Arab Advisors Group
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A tightly controlled GSM duopoly situation stifles Syria's GSM market growth!
Thursday, February 28, 2002

A newly released report from the Arab Advisors Group fully analyzes the Syrian communications market, its fixed services operator, STE, and the two GSM operators Syriatel and Spacetel Syria. The report found that the Syrian GSM market (with a 2001 penetration rate of only 1.12%) is well under its true potential. The Arab Advisors Group noted in the report that the tightly controlled BOT GSM duopoly in the market is the major reason behind such sub-optimal growth.

February 28, 2002 -

The Syrian communications market is waking up from its slumber, albeit at a slow rate. The country's fixed services monopoly, the Syrian Telecom Establishment, still has to contend with a waiting list for phone lines that is more than 150% of telephone lines in operation. Towards that end, extensive infrastructure upgrade projects are underway by the Syrian Telecom Establishment, which nonetheless, remains in the centrally planned model of telecom operators, which is all but extinct in many regions of the world.

A new report, entitled Syria Communications Projections report 2002, was released to the Arab Advisors Group's (www.arabadvisors.com) Strategic Research Service subscribers in February 2002. The 34-pages report is the culmination of painstaking primary research over more than two months by Arab Advisors Group's analysts. The report found that while mainline (PSTN) penetration stood at a respectable 10.57% in 2001 (despite the high waiting list), Syria's GSM market is one of the least developed of all Arab markets. There were fewer than 200,000 GSM users in the country of more than 17 million people, a dismal penetration rate by all means.

"Very high connection charges - and lack of prepaid service offerings- are the main culprits behind stifling the potentially high growth in GSM subscribers in Syria", Sarah Alalul, Arab Advisors Group analyst explained. "Evidently, people able to afford a mobile are primarily business people and government officials. Mobile usage will not increase until there is a significant drop in connection fees. At US$ 390 in connection fees, Syria's mobile operators charge 20 times more in connection fees than what mobile operators charge in Jordan, for example."

The Arab Advisors Group report shows that the two GSM operators in Syria, Syriatel and Spacetel Syria, are required to negotiate with the STE on every effort to change prices and allow competition of any sort. They therefore can only compete on quality without much leeway in offering bundles and lower rates. The absence, to date, of prepaid service is another major hurdle facing mass adoption of mobiles in Syria.

As the duopoly operators anticipate the introduction of prepaid mobile service at the end of this year (once approved by the STE), GSM usage is expected to increase exponentially as have other Arab countries' mobile subscriber bases upon inception of prepaid, as seen in Morocco, Egypt, Lebanon and Jordan. The Arab Advisors Group projects Syria's GSM subscribers to exceed 4.5 million in 2006, a 22.86% penetration rate. "Year 2006 is when we project GSM subscribers to reach parity with PSTN subscribers." Ms. Alalul added.

The Syria Communications Projections Report-2002 also includes analysis of the average revenue per user (ARPU) for GSM and PSTN users in Syria and revenues projections until 2006. The Arab Advisors expects total GSM revenues in Syria to exceed US$ 430 million by 2003. Between 2001 and 2006 the Arab Advisors Group projects GSM subscribers in Syria to grow by a CAGR of 88% to exceed 4.5 million while total GSM revenues will grow at a lower CAGR of 54% to exceed the US$ one billion mark by 2006. As for PSTN services, given an expanding subscriber base, and a steady ARPU, revenues are projected to grow by a CAGR of 21% between 2001 and 2006 to exceed US$ 854.25 million.

The Syria Communications Projections Report-2002 includes 5-year historical figures on 40 plus indicators of the communications market as well as 5-year projections (till 2006). The report's table of content can be downloaded in PDF format from Arab Advisors Group's web page (www.arabadvisors.com). The report analyses the operations of the operators in the market and presents detailed profiles of their operations and strategy.

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