Telecoms boom leaves rural Africa behind

JOHANNESBURG/FREETOWN (Reuters) – While mobile phone usage has exploded across Africa over the last decade, transforming daily life and commerce for millions, it’s a revolution that has left behind perhaps two thirds of its people.

Poor or no reception outside the towns helps explain why the continent’s mobile penetration, in terms of the percentage of the population using the service, is far lower than previously thought, and the cost of providing that service to impoverished, sparsely populated areas remains prohibitive.

In rural Sierra Leone, a country where GDP per capita is less than $ 400 a year, money doesn’t grow on trees, but mobile reception can, says street trader Abass Bangura in Freetown, the West African country’s capital.

In parts of Tonkolili, a district in the center of the country, or Kailahun to the east, it’s the only way you can get reception, he said.

“You climb stick, like mango tree, before you have network,” he said.

In South Sudan, the world’s newest state, it’s a similar story. Less than a year old, the country already has five mobile operators, and its capital, Juba, is teeming with giant billboards advertising mobile phones, but go just a few kilometers beyond a handful of fast-growing towns, and cell phones become useless.

Multiple SIM cards help users navigate patchy network coverage and take advantage of price promotions from rival operators.

That is typical of much of the continent.

With a population of just over a billion people, Africa has over 700 million SIM cards, but with most users owning at least two cards, penetration is only about 33 percent, according to a study released in November by industry research firm Wireless Intelligence.

“If we look at the fact that the rural population of Africa is about 60-70 percent of the population, and if we look at the degree of penetration into the rural market, it’s very, very low,” said Spiwe Chireka of advisory firm IDC.

In Nigeria, Africa’s most populous country, there are more than enough SIM cards for everyone, but penetration is only 61 percent, according to a 2012 study by research firm Informa.

The average mobile phone user in Nigeria owns an average of 2.39 SIM cards. Globally, only Indonesia is higher, with an average of 2.62 SIM cards per user.

Even in Africa’s biggest economy, South Africa, SIM numbers comfortably exceed the population, but given the number of people using multiple devices, actual population penetration is closer to 80 percent, says market leader Vodacom.

“You’ve got a lot of people buying SIMs, but maybe not enough phones to put it in,” said Olayemi Jinadu, an executive with the Sierra Leone arm of Indian telco Bharti Airtel.

COST VERSUS BENEFIT

The unserved rural millions could represent another growth opportunity for Africa-focused telcos like South Africa’s MTN Group, Bharti Airtel and Kuwait’s Zain, but first they have to figure out a cost-effective way to push into sub-Saharan Africa’s remote corners.

“There’s great potential, but the big concern for us is operational costs,” said Andre Claasson, chief operating officer at Zain South Sudan.

In rural Africa, the cost of running a network tower often exceeds the revenue it reaps. Fuel is typically about 40 percent of a tower’s operating cost, and in remote areas companies burn more diesel by bringing fuel to towers than is used powering them.

Although roughly 73 percent of Africa’s land has cell phone coverage, according to market research firm IDC, that still leaves vast tracts of rural Africa without network access.

Africa has 170,000 mobile towers now and needs another 60,000, according to tower company IHS Group, which at an average $ 200,000 each means an outlay of $ 12 billion.

“If you are an operator asked to spend $ 200,000 to build a site and another $ 2,000 a month to run it in an area with 500 people herding cows, it doesn’t make sense,” said Issam Darwish, IHS’s chief executive.

Average revenue per user is also low. It can vary between $ 1 and $ 10 per month, much lower than in developed markets such as the United States, which delivered ARPU of $ 51 in 2012 or Britain, $ 27.

Bharti, sub-Saharan Africa’s third-largest telecom group, says it makes $ 6.40 per user in Africa, which is higher than its home Indian market, where it makes only $ 3.30 a month, but the cost of operating in Africa is much higher and there isn’t a comparable middle class ready and able to spend more.

“You either have a handful of people in the affluent part of the society or you have lots of people who can’t afford the services,” its Chairman Sunil Mittal said last year.

Operators can save money by sharing towers, but even then, some sites will never make sense without government subsidies, analysts say.

African expansion has not been cheap for telcos. Over the past five years, mobile operators have spent a combined $ 16.5 billion on capital expenditure in the key markets of South Africa, Nigeria, Kenya, Senegal and Ghana, according to Wireless Intelligence.

