SYRIA. In the last few years national development efforts have been significantly increased in the IT sector. Nearly all areas of telecommunications in Syria have undergone extensive development and modernisation, from voice and data telephone systems to the Internet.
Ericsson has supplied and supervised the installation of one million telephone lines, a project completed in 2004. Siemens of Germany is expanding the number of switches to 400,000, and a Syrian-Korean joint venture company is locally manufacturing and installing 250,000 rural switches. Ericsson is executing inter-city fibre optic links, while both Bosch (for the microwave component) and Samsung (for the fibre optic component) are supplying and supervision for the installation of the links between rural centres. Ericsson will also supply computer equipment for three new telephone billing centres.
Line telephony overall is managed by a public monopoly, the Syrian Telecommunications Establishment (STE). The STE, one of the rare profit-making outfits of the public sector, has set up more than 2.4 million lines and keeps developing the network. The STE is being supported by EU funding in programme to overhaul its management systems and to promote the development of the private sector from 2002 to 2006.
Mobile phone systems are managed by two private operators: Syriatel and Spacetel. They operate on the basis of a BOT contract (build-operate-transfer). At the end of 2004 the two GSM systems had an estimated 900,000 subscribers (equivalent to 4% of the total population) equally shared between the two operators. Access to the network, for a long time reserved to the very wealthy in society, has grown thanks to a drop in tariffs. The cost to get a line is now SYP9,000 (US$180) to which must be added a monthly subscription of SYP600 (US$12).
In 2001 the Syrian government awarded the first 15-year build, operate and transfer GSM licence, one two existing operators of pilot projects, to Syriatel, a joint venture 25% owned by Egypt-based Orascom Telecom Holding (OT) - the leading GSM telecommunications and Internet services operator in the Middle East - and 75% held by various Syrian investors. The Syrian Telecommunications Establishment, who put the bids out in September 2000, announced the results in January 2001.
A second BOT licence was awarded to a Lebanese-Syrian joint venture Investcom in a bid against Turkish mobile operator Telsim. Investcom, a branch of the Lebanese group Mikati, and SyriaTel (which at the time comprised the Egyptian company Orascom and Syrian partners Drex) had installed an experimental mobile phone network in Syria the previous year in February 2000. The two companies had spent US$31 million on this initial mobile network, which was set up in Damascus, Aleppo and Latakia for a trial period of one year.
Regular GSM operations began on 15 April 2001, although demand for cellular phones was below expectations, largely due to the high subscription costs, prompting authorities to drop them by two thirds in October 2001. To further encourage subscribers, the Ministry of Communications has announced plans to cut monthly subscription fees by half, providing free monthly minutes for the remaining half. In August 2004 a group of 30 Syrian lawyers and human rights activists called for a national boycott of the cellular network in protest, exactly three years after former deputy Raid Seif was arrested for denouncing in Parliament the terms of a mobile phone contract. This gives some idea of the highly politicised nature of business in Syria.
Short Messaging System (SMS) is now available in Syria for a minimal monthly fee and service charges, as well as limited roaming capability with Arab and European countries.
"With a population of over 16 million, three million of which reside in the capital city, Damascus, and with its prominent role in the Middle East, Syria is definitely a very important market for OT’s regional strategy," said Orascom Telecom Chairman Naguib Sawiris.
The fifteen year BOT contract required an up front payment of frequency fees of US$20 million for the GSM 900 MHz network, and an additional US$15 million to allow the operator to use the GSM 1800 MHz frequency bands, OT said in a prepared statement. The contract also defined a revenue sharing agreement. OT is obliged to transfer 30% of the revenues of the first three years, 40% of revenues generated in the second three years and 50% of the revenues in the remaining contract period.
SyriaTel had already been running one of two trial networks in Syria, serving at that time more than 11,000 subscribers in the main cities. By the end of the project in 2016 OT had projected more than 850,000 users, according to the statement.
In July 2003 it was reported that OT completed a transaction to dispose of its stake in Syriatel after settling a legal dispute with its local shareholder, Drex Technologies. OT founded the Syrian mobile company in 2001 in cooperation with Drex. The agreement settled a dispute over an Orascom allegation, submitted in Octobe 2002, that Drex was making use of its political affiliations to take over the company. The settlement resolved all legal disputes and litigation in international and Syrian jurisdictions.
