April 11, 2011
When five months ago in
November 2010 the knights started the journey they were six: Three were from
the Arabian Peninsula (one from the Kingdom of the Nahyans,
one from the Kingdom of the Thanis and one from the Kingdom of the Sauds),
one was French, one was Persian and one was Turkish. Soon they became five
because the Persian cavalier was absolutely not fit for the adventure. The
remaining five seemed all brave, strong and committed to completing the
adventure. It seemed … In fact, two months ago another knight, the Turkish
cavalier, announced his retirement (officially sanctioned only two months later
with a skinny statement) while around ten days ago, two other knights, the one
from the Kingdom of the Nahyans and the French one
stopped their epic adventure. Now, the competing knights are just the one from the Kingdom of the Thanis and the one from the Kingdom
of the Sauds. The final fight is set for April 27. The two survivor
knights do appear to be committed to their goal — they stated their will to play
and battle in the last days — but things change very fast and no one knows what
is going to happen …. And, most importantly, no one knows who will be the
winning hero.
The story told in the previous paragraph is not a medieval saga set between Europe and the Middle East and filled with brave and courageous knights. What was recounted above is the bidding process for Syria’s third mobile license. In fact, at the beginning of the process there were six companies, now only Saudi Arabia’s S.T.C. and Qatar’s Qtel are still into the game for the final phase, said on April 2, Mohammed Al-Jalali, the Syrian deputy telecommunications minister. He continued saying that on April 14, S.T.C. and Qtel would be given notice about the evaluation phase (the phase where companies have been requested to submit technical and investment proposals) and that the auction would take place on April 27. The auction will start at $122 million.
On March 30, 2011, U.A.E.’s Etisalat stated that it would not
compete anymore for the Syrian license. “Etisalat … has determined that the
terms and conditions of the bid would not enable Etisalat to achieve its
objectives regarding the technology and value it wishes to bring to the market
nor for its investors and shareholders” said the U.A.E.’s company through a
released statement. No additional details were disclosed. According to the
Middle East Economic Digest (MEED), Etisalat was not convinced of bidding as a consequence of the 25 percent revenue share requested by the Syrian government. After, the failure to
purchase 46 percent of Kuwait’s Zain at the value of $12 billion (adduced reasons:
Zain’s divided board, extended due diligence and political unrest) it was
presumable Etisalat’s interest for other smaller investment opportunities, like
Syria’s third mobile license or Iraq’s fourth mobile license. According to Mr.
Irfan Ellam, a telecom analyst with Al Mal Capital, Etisalat’s decision could be
very positive because, given the 25 percent revenue share to be transferred to the Syrian
government, it would have been very difficult to extract some value. In fact,
Etisalat’s 2010 income margin was 24 percent. In addition to this, the Syrian
Telecommunications Establishment (S.T.E.) will obtain a 20 percent stake in the new
mobile operator. Mr. Ellam continued saying that this retrenching should not be
considered a missed opportunity. If there is no profitability of any kind there
is no value for shareholders — and in the end there is no lost opportunity. The
same line of thought was expressed by Simon Simonian, a telecom analyst with
Shuaa Capital, who stressed positively Etisalat’s rigor and discipline in its
expansion strategy.
On April 1, 2011, France Telecom stated that it did not want
anymore to bid for the license. The company confirmed its interest towards an expansion
in both Middle East and Africa. This task should be accomplished through
two or three acquisitions per year notwithstanding the current political unrest in
the MENA region. France Telecom wants to spot countries with low mobile
penetration and high growth potential. Syria was a perfect target, but the
costly license price coupled with the poor spectrum resources on offer pushed
France Telecom to drop its candidature. "We want to build a real center of
activity in the Middle East but very carefully” said France Telecom’s vice
president Elie Girard to Reuters while he officially admitted that political
unrest in Syria was not a significant element in relation to the drop out from
the Syrian license bidding process. Officiously, France Telecom’s choice could be linked to the
decision of the new ad interim
Tunisian government to seize a controlling stake in Orange Tunisie. The new
institutions want to review the joint venture between France Telecom (49 percent) and
Divona Telecom (Divona Telecom is owned by Investec, the Tunisian unit of
privately held Mabrouk Group). Political instability and business opportunity
do not well overlap.
Turkcell, Turkey’s biggest operator, officially pulled out
of the competition few days ago, but already in February it was known that the
company was out of the race. Last week’s statement only gave legal authority to
a position already taken, although the unique details released were that after the
evaluation of the tender conditions Turkcell decided not to compete for the
license. (For additional information about Turkcell's decision not to compete in
Syria please see:
http://www.turkcell.com.tr/c/docs/announcements/20110331-syria-tender.pdf).
http://www.turkcell.com.tr/c/docs/announcements/20110331-syria-tender.pdf).
In the end the two remaining (and competing) companies are Saudi Arabia’s S.T.C. and Qatar’s Qtel. “[S.T.C.] announces that it submitted on Wednesday, March 30, its technical and operational offer … The offers that are qualified by Syria’s [telecommunications] ministry will enter the final [financial] phase of the auction on April 27” said S.T.C. with a statement.
“Qtel confirms that it has submitted both the financial and
technical bids for the third license in Syria” reported a Qtel’s statement
emailed to Reuters. On March 27, during the Annual General Meeting of Qatar Telecom, Sheikh Abdullah bin Mohamed bin
Saud al-Thani, Qtel’s chairman, confirmed that Qtel’s board took the decision to
pursue the third mobile license in Syria.
There is no doubt that the Syrian
government established a thorny legal framework in order to obtain and then
operate the license. In the end, the problem is how to get some profits when a
25 percent revenue share has to be transferred to the Syrian government, which has a 20 percent stake in the new established company. All this said, notwithstanding the Syrian
government has raised the bar so high, it has still two capable bidders that have some experience working in complicated environments.