The Syrian Telecommunications Establishment, a state-owned body holding a monopoly over Syria’s landline network announced a marked surge in revenues in 2006, owing to a 13.7% hike in subscriber numbers and 13.9% in network capacity over the previous year.
Mosbah Shalash, STE director of planning and regulatory affairs attributes the boom to a “controversial plan to slash subscription costs by 70% and international call fees by 60%,” which generated a surplus of SYP800 million ($15.7 million).
Crackdown on corruption
In what appears to be another new leaf being turned over in Syria’s reform efforts, a crack-down on corruption has witnessed the dismissal of STE’s director general, Haitham Shidiyaq, for setting up a joint venture with an NGO for commercial purposes.
The landline network, responsible for 59% of the 2006 profits, is the main source of income for STE, whose revenues rose by 28% from 2005, to SYP51.7 billion ($1.01 billion).
However, these newly found riches, earned chiefly from inter-city and international calls, are not enough to compensate for the high installation costs and low remote area charges, says Hussein Ibrahim, IT expert and advisor to the former Telecommunications Minister, Mohamed Bashir Al Munajjed, “Syria’s landline network has achieved progress, but it still needs a lot of work to meet demand,” he said. The telecom administrator’s geographical coverage is still holding steady at 73% while new methods of reaching the remaining subscribers are being studied.
Expanding into rural areas
By way of a solution, the STE obtained a loan of $136 million from the Faculty for Euro-Mediterranean Investment and Partnership to implement the “Third Rural Telecoms Project,” which aims to install 430,000 new lines in 4,300 villages. The two-year, $273 million project is expected to be launched in 2007. The installation operations will be based on copper, fiber and wireless systems.
Another option being introduced is a BOT measure for the landline network, similar to the one applied to the two GSM operators, Areeba and Syriatel, whereby the STE collects 40% of the two companies’ total income, in return for the infrastructure.
“The new direction is to form strategic partnerships between the state and the private sector, in which the state would own the infrastructure and would operate as an exclusive legislator and regulator, while the private sector would manage the services,” said Ibrahim, “STE’s monopoly over the landline network can no longer be viable in the age of globalization and openness.”
Full-fledged reform by 2010
These strategies come as part of a package deal that placed Syria on a long-term economic reform track, due to be fully instituted by 2010. The official launch of the first Syrian stock market, scheduled for early 2008 signals just such a shift, from a centralized to a social market economy. Syria is basing its model on increased competition and liberalization, leaving the government only a supervisory function. More tell-tale signs of the country’s slow but sure transformation have been witnessed in the past two years, with the entry of private banks and insurance firms into the market for the first time in 40 years.
“While the STE will keep operating as a state entity, due to the soaring profits it generates for the state treasury,” said Shalash, “the consortiums it would form in partnership with the private sector would be able to float shares in the future Syrian stock exchange.”