Bharti has earmarked $ 1.5 billion for capex this year, while fourth-placed France Telecom is spending $ 9.3 billion between 2010 and 2015.

Spare cash is increasingly rare for debt-strapped European telecoms operators, which are cutting their dividends to cope with falling revenues and network upgrade costs in their home markets.

Some African regulators have set up funds to promote coverage, to which operators are expected to contribute.

In Sierra Leone, the Universal Access Development Fund (UADF) is yet to subsidize the cost of putting up a single mast, though it has been active for several years. The regulator complains networks do not contribute the fees they should.

“If we can’t subsidize, they’ll never erect towers there,” said Bashir Kamara, Project Manager at UADF.

($ 1 = 0.6350 British pounds)

(Additional reporting by Hereward Holland in Juba and Chijioke Ohuocha in Lagos; Editing by David Dolan and Will Waterman)

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Beyoncé Poses as Sexy Referee Ahead of Super Bowl Performance

By Aaron Parsley

01/30/2013 at 11:00 AM EST

She's calling the shots!

As anticipation builds for her Super Bowl XLVII halftime show on Sunday, Beyoncé has posted another photo of herself on her Tumblr – this time as a sexy NFL referee.

Sort of. She also seems to be running the ball ... in stiletto, thigh-high leather boots.

While the the Baltimore Ravens and the San Francisco 49ers take a breather from their game, it's safe to say that all eyes will be on Beyoncé after a controversy erupted over her possibly lip-synching the National Anthem at the presidential Inauguration.

There's also a rumored Destiny's Child reunion happening at halftime, though whether Kelly Rowland and Michelle Williams will join Beyoncé on Sunday is disputed.

The singer, 31, has not commented on either situation, but she will attend a Super Bowl halftime show press conference on Thursday at the Ernest N. Morial Convention Center in New Orleans.

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Soldier with new arms determined to be independent

BALTIMORE (AP) — After weeks of round-the-clock medical care, Brendan Marrocco insisted on rolling his own wheelchair into a news conference using his new transplanted arms. Then he brushed his hair to one side.

Such simple tasks would go unnoticed in most patients. But for Marrocco, who lost all four limbs while serving in Iraq, these little actions demonstrate how far he's come only six weeks after getting a double-arm transplant.

Wounded by a roadside bomb in 2009, the former soldier said he could get by without legs, but he hated living without arms.

"Not having arms takes so much away from you. Even your personality, you know. You talk with your hands. You do everything with your hands, and when you don't have that, you're kind of lost for a while," the 26-year-old New Yorker told reporters Tuesday at Johns Hopkins Hospital.

Doctors don't want him using his new arms too much yet, but his gritty determination to regain independence was one of the chief reasons he was chosen to receive the surgery, which has been performed in the U.S. only seven times.

That's the message Marrocco said he has for other wounded soldiers.

"Just not to give up hope. You know, life always gets better, and you're still alive," he said. "And to be stubborn. There's a lot of people who will say you can't do something. Just be stubborn and do it anyway. Work your ass off and do it."

Dr. W.P. Andrew Lee, head of the team that conducted the surgery, said the new arms could eventually provide much of the same function as his original arms and hands. Another double-arm transplant patient can now use chopsticks and tie his shoes.

Lee said Marrocco's recovery has been remarkable, and the transplant is helping to "restore physical and psychological well-being."

Tuesday's news conference was held to mark a milestone in his recovery — the day he was to be discharged from the hospital.

Next comes several years of rehabilitation, including physical therapy that is going to become more difficult as feeling returns to the arms.

Before the surgery, he had been living with his older brother in a specially equipped home on New York's Staten Island that had been built with the help of several charities. Shortly after moving in, he said it was "a relief to not have to rely on other people so much."

The home was heavily damaged by Superstorm Sandy last fall.

"We'll get it back together. We've been through a lot worse than that," his father, Alex Marrocco, said.

For the next few months, Marrocco plans to live with his brother in an apartment near the hospital.

The former infantryman said he can already move the elbow on his left arm and rotate it a little bit, but there hasn't been much movement yet for his right arm, which was transplanted higher up.

Marrocco's mother, Michelle Marrocco, said he can't hug her yet, so he brushes his left arm against her face.

The first time he moved his left arm was a complete surprise, an involuntary motion while friends were visiting him in the hospital, he said.

