Friday, August 27, 2010

The New Syrian Telecommunications Law

August 27, 2010
On June 9, 2010, Law 18/2010, which reorganizes Syria's telecommunications sector, was enacted by presidential decree and then published on the Syrian Official Gazette on June 23.
Thanks to this law, a newly established institution, the Telecoms Supervisory Authority (T.S.A.) will be constituted as the telecoms sector’s regulatory body. Before this reorganization, the regulatory power pertained to the Syrian Telecommunications Establishment (S.T.E.), which at the same time was allowed to run the country’s landline network. Under the new framework, the S.T.E. will be replaced by a new institution, the Syrian Telecommunications Company (S.T.C.), which will continue to operate as the landline monopolist company. The S.T.C. will be required to abide by the Company Law and the government (the Syrian Treasury) will be its unique stakeholder (100 percent ownership).
The Ministry of Communications and Technology will appoint the T.S.A. members and the authority will start implementing the new regulatory functions at the beginning of 2011. The T.S.A. will have the power to grant new licenses, including: license fees; revenue sharing models; and the methodologies for selecting the operators (tender or other procedures) of the different sub-sectors (landline, mobile, radio waves, etc.). When granting new licenses, the T.S.A. will mandatorily consider the positions of companies already operating (having currently infrastructure and employees) in Syria as telecom operators.
The importance of this law is linked to the fact that the S.T.E. is one of Syria’s most profitable state-owned companies. In fact, it is the second largest contributor to the Syrian Treasury after the Syrian Petroleum Company. In 2009, the S.T.E. had revenues of 73.1 billion Syrian pounds (with an 18 percent increase). The current two Syrian mobile operators, Syriatel and M.T.N., in 2009 enjoyed total revenues of $ 1.02 billion and $829.8 million respectively. Since mid-2009, the S.T.E. has gotten 50 percent of the annual revenues of Syriatel and M.T.N. according to the terms of the build-operate-transfer (BOT) contracts under which the two companies are allowed to operate in Syria.
The two companies strongly complain that BOT contracts impede them to well invest in new expensive infrastructure, which eventually after some years will be handed over to the government. In addition to this, BOT contracts have always blocked the possibility of listing both Syriatel and M.T.N. Syria on the Damascus Securities Exchange. The reason is that this kind of contracts does not permit to evaluate the assets of the involved companies. Splitting the old S.T.E. into two different bodies — the T.S.A. (the new telecoms regulatory body) and the S.T.C. (the new landline monopolist company) — should permit to reform more easily the telecoms sector.
In particular, the T.S.A. — not being involved in the telecoms market as an operator and not receiving direct economic resources from Syriatel and M.T.N. as it used to happen with the S.T.E. — should be capable of modernizing the sector through an increase in the level of competition in this way protecting the rights of consumers. This could be achieved by transforming Syria's BTO contracts into classic licenses and introducing a third mobile license. For example, it is important to remember that the Syrian mobile market is not a saturated market. According to the Ministry of Telecommunications, out of a population of around 20 million Syrians and more than 3 million expatriates, Syria has 10.4 million of mobile subscribers, including pre-paid cards. It is esteemed that there are in Syria at least four million of untapped potential new subscribers. But with the current scarce competition (high mobile prices coupled with bad services) it is difficult to initiate these four million people to the mobile market.
The new law should be a sort of innovative model in order to limit government participation in relevant Syrian industrial sectors. In other words, in Syria from now on, it should be implemented a process oriented toward an increased role played by the private sector in industries previously 100 percent controlled by the state. Probably, the government will continue to have a controlling position, but the management should be linked more consistently to the private sector.

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