October 31, 2010
Last
week state-owned Saudi
Telecom Company (S.T.C.), the largest listed telecom operator
in the Middle East, showed a great interest in bidding for a mobile license in
the Syrian Arab Republic.
In September, Syria tendered to sell a third mobile license. The deadline to
submit pre-qualification applications will expire on November 14, 2010.
Given
a very low rate of mobile penetration (44 users per 100 inhabitants) and
promising growth chances, Syria is an attractive market. Out of a population of
around 20 million Syrians and 3 million expatriates, Syria has 10.4
million of subscribers, comprising pre-paid cards, reports the Telecom
Ministry. These numbers well explain that the market is absolutely not
saturated. Currently in Syria there are two mobile operators Syriatel
(55 percent of the market) and South Africa’s M.T.N. (45 percent of
the market).
In
the last four years telecoms deals in the Persian Gulf alone have been
worth $33 billion. Once U.A.E.’s Etisalat acquires 46 percent of Zain (one
Kuwait operator) for around $11.7 billion, Etisalat will be forced to sell
Zain’s 25 percent stake in the subsidiary Zain Saudi Arabia, which is
currently competing again Etisalat’s Mobily in the Saudi Arabian telecoms
markets with reference to both 2G and 3G services. In fact, the Saudi I.T.C.
regulator (Communications and Information Technology Commission, C.I.T.C.)
could never accept to have two out of three mobile licenses controlled by the
same operator (Etisalat). But apart from the Etisalat’s bid for Zain and the
subsequent sale of Zain Saudi Arabia, from now on, according to many bankers
and analysts, the telecommunications industry in the Gulf should develop a more
designed and structured growth. This trend, which is also a necessity,
comes out of scarce acquisition targets and increased competition in
all of the Middle Eastern domestic markets, with declining ARPU (average
revenue per user).
So,
Syria’s license for sale is a very first-class target in a region where
presently the only other attracting opportunities (obviously, excluding the
Etisalat’s bid for Kuwait’s Zain and the Zain Saudi Arabia’s sale) could be
Lebanon’s long-delayed privatization plans. In fact, many other players in the
region are government-controlled companies and it is quite possible that at
least in the medium term none of these will be sold or will change its
proprietary assets.
On
October 25, 2010, S.T.C. submitted its expression of interest to bid for the
Syrian license through a letter sent to the Syrian Ministry of Communications
and Technology (MOCT). S.T.C. is facing a strong and increasing competition in
its own domestic market, which is split among three mobile
operators: S.T.C., Mobily (U.A.E.’s Etisalat) and Zain Saudi Arabia (Kuwait’s
Zain). According to Ghassan
Hasbani, S.T.C.’s chief executive officer (C.E.O.) of
international operations, there are important and potential synergies
between Saudi Arabia’s telecoms sector and the Syrian one. S.T.C. is an
integrated telecom operator and is providing fixed line, mobile and internet
services. Aside from Saudi Arabia, S.T.C. has already operations in
Bahrain, India, Indonesia, Kuwait, Malaysia, South Africa and Turkey.
Recently
this month, S.T.C. declared that its third-quarter net profits had soared 38
percent to a value of almost $900 million, from $640 million in the second
quarter of 2010. This result was mainly due to the one-time gain linked to
S.T.C.’s boosted earnings in India. In fact, S.T.C. affirmed that this positive
boost in its profits was related to a 5 percent increase in its
operating income and to a $200 million one-time gain, connected to S.T.C.’s
share in the proceeds from Aircel India (S.T.C.’s unit in India), which sold
some assets.
With
no doubt, Syria’s mobile market is quite appealing and for this reason some
interest for this third mobile license has come also from U.A.E.’s Etisalat,
Kuwait’s Zain, Qatar’s Qtel, Russia’s M.T.S. and Turkey’s Turkcell. In addition
to these companies, also Vodafone and France Telecom could be interested,
although they do not possess any competitive edge over the other companies.