"I had no idea what was going through my mind. I was with my friends, and it happened by accident," he recalled. "One of my friends said 'Did you do that on purpose?' And I didn't know I did it."

Marrocco's operation also involved a technical feat not tried in previous cases, Lee said in an interview after the news conference.

A small part of Marrocco's left forearm remained just below his elbow, and doctors transplanted a whole new forearm around and on top of it, then rewired nerves to serve the old and new muscles in that arm.

"We wanted to save his joint. In the unlucky event we would lose the transplant, we still wanted him to have the elbow joint," Lee said.

He also explained why leg transplants are not done for people missing those limbs — "it's not very practical." That's because nerves regrow at best about an inch a month, so it would be many years before a transplanted leg was useful.

Even if movement returned, a patient might lack sensation on the soles of the feet, which would be unsafe if the person stepped on sharp objects and couldn't feel the pain.

And unlike prosthetic arms and hands, which many patients find frustrating, the ones for legs are good. That makes the risks of a transplant not worth taking.

"It's premature" until there are better ways to help nerves regrow, Lee said.

Now Marrocco, who was the first soldier to survive losing all four limbs in the Iraq War, is looking forward to getting behind the wheel of his black 2006 Dodge Charger and hand-cycling a marathon.

Asked if he could one day throw a football, Dr. Jaimie Shores said sure, but maybe not like Baltimore Ravens quarterback Joe Flacco.

"Thanks for having faith in me," Marrocco interjected, drawing laughter from the crowd.

His mother said Marrocco has always been "a tough cookie."

"He's not changed that, and he's just taken it and made it an art form," Michelle Marrocco said. "He's never going to stop. He's going to be that boy I knew was going to be a pain in my butt forever. And he's going to show people how to live their lives."

___

Associated Press Chief Medical Writer Marilynn Marchione in Milwaukee and AP writer David Dishneau in Hagerstown, Md., contributed to this report.

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Wall Street edges higher, Amazon offsets GDP

NEW YORK (Reuters) - Stocks were flat on Wednesday as an unexpectedly weak read on fourth-quarter economic activity was offset by strong results at Boeing and Amazon.com.

Equities continued to shrug off negative news, with the S&P 500 staying above 1,500, a level that market technicians call an inflection point that will determine the overall direction in the near term.

The first read showed gross domestic product fell 0.1 percent, far below expectations for growth of 1.1 percent. However, private sector employment topped forecasts, with the ADP National Employment report showing 192,000 jobs added in January, higher than the 165,000 expectation.

"The GDP report is the only negative shock we've had in a while, and it isn't terrible since it showed increases in business and consumer spending, which is what everyone wants to drive growth from here," said Randy Frederick, managing director of active trading and derivatives for Charles Schwab in Austin, Texas.

Deeper losses were prevented by a rise in both Boeing Co and Amazon.com Inc , which rallied after earnings beat expectations, continuing a trend this quarter of high-profile names advancing after results.

Amazon.com Inc rose 6.7 percent to $277.87 a day after reporting strong revenue growth. Boeing rose 0.5 percent to $74 after its results. The Dow component also said that while production continued on its Dreamliner jet, which has had technical problems recently, it was suspending delivery until clearance was granted by the Federal Aviation Administration.

Thomson Reuters data showed that of the 174 companies in the S&P 500 that have reported earnings this season, 68.4 percent have been above analyst expectations, which is a higher proportion than over the past four quarters and above the average since 1994.

The Dow Jones industrial average <.dji> was up 5.50 points, or 0.04 percent, at 13,959.92. The Standard & Poor's 500 Index <.spx> was up 1.09 points, or 0.07 percent, at 1,508.93. The Nasdaq Composite Index <.ixic> was up 5.73 points, or 0.18 percent, at 3,159.39.

The S&P 500 is on track to post its best monthly performance since October 2011 as investors poured $55 billion in new cash into stock mutual funds and exchange-traded funds in January, the biggest monthly inflow on record.

The Dow Jones industrial average has been flirting with 14,000, a level it hasn't seen since October 2007. Many analysts have said markets may need to take a pause.

"I'm neutral on markets at these levels, even though there aren't a lot of negatives out there," Frederick said. "At some point there will be a pullback, but the underlying trends remain strong and I think it is possible the S&P could hit a new all-time high sometime this quarter."

