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French Version

Hamade : Conditions ripe for selling off telecom sector

Minister says cellular revenues main source of state income

Political circumstances and market conditions are ripe for privatization of the telecom sector in Lebanon but the government will not sell the money-spinning sector at any price, Telecommunications Minister Marwan Hamade said Friday.

g sector at any price, Telecommunications Minister Marwan Hamade said Friday. "Even President Emile Lahoud would not object to privatization if the amount offered was reasonable," he told The Daily Star.

But the minister refused to disclose the price which the government aspires to for both cellular networks, saying that the Cabinet will review all offers and make the "right choice."

According to the proposed five-year economic plan, which is yet to be approved by the Cabinet, the government will revoke the four-year contracts with Lebanon's two mobile operators MTC Touch and Alfa to pave the way for the privatization of the networks.

The contracts, which were signed with former Telecommunications Minister Jean Louis Qordahi nearly two years ago, stipulate that the Telecommunications Ministry has the right to cancel the contracts after giving the companies six months' notice.

Hamade said that income from the telecom sector is the largest single source of revenue for the government.

"We are getting more than $800 million a year from both networks and this does not include the fixed-line service," the minister said.

International investment bank JP Morgan recently completed a study on the mobile sector to determine its true value.

Hamade declined to reveal the price tag placed by JP Morgan on the networks but stressed that the amount was close to reality.

Asked about his projection for the privatization of telecoms, electricity and other stated-owned companies, Hamade said that Lebanon can definitely get an offer of more than the $5 billion which was the amount projected in the Paris II conference paper.

"At that time the market value for the sectors was down but now we are envisaging more than this figure," he added.

International consultants KPMG carried out a study on behalf of the Telecommunications Ministry in 2003 to calculate the gross revenues of the two telecom sectors which at that time were run by LibanCell and FTML.

The study showed that total revenues from both networks will reach $24 billion over the next 20 years.

It added that were the government to securitize the mobile sector over the next 20 years rather than privatize it, it could collect $10.2 billion.

Privatization is one key element in the government plan to reduce the $38 billion public debt, representing 183 percent of the country's Gross Domestic Product.

"I'd like to see the government revenues from the telecom kept one way or another," the minister said, suggesting that it would be a good idea if the state kept a share and sold the rest to foreign companies.

"I am in favor of democratization of the telecom sector because I want to see Lebanese citizens owning a stake in the companies," Hamade said.

But sources said some Cabinet members favor full privatization because this would attract more investment in the IT and software industries in Lebanon.

"There are several scenarios to hand, such as full privatization and dividing the telecom sector between the state and the government," Hamade said.

He stressed, however, that the state should not have majority share in the telecom sector as this would scare away potential investors. The minister said that OGERO, which is operating the fixed-line network, will soon be replaced by Liban Telecom.

OGERO (Organisme de Gestion et d'Exploitation de l'ex Radio Orient), established in 1972 to manage and operate the telegraph and submarine telecommunications of Radio Orient (the early 1900s company) is one of the most inefficient companies run by the government. It is 100 percent owned by the government and acts under the supervision of the telecommunications minister.

OGERO has 1,800 kilometers of fiber optic cables in its national network.

Staff from OGERO fear the government may lay off most of them once Liban Telecom is formed. Experts say the government may keep around 1,500 staff from OGERO and end the contracts of the rest.

Hamade said the regulatory body, which will oversee the privatization of the telecom sector, will be formed soon.

"I am not going to name any one for positions of regulatory body. The people will be selected on qualification basis."

But Kamal Shehadeh, president of Connexus consulting firm, said some issues need to be sorted out before privatization.

"The government did not yet sort out the problem with LibanCell, which won an arbitration case against the ministry for revoking the BOT contracts prematurely."

He added that FTML, part owner of the other former mobile operator, had already settled for $96 million to be paid over the next three years.

Shehadeh said it is wrong to view the telecoms sector from a revenue angle only. "Privatization is important to improve the whole sector and bring in more investments," he said.

Beirut 21-03-2006
Osama Habib
The Daily Star

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