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Market Insight: Syria’s underdeveloped mobile market offers a rare opportunity |
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 29/09/2009
Daniel Jones
The Syrian government has outlined its intention to licence a third mobile operator during the end of 2009 or the beginning of 2010. Syria’s two existing MNOs, SyriaTel and MTN Syria operate under Build-Operate-Transfer (BOT) contracts with the incumbent and regulator Syria Telecom, which has exclusive rights to operate both fixed and mobile networks. Under the terms of the BOT agreements, signed in 2002, a new operate could not be licensed until the second half of 2009 at the earliest. The process is anticipated to attract attention from regional and international operators. According to Onda Analytics’ new report on this opportunity, the new licensee is likely to generate annual revenues of USD570 million by 2015, following a likely launch at the beginning of 2011.
Syrian mobile penetration is relatively low
Syria has seen a relatively low level of adoption of mobile services, with 42% mobile penetration in June 2009. This compares poorly with some is its regional peers of similar income levels. This is largely down to the effect of a regulatory regime that imposes strict price controls on MTN Syria and SyriaTel. As shown in Figure 1, a country with income levels similar to those of Syria might be expected to have a mobile penetration rate of around 60%, rather than close to the 40% mark as is the case in Syria. This represents around 4 million potential new subscribers.
Figure 1: From Syrian third licence report [Source: CIA World Factbook, Onda Analytics, operator data]
The new operator’s entry strategy will be crucial to its success
The slow development of the Syrian mobile market is good news for a new entrant, who will be able to capitalise on future market growth. On the other hand, it will also be subject to the same price controls as its competitors, for the time being at least. Many new entrant strategies rely (to a greater or lesser extent) on price competition, whether this is through direct decreases in tariffs or indirect measures, such as per-second billing or increased prepaid credit expiry periods. Without such differentiation, the new entrant will have to look to other factors. A strong existing brand and range of service provision at launch will be key factors that can enable a new MNO to successfully differentiate its offering from those of existing players. Part of its new service offering should be mobile broadband, which both existing operators launched commercially earlier this year, and will allow it to benefit from the low development of Syria’s fixed broadband services. With such a strategy in place, Onda Analytics’ recently released report, Syrian third mobile licence, forecasts almost 2 million subscribers for the new entrant after three years of operation.
The regulatory environment is all-important
With an identified underdeveloped mobile market and a restricted mandate for the existing operators, the policies of the Syrian regulator will be crucial in the development and therefore core value of the mobile market. It will be important for potential bidders to recognise the historic regulatory positioning, along with the roadmap for the likely development of policy. An independent regulator could be on the cards and may significantly change the regulatory situation.
The decline in Syria’s oil revenues over the last few years could lead to the government attempting to raise funds by other means to compensate – it would not be the first country to see a new mobile licence as providing such an opportunity. Loosening industry regulation could have a similar effect by speeding up mobile market development and thus increasing tax revenues.
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