The all-time intraday high for the S&P 500 is 1,576.09, reached October 11, 2007.

The Federal Reserve concludes a two-day meeting on Wednesday, and while the central bank is expected to keep monetary policy on a steady path, intensive debates continue behind the scenes over when the controversial bond-buying program should be curtailed.

Chesapeake Energy Corp rose 11 percent to $21.11 as the S&P's biggest percentage gainer, a day after saying Aubrey McClendon would step down as chief executive after a year in which a series of Reuters investigations triggered civil and criminal probes of the second-largest U.S. natural gas producer.

(Editing by Chizu Nomiyama and Nick Zieminski)

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Merkel urges Egypt's Mursi to hold crisis dialogue

CAIRO/BERLIN (Reuters) - German Chancellor Angela Merkel urged Egypt's Islamist president on Wednesday to open a dialogue with all political forces in the crisis-ridden Arab country after a week of violence that has killed more than 50 people.

President Mohamed Mursi flew to Germany to try to convince Europe of his democratic credentials, but in a sign of the political tensions back home, he restricted his trip to a few hours and canceled a planned Paris leg.

"One thing that is important for us is that the line for dialogue is always open to all political forces in Egypt, that the different political forces can make their contribution, that human rights are adhered to in Egypt and that of course religious freedom can be experienced," Merkel told Mursi at a joint news conference.

The Egyptian leader, who has faced months of protests by liberal and youth groups opposed to a new Islamic constitution, replied that dialogue was possible and that Egypt would be a state based on the rule of law, not run by the military.

But he refused to give a commitment sought by the opposition to form a national unity government, saying that would be for the new parliament to decide after elections expected in April.

Two more protesters were shot dead before dawn near Cairo's central Tahrir Square on the seventh day of what has become the deadliest wave of unrest since Mursi took power in June.

The army chief warned on Tuesday that the state was on the brink of collapse if Mursi's opponents and supporters did not end street battles that have marked the two-year anniversary of the revolt that toppled autocrat Hosni Mubarak.

Mursi is due to return to Cairo later in the day.

Near Tahrir Square on Wednesday morning, dozens of protesters threw stones at police who fired back teargas, although the scuffles were brief.

"Our demand is simply that Mursi goes, and leaves the country alone. He is just like Mubarak and his crowd who are now in prison," said Ahmed Mustafa, 28, a youth who had goggles on his head to protect his eyes from teargas.

Opposition politician Mohamed ElBaradei called for a meeting of the president, ministers, the ruling party and the opposition to halt the violence. But he also restated the opposition's precondition that Mursi first commit to seeking a national unity government.

Mursi's critics accuse him of betraying the spirit of the revolution by keeping too much power in his own hands and those of his Muslim Brotherhood, the Islamist movement banned under Mubarak which won repeated elections since the 2011 uprising.

Mursi's supporters say the protesters want to overthrow Egypt's first democratically elected leader. The unrest has prevented a return to stability ahead of parliamentary elections due within months, and worsened an economic crisis that has seen the pound currency tumble in recent weeks.

The worst violence has been in the Suez Canal city of Port Said, where rage was fuelled by death sentences passed against soccer fans for deadly riots last year. Mursi responded by announcing on Sunday a month-long state of emergency and curfew in Port Said and two other Suez Canal cities.

Protesters have ignored the curfew and returned to the streets. Human Rights Watch called for Mursi to lift the decree.

Mursi was keen to allay the West's fears over the future of the most populous Arab country in his meetings with Merkel and powerful industry groups in Berlin.

"DISTURBING IMAGES"

"We have seen worrying images in recent days, images of violence and destruction, and I appeal to both sides to engage in dialogue," German Foreign Minister Guido Westerwelle said in a radio interview on Wednesday ahead of Mursi's arrival.

Germany's "offer to help with Egypt's transformation clearly depends on it sticking to democratic reforms", he added.

Germany has praised Mursi's efforts in mediating a ceasefire between Israel and Palestinians in Gaza after a conflict last year, but became concerned at Mursi's efforts to expand his powers and fast-track a constitution last year.

Berlin was also alarmed by video that emerged in recent weeks showing Mursi making vitriolic remarks against Jews and Zionists in 2010 when he was a senior Brotherhood official. Germany's Nazi past and strong support of Israel make it highly sensitive to anti-Semitism.

