors and listen to the voice of reason. Egypt is above everyone so protect it."

The situation has exposed the vulnerability of multinational companies like Vodafone and France Télécom as they pursue growth in developing markets rife with political instability.

Big companies usually carry out risk assessments before making significant investments in volatile regions, but political risks rarely fit cleanly into a simple analytical or numerical model, said Steven 

Haynes, director of corporate intelligence at KPMG LLP.

Vodafone entered Egypt in the late 1990s and India in 2007, pleasing many investors by seeking growth opportunities outside the European market.‬Now, the political risks in both countries have turned ugly: Vodafone has taken billions in write-downs on its India investment, in part due to regulatory issues and a costly tax dispute with the government. In Egypt, the company is scrambling to protect its infrastructure and employees—while delivering the Egyptian army's messages.

"When armed police arrive at your offices there is not much one can do," France Télécom Chief Executive Stephane Richard said on the sidelines of a press conference Thursday, when asked about last week's decision to sever access to all of its services. Mr. Richard said a clause in the company's Egyptian mobile-phone license allows the government to shut down mobile services in the country.

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