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French Version

Qordahi: Struggle to transform mobile sector is under way

Telecoms Minister upbeat about future prospects
Key to success lies in linking privatization with liberalization and regulation, thus ensuring effective safeguards for consumers.

The long struggle to transform the mobile telecommunications sector from a state monopoly blackened by political influence to a liberalized and free one is well under way, according to Telecommunications Minister Jean-Louis Qordahi.

"A highly professional team has locked all the systems and is managing the companies far from politics to the benefit of future operators," Qordahi told The Daily Star during an interview last week.

The international bank HSBC has been charged by the Lebanese government to manage the process of finding adequate buyers for two cellular licenses with the help of the available information. The firm is to explain the risks and advantages of the sector to potential investors and assist the government in evaluating all offers made. This roadshow, as it is called by concerned officials, began so that the sale of the two mobile networks owned by LibanCell and Cellis-FTML could produce revenues to help restructure the country's suffocating $31 billion public debt. The offers made for the purchase of the licenses are separated in two different categories, as stipulated in the auction-tender Law 393 of June 2002.

The first option is based on a revenue-sharing scheme where the government keeps 40 percent of profits. The second option involves a "full value" sale with no revenue sharing. "One has to understand that this is the first time a business is sold with a 20-year license and not only a license with a blank sheet," said Qordahi.

The sale of the licenses includes the assets of the two current operators, each with a customer base of around 400,000, a cash flow, a known monthly turnover and an existing network, "all of this without a liability," he explained.

In case the offers are not satisfactory, the government will go ahead with a third option to privatize only the management of the sector. This would allow independent professional operators to manage the companies for three years on behalf of the government."By doing so we can wait for better moments so that we can get better offers," said Qordahi. However, the sale cannot be achieved if the mobile sector is still influenced by politicians "who were against my policy, since they want to keep a cartel," said Qordahi.

According to the minister, who has been in office for two years, the mobile operators have been scrutinized and their networks are ready for sale. Qordahi also stressed the need for regulation of the sector after privatization, which he said his ministry had worked hard to establish. "Privatization is linked to liberalization and to regulation. If we do not have the last two then we are moving from a state monopoly to a private cartel," said Qordahi. This strategy began as soon as September 2002, when the government signed an ownership transfer agreement that released the networks from their current operators.

The contract assigned a level of performance that has to be met so that the best service possible is offered. The operators under the transfer agreement have to report to a technical and financial auditor, which itself has to report to a supervisory board. The board, which oversees the transfer agreement, has a representative at the ministry and also a member of an international regulatory body. For LibanCell, the ministry has a representative on the board, and there is also "a former regulator of the British telecommunications regulating firm, Oftel," said Qordahi. The auditors do the day-to-day job of verifying that the operator is maintaining performance targets, while the board takes care of important and critical decisions. The ministry selected the European firm Euro Strategy on Jan. 8, funded by a $3.5 million donation from the European Union, to assist with the creation of an independent regulatory body to supervise all the operators.

"It is important for investors to know that an independent body will be arranged by the end of January in accordance with the law, like any other country in the process of privatizing its assets," he said. The five members of this board are going to receive a mandate for a nonrenewable four-year period to assure their complete independence from political struggles. In addition, these members do not have the right to work in the telecommunications sector before or after their mandate. "We need this authority to be free from politics to be sure that the new operators do not switch from a state monopoly to a private one," he said. However, the Cabinet has the final say on establishing the new body.

Asked by The Daily Star if there was a potential for the body to fall under political influence from ministers, Qordahi responded: "I decided on five members in order to avoid a political criteria and so as to stay away from the number six," which could be constituted of two members from each political power. "Euro Strategy and the Ministry of Telecommunications will decide on the professional criteria of selection. This is how you make decisions in a clean way," Qordahi said, adding that 90 percent of the independent regulatory body's employees should be composed of the country's educated elite, so as to give the body a good chance of not falling prey to corruption.

"I created the board and brought in an international regulator. When you bring a man such as the one from Oftel, you cannot just joke with him. He used to stand in front of Tony Blair and say 'this is my point of view.'" Qordahi also appointed a former French senator and a member of the Telecommunications Regulatory Authority, which is part of Cellis-FTML's ownership supervisory board. According to the minister, this gives the sector credibility, because no one is in the position of influencing the opinion of these high-status men. "Some people were saying that I wanted to keep the sector in the hands of the government. Come on, I come from the private sector and I know how business is done, but I want this out of the hands of the political people. All I desired was to safeguard this sector because I believe it is the only one with a potential to expand our economy," said Qordahi.

Regarding the status of LibanPost, Qordahi stated that the carrier was not sold to the Mikati group, but rather a $30 million commitment was made by Bank Audi along with a group of shareholders "which remain unclear until today."

All that is known, according to Qordahi, is that there are two companies under the umbrella of the bank, which is definitely attempting to establish a group of investors. LibanPost has improved enormously over the last year by increasing their sales, making the postal service economically viable. "This year customers will receive their telephone bills via LibanPost and the national carrier will no longer be a place where people simply go to stamp their mail," said Qordahi. It will also become a service center where one can access the internet, photocopying machines and public phones.

Beirut 27-01-2003
Tarek El Zein
The Daily Star

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