Mursi's past anti-Jewish remarks were "unacceptable", Westerwelle said. "But at the same time President Mursi has played a very constructive role mediating in the Gaza conflict."

Asked about those remarks at the news conference with Merkel, Mursi said they had been taken out of context and he was not against the Jewish faith.

Egypt's main liberal and secularist bloc, the National Salvation Front, has so far refused talks with Mursi unless he promises a unity government including opposition figures.

"Stopping the violence is the priority, and starting a serious dialogue requires committing to guarantees demanded by the National Salvation Front, at the forefront of which are a national salvation government and a committee to amend the constitution," ElBaradei said on Twitter.

Those calls have also been backed by the hardline Islamist Nour party - rivals of Mursi's Brotherhood. Nour and the Front were due to meet on Wednesday, signaling an unlikely alliance of Mursi's critics from opposite ends of the political spectrum.

Brotherhood leader Mohamed El-Beltagy dismissed the unity government proposal as a ploy for the Front to take power despite having lost elections. On his Facebook page he ridiculed "the leaders of the Salvation Front, who seem to know more about the people's interests than the people themselves".

German industry leaders see potential in Egypt but are concerned about political instability.

"At the moment many firms are waiting on political developments and are cautious on any big investments," said Hans Heinrich Driftmann, head of Germany's Chamber of Industry and Commerce.

Mursi's supporters blame the opposition for preventing an economic recovery by halting efforts to restore stability. The opposition says an inclusive government is needed to bring calm.

(Additional reporting by Yasmine Saleh and Marwa Awad in Cairo, Stephen Brown and Gernot Heller in Berlin and Arshad Mohammed in Washington; Writing by Peter Graff; Editing by Giles Elgood and Paul Taylor)

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RIM starts glitzy BlackBerry 10 launch parties

NEW YORK (Reuters) – Research In Motion Ltd on Wednesday kicked off a string of global launch parties for a long-delayed line of smartphones it says will put it on the comeback trail in a market it once dominated.

The new BlackBerry 10 phones will compete with Apple‘s iPhone and devices using Google‘s Android technology, both of which have soared above the BlackBerry in a competitive market.

They boast fast browsers, new features, smart cameras and, unlike previous BlackBerry models, enter the market primed with a large app library.

(Writing by Janet Guttsman; Editing by Frank McGurty)

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Camila McConaughey Takes Baby Livingston to the Park (Photo)

By Tim Nudd

01/29/2013 at 10:05 AM EST

Camila Alves and baby boy Livingston

FameFlynet

A lovely 80-degree day in Austin, Texas, was just what Livingston McConaughey needed for a nice stroll in the park.

Camila and Matthew McConaughey's newborn son enjoyed an outing with mom on Sunday – the first glimpse of the couple's third child, who was born Dec. 28.

Camila, who celebrated her 30th birthday on Jan. 28, shared her happiness via Twitter, writing, "Today I am 30 years old, Livingston is 30 days old and I'm blessed with 3 healthy children...I am so thankful and full of joy!"

At the park on Sunday, she mostly kept Livingston covered in a light blanket, and was seen kissing the boy on the head.

Camila, meanwhile, was dressed comfortably in a white shirt, black leggings, sneakers and dark sunglasses.

Matthew was also out and about in Austin on Sunday, looking well on his way back from his dramatic weight loss for a movie role.

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Study says leafy greens top food poisoning source

NEW YORK (AP) — A government study has fingered leafy green vegetables as the leading source of food poisoning illnesses.

However, the most food-related deaths were from contaminated chicken and other poultry.

The Centers for Disease Control and Prevention released the study Tuesday. It's based on an analysis of food poisoning cases from 1998 through 2008. It's the agency's most comprehensive attempt to identify which foods most often carry germs that make us sick.

The CDC estimates roughly 1 in 6 Americans — or 48 million people— gets sick from food poisoning each year. That includes 128,000 hospitalization and 3,000 deaths.

____

Online:

CDC journal: http://www.cdc.gov/eid/

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Wall Street flat, investors look for new catalyst

NEW YORK (Reuters) - Stocks were flat on Tuesday as investors looked for new reasons in economic data or earnings to extend a rally that pushed major averages near five-year highs.

