Syria's third mobile licence loses value

08 February 2011

Ministry’s attempts to liberalise market devalues third licence

Syria’s third licence has lost value before the auction has even taken place. Initially expected to be worth about $600m, the government has posted a reserve of €90m ($122m) for the auction that will take place on 12 April.

“There is a general feeling of uncertainty around the licence and that has reduced its value,” says one of the bidders.

In December 2010, Syria’s Communication and Technology Ministry announced that five companies had qualified to take part in the auction. They are UAE’s Etisalat, France Telecom, Qatar’s Qtel, Saudi Arabia’s STC and Turkey’s Turkcell.

 Iran’s Toseye failed to qualify amid rumours of strained relationships between the two countries.

During the prequalification conference held on 8 December 2010, Communications Minister Imad Sabouni asked for guaranteed revenue projections. “The auction had not taken place, so it was strange that the ministry was asking for plans at this stage,” says the source.

Revenue share will be 25 per cent, less than the current 50 per cent incumbents South Africa’s MTN and privately-owned Syriatel have to pay with their build-operate-transfer (BOT) agreements. The ministry is currently reviewing the agreements to convert them to a conventional licence.

“The bidders were not happy with guaranteed revenue share. We asked them to prepare their estimation for revenues for the first five years and to guarantee that they would not present higher expectations for these revenues. We did not want them to give exaggerated figures and end up with less revenue,” says Muhammad Aljalali, Deputy Communications Minister.

The incumbents will also have to buy out their BOT agreement. The current price is estimated at $500m, but it is still under negotiation. “An agreement should be reached within the month, before the auction for the third licence takes place,” says Aljalali.  

“If the incumbents are given the opportunity to upgrade their licences, it will not create a level playing field for the third operator. MTN and Syriatel are already established in the country. The ministry needs to guarantee some advantages for the new operator, at least for the first few years,” says a bidder.

The government has responded by saying that not offering exclusive rights is normal.  “This is ordinary, when the third operator enters the market it has the opportunity to compete and has the ability to choose its own prices they think is suitable for the market. We have given the third licence many advantages like infrastructure sharing and national roaming,” says Aljalali.

In a move toward opening up the telecoms sector, the ministry will establish an independent industry regulator. “We will select a council of commissioners within the next 10 days, who will then establish the regulator,” says Aljalali.

The commissioners will assign the licence agreement. “According to Syria’s telecommunications law, the head of the council of commissioners will be the communications minister for the first two years. After that it will become completely independent,” says Aljalali.

Final negotiations for the third licence are set to take place on 17 April.  “We are looking to apply our best efforts to make this process succeed,” adds Aljalali.

Mobile penetration in Syria is about 47 per cent at the moment, but it is forecast to rise to 75 per cent by 2015.

 

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