Vodafone in Egypt: National crises and their implications for multinational corporations

Vodafone in Egypt

National crises and their implications for multinational corporations

Since December 2010, we have witnessed a social media as well as a political revolution across North Africa and the Middle East. Although it was the brave citizens of these countries that took to the streets, social media played an influential role in helping to mobilize mass protests. However, it has also brought into focus the many ways that governments can restrict freedom of expression, and their willingness to shut down internet services and telecommunications infrastructure when their authority is threatened. With increasing frequency, we have seen governments target social media – earlier this year the Turkish government blocked access to YouTube and Twitter.

Drawing on these events and the challenges faced by telecommunications and internet providers in these countries, ESMT’s Urs Müller and Shirish Pandit wrote the case study “Vodafone in Egypt: National crises and their implications for multinational corporations.” According to Shirish Pandit, “This is something that is also relevant when one looks to events in Turkey or Ukraine. In a socio-political sense, they all have in common that they involve unforeseen popular uprisings with wide-reaching implications for politics, the economy, and society. These events allow us the opportunity to explore some of the ethical, political, and business challenges prevalent in emerging markets. They also pose tough questions for companies who enter seemingly stable markets, but which develop into a state of turmoil.” The Vodafone case illustrates the difficult situations faced by corporations where there are overlapping ethical, political, business, and legal considerations.

Since Vodafone’s entry into the Egyptian market in 1998 as a minority stakeholder in the second GSM license holder, Vodafone Egypt had grown over the years to become the leading mobile operator in Egypt in terms of revenues as well as customer base. By the end of 2010, it was serving 24.6 million customers and had 6,500 employees. Although the Egyptian government had made many moves since 1999 to liberalize the telecom industry in Egypt – successfully bringing about increased competition between the three key market players – the government still retained a significant amount of control. For example, the Egyptian government under then President Hosni Mubarak could not only monitor ICT activities but was also technologically in a position to disconnect the entire system if it wished.

On Thursday, January 27, 2011, hundreds of thousands of protesters in Egypt gathered to demand an end to the 30-year rule of President Mubarak. The communication and connectivity through social media had acted as a key catalyst in enabling the protesters to coordinate their actions. With the protest movement expected to gather momentum the following day, the government not only blocked access to Twitter and Facebook, but it ordered the three main voice and data communications providers – Vodafone, Mobinil, and Etisalat – to suspend mobile services in selected areas, especially those around Tahrir Square, the nucleus where protesters had assembled. The government also instructed the communications providers to broadcast a series of propaganda text messages on its own behalf.

The following morning, the government ordered a complete shutdown of internet services – something unprecedented in the history of the internet. The sanctions for non-compliance included imprisonment of the telecom operators’ management, as well as suspension of their license to operate. With these factors in mind, Vodafone management not only conformed with the order to shut down mobile services, but it also sent out the text messages. However, its competitor – Mobinil – reacted differently, making it clear that the messages were coming from the Ministry of Interior. There was sharp criticism of Vodafone following these decisions, both from organizations such as Amnesty International and customers in Egypt.

“Vodafone in Egypt” provides a timely and fresh viewpoint on the notion of responsible leadership. This case shows that there is often no correct response. Vodafone made a decision that was legally correct under the laws of that country, but in the process it temporarily deprived its customers of their freedom of expression. This raises many questions, including: How far should companies go to protect their business interests? Do companies have an obligation to protect human rights? This case also highlights the risks involved in allowing governments to control – and potentially misuse – key communications infrastructure. The Vodafone case provides students with an important platform for debate on how multinationals operating in – and/or aiming to enter into – emerging markets should make decisions that balance business, legal, ethical, and political considerations, particularly in the event of a national crisis.

Kim Murphy