OT no longer holds any shares in Syriatel and reportedly receiveed cash consideration to compensate for it's initial investment, loans made to Syriatel and expenses incurred. At the time of writing OT continues to provide management expertise to Syriatel on a contract basis for a management fee.
European Union support for reform
To assist the Syrian Government in the modernisation and reform of the telecom sector, the EU supports since 2002 the Syrian Telecommunication Establishment (STE) with a grant for a 'Telecom Sector Support Programme' (TSSP). Its overall objective is to support policies of economic transition, reform of the public sector and development of the private sector, in particular concerning the telecom infrastructure and modern communication services. This is directly related to policies in favour of socio-economic development and sustained economic growth, budgetary equilibrium via an appropriate contribution of the telecom-sector, and improvement of life-chances in a modern "information society".
The TSSP pursues, in line with reform initiatives of the Ministry of Telecommunications & Technologies specifically:
Based on identified needs of STE, its strength and weaknesses, the following activities were agreed between the EU, the STE and the Ministry of Telecommunications & Technologies:
Implementation of the TSSP started during March 2002 and it will last three years until February 2006, buy which time the market is expecting some new strategies to emerge, policies and plans for a regulatory framework, corporate constitution and re-organisation of STE, improved planning processes, operation and maintenance procedures, monitoring and control of service quality.
The STE is looking to upgrade its procurement, marketing, billing, revenue collection, accounting and financial control systems and procedures. More market-oriented functions are being developed. Pilot projects in key areas have been implemented and their extension to other areas and subsidiaries is being planned and financed.
History of Internet services
In February 1996 the Prime Ministry approved the request of the Syrian Telecommunications Establishment (STE) to subscribe to the Internet and reserve the top-level domain SY. In March 1996 STE signed a collaboration agreement with the Syrian Computer Society (SCS), chaired by the then President's son Dr Bashar Al-Assad, the first advocate of the Internet in Syria.
Despite the online connection established in 1996 and frequent pro-Internet statements Syria was one of the last countries in the region to allow public local access to the Internet. Initially Syrians subscribed to expensive ISP services from neighbouring Jordan, Lebanon and Turkey, or those who were able to travel to neighbouring Jordan or Lebanon could utilise cybercafés. This was another area that was slow to develop in Syria but opened up under the Presidency of Bashar al-Asad.
The STE holds the monopoly of the access to the Internet as the backbone operator, and is one of the two access providers (ISP) with the Syrian Computer Society, a non-profit organization which comprises the main player of the private sector.
The Syrian Computer Society (SCS) operates its own ISP, and members of the SCS benefit from cheaper rates for Internet services than STE customers. However in May 2002, STE abolished Internet initial subscription cost and subsequent monthly fees, as well as lowered the cost of Internet connection per minute by a third. There is a tremendous demand for Internet access that is not being met because of STE's limited infrastructure. A project to enlarge Syria’s Internet backbone with a dedicated Public Data Network (PDN) intended to expand STE’s ISP service and to allow for the establishment of more private ISPs is ongoing. The PDN will replace the telephone network in terms of data transfer, Internet accessibility, and other digital services. STE has also recently announced several tenders for a VHF radio paging system, for a GIS system, for Wireless Local Loop (WLL), and for development of a Digital Pair gain System (DPS).
It is considered that 150,000 people surfed the Internet at the end of 2004, equally shared by the two providers, whereas the total number of users is estimated at 600,000 by the Ministry of Communications.
In 2005 private access providers should be allowed, but the development of the network is not as exponential as expected. This sector remains a priority set by the political authorities. Concerning data transmission and the Internet, Syria is still undergoing profound policy changes, which will see the current national ISP duopoly being transformed in a much more open environment, conducive of competition, and improvement of service, with the start of the ISP licensing process expected.
Syria has taken considerable steps in the modernisation and upgrade of its infrastructure network and that is the new promising project: Public Data Network or PDN. The Internet service backbone project in Syria aims at providing nationwide data services based on modem technologies.
Role of the private sector
The private sector is now beginning to take the lead in developing new telecommunications systems. The Syrian Telecommunications Establishment (STE) aims to cover about 95% of the country's populated areas with the improved telephone network by the end of 2004.
Even if full privatisation is not yet in the agenda, the legal framework makes it increasingly possible to penetrate a high potential market. The banking and the insurance sectors are opening up to private and foreign players. In IT, telecom and Internet networks remain to be expanded to the whole country. And numerous operators, especially for the web, are expected to propose new services and contents.