Syriatel and Turkcell Courting

It is hard to tell what the potential sale of a majority stake in Syriatel to Turkcell means. For some it may have important symbolic implications. It suggests that Rami Makhlouf, the majority owner of Syriatel and cousin of the president, may be taking a lower profile in Syria's economy.

This is not the first time that he has appeared to give up a high profile position. At the end of 2005, he left for the Arab Emirates for a spell. It was rumored at the time that he was being "banished" in order to reassure Syrian businessman and foreign investors that the president was policing economic fairness and didn't want family members to play such a dominant role in the economy. This turned out to be little more than a month long vacation.

Some suggest that Rami M. may want to take capital out of Syriatel in order to start something new. We don't know. 

Syriatel, Syria’s largest private corporation, to change hands

10 December 2007 from The Syria Report

Syriatel, Syria’s largest private corporation, is about to be sold by its main shareholder, Mr Rami Makhlouf. Earlier today, Turkcell, one of Turkey’s three operators of a mobile phone network filed a public notice with the Istanbul Stock Exchange to notify that it was finalizing documents to bid for at least 51 percent of the shares of Syriatel Mobile Telecom, giving it a controlling stake in the larger of the two GSM operators in Syria. Turkcell did not provide any information on its potential final stake in the company or on the value of the deal.

Turkcell is a joint-venture between Sonera Holding B.V., a Scandinavian GSM operator, and Turkish investors. As The Syria Report went to press, Syriatel’s management was not available for comment. It is not clear how far the two parties have gone in discussions related to the sale or if any other GSM company is putting forward another bid. If the deal goes forward, it would be the second Syrian mobile phone company that changes hand within a year. Late last year, Areeba Syria was sold to MTN, a South-African mobile phone operator, within a broader deal involving the sale of all the shares of Investcom, the mother company of Areeba, by its shareholders, the Mikati family from Lebanon…. 

By Seda Sezer
     Dec. 10 (Bloomberg) — Turkcell Iletisim Hizmetleri AS, Turkey's biggest mobile-phone company, plans to bid for a majority stake in Syrian cellular operator Syriatel. 
 Turkcell will make an offer for at least 51 percent of Syriatel Mobile Telecom, according to a filing with the Istanbul Stock Exchange today, which didn't give further details. Turkcell has said it plans to expand in regional countries. It has a unit in Ukraine, owns stakes in other Central Asian networks, and made unsuccessful attempts to buy companies in Iran and Greece.

Turkcell Interested in Bidding for Stake in Syriatel Mobile
Shardul Shrimani
10 December 2007
Copyright 2007, Global Insight Limited. All Rights Reserved.

SyriaTel is owned by Syrian businessman Rami Makhlouf, and has been offering GSM services in Syria since 2001. SyriaTel has 3.47 million customers and a 55% market share in Syria. The country has a slightly lower mobile penetration compared to other operators in the region, currently standing at 33%, according to MTN, which is SyriaTel's only mobile competitor and has the highest growth potential after seeing a rise in subscribers from 1.5 million to 2.2 million at the end of 2006. ARPU levels in the country are between US$17 and US$20, but have remained relatively stable over the last few years.

Turkcell has been interested in snapping up Middle Eastern licences and stakes in operators for some time. However, the operator has expressed pessimistic views on obtaining licences in countries where larger mobile operators are more dominant. Within the Middle East, Turkcell was unsuccessful in bidding for the third Kuwaiti licence, which was recently won by STC, and also lost out on an Iraqi mobile licence this year, which saw Korek, the small Iraqi operator, win and then partner with existing player Orascom (see Kuwait: 26 November 2007: and Iraq: 17 August 2007: ). Although the operator lost in Iraq, the territory is still classed as a high-risk investment region.

Outlook and Implications

There are very few Middle Eastern mobile licences available now, as heavy liberalisation over the past few years has greatly limited the investment opportunities in the region. Last month, Kuwait offered a third mobile licence to STC, leaving Qatar, which has the final mobile monopoly in the region and is expected to award a second licence by the first quarter of next year. Even then, this could be the last available licence for 2008. Turkcell has not got the investment powers of dominant mobile operators in the Middle East, such as Etisalat and MTC, and a stake in a smaller operator would give the company a much better chance of investing in the region.

Turkcell's investment in SyriaTel will greatly benefit both operators. Turkcell has the highest market share in Turkey, but is facing competition from Vodafone and Avea, and will suffer further when mobile number portability is implemented by the regulator. The duopolistic mobile market in Syria provides Turkcell with the ideal opportunity to enter the market. Both MTN Syria and SyriaTel are in trials for 3G, and a full service launch could be as early as the first half of 2008.

While the country has all the characteristics of high-growth potential, the government has indicated in the past that it may introduce a third mobile operator. This was originally indicated early in 2007, and there have been no further developments as yet, but SyriaTel must build on its market-leading position before a third operator enters the market (see Syria: 8 September 2005: ). 

Comments (3)

AnotherIsraeliGuy said:

Everybody knows what money minting machines mobile phone operations are. Probably there are a lot of silent partners and there is no way to give them their share without a liquidity event. Since an IPO is out of the question, probably a sale was required. Another option is the ususal one: He is uncomfortable in having so much of his net worth inside Syria and wants to move some of it abroad, therefore he is selling and will send the money elsewhere. Probably a combination of both reasons.

December 10th, 2007, 8:48 pm


trustquest said:

This sale is not an open market sale. The company was not for grab and it was not posted for sale for competitive bidder to buy the company. This is a strategic and political move on the part of the regime to sell the company to Turkey. This move will protect the regime to have an economical backing from north to the regime. This is the result of the president last month visit.
Please someone proves me wrong?

December 10th, 2007, 10:53 pm


Shual said:

I am no specialist in oligarchy, but “to sell the company to Turkey “??? Mikhail Friedman is not turkish. And not “it has a unit in Ukraine” … it is a unit of some oligarchs. And its Kazakhstan and not Turkey: 07.11.07: “Kazakhstan and Syria could become a connecting-link in economics between the Middle East and the Central Asia. Such an opinion was expressed by the President of Kazakhstan, Nursultan Nazarbayev, on the first meeting of Kazakhstani-Syrian Business Council which was held in the frames of Kazakhstani president’s visit to Syria.”

December 11th, 2007, 5:03 am


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