Equities have been on a tear lately, with the S&P 500 recently climbing for eight straight sessions, extending its rise in January to 5.1 percent. The index hovered around 1,500, suggesting there was still support for a market that has been hovering around five-year highs.

"A move like this in one month is extraordinary, and keeping the gains going will depend on concrete news like earnings and data that show the economy is getting better," said Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia. "We haven't seen enough of that to make people jump in after the rally we've had."

The gains have largely come on a strong start to earnings season, though results were mixed on Tuesday with Pfizer Inc rising but Ford Motor Co dropping after its report.

Both companies reported profits that topped expectations, but Ford also forecast a wider loss in its European segment. Shares dropped 3.6 percent to $13.32 as one of the biggest percentage losers on the S&P 500.

Pfizer, a Dow component, rose 1.2 percent to $27.16 after its results while Eli Lilly and Co rose 1.2 percent to $53.25 after reporting adjusted fourth-quarter earnings and revenue that beat expectations.

In economic news, stocks retreated slightly after data showed U.S. consumer confidence dropped to its lowest level in more than a year in January. Americans were more pessimistic about the economic outlook and their financial prospects, according to the Conference Board.

In addition, home prices rose 0.6 percent in November, as expected, according to the S&P Case/Shiller Home Price Index. The news comes a day after data showed an unexpected drop in December pending home sales.

Thomson Reuters data showed that of the 150 companies in the S&P 500 that have reported earnings so far, 67.3 percent have beaten analysts' expectations, which is a higher proportion than over the past four quarters and above the average since 1994.

The Dow Jones industrial average <.dji> was up 13.40 points, or 0.10 percent, at 13,895.33. The Standard & Poor's 500 Index <.spx> was down 1.01 points, or 0.07 percent, at 1,499.17. The Nasdaq Composite Index <.ixic> was down 18.21 points, or 0.58 percent, at 3,136.09.

The Nasdaq was pressured by a pair of disappointing tech outlooks. Seagate Technology Plc forecast third-quarter revenue below expectations while BMC Software Inc gave a 2013 profit view that was below forecasts.

Seagate shares slumped 8.7 percent to $34.10 while BMC fell 7.8 percent to $41.

On the upside in technology, Yahoo Inc rose 1.2 percent to $20.55 a day after forecasting a rise in annual revenue.

The Federal Reserve's Open Market Committee is due to hold two days of meetings on interest rates beginning on Tuesday.

In a sign of an improved view towards equities, investors poured $55 billion in new cash into stock mutual funds and exchange-traded funds in January, the biggest monthly inflow on record, research provider TrimTabs Investment Research said.

(Editing by Kenneth Barry and Nick Zieminski)

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Army warning: unrest pushing Egypt to brink

CAIRO, Egypt (Reuters) - Egypt's army chief said political strife was pushing the state to the brink of collapse - a stark warning from the institution that ran the country until last year as Cairo's first freely elected leader struggles to contain bloody street violence.

Abdel Fattah al-Sisi, a U.S.-trained general appointed by President Mohamed Mursi last year to head the armed forces, added in a statement on Tuesday that one of the primary goals of deploying troops in cities on the Suez Canal was to protect the waterway that is vital for Egypt's economy and world trade.

Sisi's comments, published on an official army Facebook page, followed 52 deaths in the past week of disorder and highlighted the mounting sense of crisis facing Egypt and its Islamist head of state who is struggling to fix a teetering economy and needs to prepare Egypt for a parliamentary election in a few months that is meant to cement the new democracy.

Violence largely subsided on Tuesday, although some youths again hurled rocks at police lines in Cairo near Tahrir Square.

It seemed unlikely that Sisi was signaling the army wants to take back the power it held for six decades since the end of the colonial era and through an interim period after the overthrow of former air force chief Hosni Mubarak two years ago.

But it did send a powerful message that Egypt's biggest institution, with a huge economic as well as security role and a recipient of massive direct U.S. subsidies, is worried about the fate of the nation, after five days of turmoil in major cities.

"The continuation of the struggle of the different political forces ... over the management of state affairs could lead to the collapse of the state," said General Sisi, who is also defense minister in the government Mursi appointed.

He said the economic, political and social challenges facing the country represented "a real threat to the security of Egypt and the cohesiveness of the Egyptian state" and the army would remain "the solid and cohesive block" on which the state rests.

