December 9, 2010 / 7:18 PM / 9 years ago

Rare meeting spotlights Syria cellphone licence risk

* Companies unhappy about having to give revenue projections

* Previous process tinged with political interference

By Khaled Yacoub Oweis

DAMASCUS, Dec 9 (Reuters) - Syrian telecom officials came under a torrent of questions at a meeting with international companies regarding a major cellphone tender, seen as a test of the state’s declared intent to shed secrecy in doing business.

The rare meeting in the Syrian capital on Wednesday was part of an auction process for a third cellphone licence in one of the last markets in the Middle East with a major potential for expansion, telecom executives told Reuters.

The cellphone sector, a major source of state revenue, has been marred by political interference since the government awarded operational contracts to two existing cellphone companies, MTN and Syriatel, nine years ago.

Two independent public figures who criticised those contracts were jailed for a total of 12 years. Officials said the process for granting the third licence, which started last month will adhere to international standards.

Representatives from Turkcell (TCELL.IS), France Telecom FTE.PA, Saudi Telecom (7010.SE), Emirates’ Etisalat and Qatar’s Qtel, the five firms that made a pre-qualification shortlist to become Syria’s third operator, met Telecom Minister Imad Sabouni and his aides at a hotel in Damascus.

Detecon, a German consultancy advising the government on the process for granting the licence, also attended.

“The licensing process is going with a high level of clarity and transparency. The objective of this meeting is to reach a better understanding of the companies’ requirements,” Sabouni said before a two hour Q&A.

RISKS

“The questions centred on sections in the tender where investors see risk, and vagueness about certain clauses,” one of the executives said.

The executive said one company raised the need to regulate roaming agreements with the existing two operators so the new operator would not face a disadvantage.

“The minister agreed that this needs to be addressed. He and his team were professional, emphasising that the government will be a partner with the third operator and had no interest in seeing the new entrant lose money,” he said.

A point of contention was that pre-qualified companies had to submit a business plan with revenue projection, although an auction will decide who will be awarded the licence.

The tender requires the winning bidder to give 25 percent of the annual revenue from the cellphone operation in Syria to the state. It also stipulates that Syria’s state telecoms company will hold a 20 percent stake in the company that will be awarded the licence.

An official from the state telecoms company emphasised in a question to the minister the need to comply with Arab League boycott rules against Israel.

“This is another unseen potential risk,” said another executive, pointing to vagueness and random application of the boycott rules.

The Syrian economy underwent heavy nationalisation when the ruling Baath Party took power almost 50 years ago, imposing emergency law still in force. But the government has taken limited steps to open the economy since President Bashar al-Assad succeeded his father 10 years ago.

Another meeting with the five prequalified companies is scheduled before the auction on the licence on April 12.

(Editing by Jon Loades-Carter)

((khaled.oweis@reuters.com; tel. +963 11 2228022/3)) Keywords: SYRIA TELECOM/

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