Sisi was picked by Mursi after the army handed over power to the new president in June once Mursi had sacked Field Marshal Hussein Tantawi, in charge of Egypt during the transition and who had also been Mubarak's defense minister for 20 years.

DEEPLY POLARISED

The 58-year-old previously headed military intelligence and studied at the U.S. Army War College. Diplomats say he is well known to the United States, which donates $1.3 billion in military aid each year, helping reassure Washington that the last year's changes in the top brass would not upset ties.

One of Sisi's closest and longest serving associates, General Mohamed el-Assar, an assistant defense minister, is now in charge of the military's relations with the United States.

Almost seven months after Mursi took office, Egyptian politics have become even more deeply polarized.

Opponents spurned a call by Mursi for talks on Monday to try to end the violence. Instead, protesters have rallied in Cairo and Alexandria, and in the three Suez Canal cities - Port Said, Ismailia and Suez - where Mursi imposed emergency rule.

On Tuesday, thousands were again on the streets of Port Said to mourn the deaths of two people in the latest clashes there, taking the total toll in Mediterranean port alone to 42 people. Most were killed by gunshots in a city where weapons are rife.

Mohamed Ezz, a Port Said resident speaking by telephone, heard heavy gunfire through the night. "Gunshots damaged the balcony of my flat, so I went to stay with my brother," he said.

Residents in the three canal cities had taken to the streets in protest at a nightly curfew now in place there. The president's spokesman said on Tuesday that the 30-day state of emergency could be shortened, depending on circumstances.

In Cairo on Tuesday afternoon, police again fired teargas as stone-throwing youths in a street near Tahrir Square, the centre of the 2011 uprising. But the clashes were less intense than previous days and traffic was able to cross the area. Street cleaners swept up the remains of burnt tires and other debris.

Street flare-ups are a common occurrence in divided Egypt, frustrating many people desperate for order and economic growth.

Although the general's comments were notably blunt, Egypt's military has voiced similar concerns in the past, pledging to protect the nation. But it has refused to be drawn back into a direct political role after its reputation as a neutral party took a pounding during the 17 months after Mubarak fell.

WARY MILITARY

"Egyptians are really alarmed by what is going on," said Cairo-based analyst Elijah Zarwan, adding that the army was reflecting that broader concern among the wider public.

"But I don't think it should be taken as a sign that the military is on the verge of stepping in and taking back the reins of government," he said.

In December, Sisi offered to host a national dialogue when Mursi and the rivals were again at loggerheads and the streets were aflame. But the invitation was swiftly withdrawn before the meeting went ahead, apparently because the army was wary of becoming embroiled again in Egypt's polarized politics.

Protests initially flared during the second anniversary of the uprising which erupted on January 25, 2011 and toppled Mubarak 18 days later. They were exacerbated in Port Said when residents were angered after a court sentenced to death several people from the city over deadly soccer violence.

Since the 2011 revolt, Islamists who Mubarak spent his 30-year rule suppressing have won two referendums, two parliamentary elections and a presidential vote.

But that legitimacy has been challenged by an opposition that accuses Mursi of imposing a new form of authoritarianism. Mursi's supporters says protesters want to overthrow Egypt's first ever democratically elected leader by undemocratic means.

The army has already been deployed in Port Said and Suez and the government agreed a measure to let soldiers arrest civilians as part of the state of emergency. Sisi reiterated that the army's role would be support the police in restoring order.

The instability has provoked unease in Western capitals, where officials worry about the direction of a powerful regional player that has a peace deal with Israel. The United States condemned the bloodshed and called on Egyptian leaders to make clear violence was not acceptable.

Mursi's invitation to rivals to a national dialogue with Islamists on Monday was spurned by the main opposition National Salvation Front coalition, which described it as "cosmetic".

The only liberal politician who attended, Ayman Nour, told Egypt's al-Hayat channel after the meeting ended late on Monday that attendees agreed to meet again in a week.

He said Mursi had promised to look at changes to the constitution requested by the opposition but did not consider the opposition's request for a government of national unity. Mursi's pushing through last month of a new constitution which critics see as too Islamic remains a bone of contention.

(Additional reporting by Yasmine Saleh and Omar Fahmy in Cairo, Yusri Mohamed in Ismailia and Abdelrahman Youssef in Alexandria; Writing by Edmund Blair; Editing by Alastair Macdonald)

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